Tuesday, July 10, 2018

Federal Circuit Affirms Finding of Willfulness, Remands on Enhancement

The decision, handed down this morning and authored by Judge Lourie (joined by Judges Dyk and Hughes) is Polara Engineering Inc v. Campbell Co.  The patent in suit, as described by the court, "relates to a two-wire control system for push-button crosswalk stations for a traffic-light controlled intersection with visual, audible, and tactile accessible signals" (p.3).  The court affirms a finding of liability, rejecting among other things Campbell's argument that the invention was in public use (rather than experimental use) more than one year prior to the filing date.  Since this blog focuses on the damages issues, however, I'll limit my discussion to the court's affirmance of the finding of willfulness and its decision to remand for further consideration on the question of a damages enhancement.

As for willfulness, the court concludes that there was substantial evidence that the defendant's pre-litigation conduct constituted willful infringement:
We agree with Polara that substantial evidence supports the jury’s finding of willful infringement. Based on the evidence adduced at trial, the jury reasonably could have found that Campbell intentionally copied the ’476 patent despite a significant known risk that its two-wire AAPS would infringe the ’476 patent. It is undisputed that Campbell was aware of the ’476 patent prior to developing its AAPS. Campbell’s president testified that Campbell developed its AAPS to compete with Polara’s Navigator-2, and that Campbell did not have a product that could compete with the Navigator-2 when Polara launched it in 2003. The jury also heard evidence that Campbell adopted a two-wire design for its AAPS despite being advised by University of Idaho counsel and its lead developer of “areas of potential conflict,” J.A. 2572–73, 2575, and “similarities,” J.A. 3362, with the ’476 patent. 
Campbell asserts that its reliance on competent opinion of counsel demonstrates its good faith belief that the ’476 patent was invalid or not infringed. Campbell has not pointed to any documentary or third-party evidence showing it received an opinion of counsel that the asserted claims of the ’476 patent are invalid and/or would not be infringed by its AAPS. To the extent Campbell relies on the testimony of its president that Campbell allegedly eventually received “a clean bill of health” from the University of Idaho and “got the go” from his own “IP attorneys,” J.A. 2574, the jury was entitled not to credit this testimony, see Harper, 533 F.3d at 1021 (“While the court must review the entire evidentiary record, it must . . . disregard all evidence favorable to the moving party that the jury is not required to believe.”).
The only written opinion of counsel Campbell received that it alleges shows its good faith only substantively discusses claim 11, which is not at issue in this case. . . . 
Moreover, Campbell’s contention that it “was not allowed to present its pre-litigation non-infringement defenses to the jury to refute willfulness,” Appellant Br. 53–54, is belied by the record. . . .
Additionally, Campbell waived its argument that the district court erred by presenting the jury with a verdict form that required a simple “yes” or “no” answer on the question of willfulness, rather than requiring the jury to specify the time period during which Campbell’s conduct was willful. While Campbell is correct that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct,” Halo, 136 S. Ct. at 1933, Campbell did not object to the district court’s proposed verdict form on this basis, see Post-trial Motions Opinion, 237 F. Supp. 3d at 979. By not timely informing the district court that failing to adopt Campbell’s proposed verdict form would be “an error of law or abuse of discretion,” Campbell waived its objection to the verdict form. United States v. Parson Corp., 1 F.3d 944, 945 (9th Cir. 1993).
Similarly, Campbell waived its Seagate-based argument that the district court should have considered that Polara did not seek a preliminary injunction in its analysis by failing to raise it to the district court. . . . Moreover, the relied-upon language does not even apply to this situation because the jury’s finding of willful infringement was not “based solely on the infringer’s post-filing conduct.” Seagate, 497 F.3d at 1374. . . (pp. 22-24).
(Editorial note:  on the question of whether the failure to seek a preliminary injunction retains any relevance, post-Halo, to the issue of willfulness--the answer to which is, probably not--I would commend readers' attention to the discussion of this issue in Magistrate Judge Burke's recent opinion in Välinge Innovation AB v. Halstead New England Corp., Civil Action No. 1601082-LPS-CJB, 2018 WL 2411218 (D. Del. May 29, 2018).  This opinion also provides a nice summary of the views of various district courts on the relevance of post-litigation conduct to willfulness and enhanced damages, post-Halo.) 

Moving on enhanced damages, the Federal Circuit appears to want more in the way of an explanation of why the district court enhanced damages two and a half times:
Although “the district court is not required to discuss the Read factors,” Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 875 F.3d 1369, 1382 (Fed. Cir. 2017), it “is obligated to explain the basis for the [enhanced damages] award, particularly where the maximum amount is imposed,” Read, 970 F.2d at 828. . . . After Halo and under Read, the “closeness of the case” remains a relevant consideration for determining the appropriateness of enhancement. Here, the district court awarded almost the maximum amount of enhanced damages, but did not adequately explain its basis for doing so, and failed to even mention Campbell’s public use defense, which presented a close question in this case.
The district court referred to Campbell’s invalidity theories generally in the closeness of the case Read factor. In determining that this factor was “neutral,” the district court merely observed that “obviousness was a close call” and that the “other invalidity theories were weaker.” Post-trial Motions Opinion, 237 F. Supp. 3d at 993. This explanation is insufficient for us to determine why the court viewed this factor as “neutral.” The court’s use of the relative term “weaker” provides little insight because it did not explain its reasons for viewing the other defenses, especially public use, as comparatively “weaker.” We view the public use defense, which the court did not explicitly address, as a closer call than obviousness. Thus, to the extent the district court determined that the public use defense was weak in this case, the court clearly erred.
Accordingly, we vacate the award of enhanced damages and remand. . . . On remand, we instruct the district court to provide a more complete explanation, including a discussion of the public use defense, in exercising its discretion. We express no view on whether damages should be enhanced or, if so, by what amount (pp. 24-26).

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