The Federal Circuit Has Jurisdiction over Appeals in Which Damages and Willfulness Remain Unresolved

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The Federal Circuit green-lights earlier and more appeals. 28 U.S.C. § 1292(c)(2) confers to the United States Court of Appeals for the Federal Circuit (the "Federal Circuit") the jurisdiction to hear appeals in civil actions which are "final, except for an accounting." In Robert Bosch, LLC v. Pylon Manuf. Corp., Nos. 2011-1363, -1364 (Fed. Cir. June 14, 2013), the Federal Circuit held, en banc, that this statute conferred the court with jurisdiction to hear an appeal of a civil action in which a verdict was reached on liability, but issues of damages and willful infringement were unresolved.

Background

Robert Bosch, LLC ("Bosch") brought a civil action against Pylon Manufacturing Corp. ("Pylon") alleging patent infringement. Prior to trial, the district court granted Pylon's motion to bifurcate the proceedings as to the issues of liability and damages, ruling also that "willfulness is a damages issue, not a liability issue." (Slip op. at 4.) The district court conducted a jury trial on liability, and entered judgment on issues of liability. Issues related to damages and willfulness were not addressed in the jury verdict.

Bosch appealed and Pylon filed a cross-appeal. Thereafter, Bosch sought to dismiss both appeals for, inter alia, lack of jurisdiction under 28 U.S.C. § 1292(c)(2), i.e., the judgment was not final because issues of damages and willfulness had not been addressed. The Federal Circuit granted rehearing en banc to determine whether the statute provided jurisdiction for this appeal.

The Federal Circuit Has Appellate Jurisdiction over Final Determinations on Liability Prior to a Jury Trial on Damages Issues

The Federal Circuit has jurisdiction over any "appeal from a final decision of a district court of the United States. . . in any civil action arising under. . . any Act of Congress relating to patents." (28 U.S.C. § 1295(a)(1)). Section 1292(c)(2) expands appellate jurisdiction to judgments which are "final except for an accounting." In Bosch, the Federal Circuit interpreted whether an "accounting" under § 1292(c)(2) includes determinations of damages and willfulness.

The Federal Circuit held that "§ 1292(c)(2) confers jurisdiction on this court to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred." (Slip op. at 22.) In reaching this decision, the court reviewed the historical meaning of "accounting" and the statutory history of § 1292 to determine the meaning of "accounting." The Federal Circuit recognized that "where words are employed in a statute which had at the time a well-known meaning at common law. . . they are presumed to have been used in that sense." (Slip op. at 6, quoting Standard Oil Co. of N.J. v. United States, 221 U.S. 1, 59 (1911).)

Prior to the codification of § 1292(c)(2), during the period from 1853 through 1922, the common law and Congress continued to refine the definition of "accounting" to include different calculations. The court explained that an "accounting" in 1853 was "restricted 'to the actual gains and profits of the [infringers].'" (Slip op. at 8.) Thereafter, the various statutes as well as Supreme Court and circuit court decisions continued to redefine the meaning of "accounting." The Federal Circuit stated that, in 1922, "Congress had allowed for an accounting to include the determination of an adjudged infringer's profits and a patentee's damages, including lost profits and a reasonable royalty." (Slip op. at 10.) Against this settled meaning, in 1927, Congress enacted the predecessor to § 1292(c)(2). Indeed, the Senate Report accompanying the statute reflected the Congressional understanding that an accounting "include both the calculation of the defendant's profits and the plaintiff's damage." (Slip op. at 11.) Thus, the Federal Circuit concluded an "accounting", as used in § 1292(c)(2), is not restricted to traditional equitable principles and must include damages.

Further, the Federal Circuit rejected Bosch's contention that an "accounting is limited to a special master's determination of damages" and that a jury trial on damages is outside the scope of an "accounting". (Slip op. at 13.) The Federal Circuit explained four reasons for this conclusion: (1) Congress expanded jurisdiction for cases in equity to civil actions for patent infringement which are final except for accounting; (2) modern damages trials determine the same issues historically decided in accountings; (3) policy considerations in reducing in the financial burden of patent litigations; and (4) the weight of twenty-five years of precedents and implications of stare decisis thereof. (Slip op. at 13-22.)

Thus, finding that an accounting includes damages and brushing aside the requirement of a special master, the Federal Circuit held "that § 1292(c)(2) confers jurisdiction on this court to entertain appeals from patent infringement liability determinations when a trial on damages has not yet occurred." (Slip op. at 22.)

The Federal Circuit Has Appellate Jurisdiction over Final Determinations on Liability Prior to a Jury Trial on Willfulness Issues

Similarly, the Federal Circuit held that "it is clear that an accounting, both prior to and after Congress's grant of interlocutory jurisdiction over cases that are final except for an accounting, included the determination of willfulness." (Slip op. at 26.)

In reaching this decision, the court revisited the state of the common law when § 1292 was enacted. The Federal Circuit noted numerous determinations of the Supreme Court and circuit courts prior to 1927 where part of the "accounting proceedings included the determination of willfulness by a special master." (Slip op. at 23-24.) Even after the enactment of the predecessor statute to § 1292 in 1927, the Federal Circuit noted that accountings still included determinations of willfulness. Specifically, the Federal Circuit cited the Seventh Circuit holding in 1937 that "it seems to be the universal practice for the District Court to make such determination [for treble damages as a result of willfulness] only after the amount and character of the damages have been stated" in an accounting. (Slip op. at 24, quoting Pyle National Co. v. Lewin, 92 F.2d 628, 631 (7th Cir. 1937).) "Other post-1927 decisions confirm that willfulness may be tried as part of an accounting under § 1292(c)(2)." (Slip. op. at 25.) Based on the above, the Federal Circuit determined that "§ 1292(c)(2) confers jurisdiction on this court to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided." (Slip op. at 26.)

Thus, finding that § 1292(c)(2) conferred jurisdiction even though issues of damages and willfulness remain unresolved, the en banc Federal Circuit remanded to the panel for resolution of the substantive issues on the merits.

Several dissenting opinions were filed in Bosch, taking the positions that the majority incorrectly determined the plain meaning of "accounting" and the historical role of special masters in performing "accountings."

Under Bosch, the Federal Circuit endorses appeals which are filed prior to determinations on damages and willfulness. Without leave of the district court, litigants in patent infringement matters may seek an appeal to the Federal Circuit as of right after a determination on liability only. Whether this decision will have any impact on the length and complexity of patent disputes (as well as the Federal Circuit docket) will be seen as cases progress through the federal courts. Nonetheless, this decision will undoubtedly be considered in the calculus of litigation strategy for any matter eligible for Federal Circuit review.