A Post-Halo World: Companies Need to Be Careful Because Juries Determine Willful Patent Infringement

Dorsey & Whitney LLP

Dorsey & Whitney LLP

The Supreme Court in Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1932, 195 L. Ed. 2d 278 (2016), relaxed the standard for a finding of willful patent infringement under 35 USC Section 284.  The “objective recklessness” standard which had previously been a part of patent litigation since the In Re Seagate decision was removed, leaving only the question of “subjective recklessness” of the alleged infringer at the time of the challenged conduct.  As the Supreme Court held, timing does matter.  

Very significantly, it continued the tradition that the factual components of a willfulness finding be left completely to the jury’s determination.  While the Halo court held that the finding of willful patent infringement, and the subsequent award of enhanced damages that follows, is still reserved for cases of egregious behavior, that may lose focus when a jury is making that determination and therefore making judgments on whether the facts show willfulness during the time in question.  

Take the recent Federal Circuit decision of SRI Int’l, Inc. v. Cisco Systems, where the jury found willful patent infringement after the patentee presented evidence that Cisco met with the inventor of the patent in 2000, that Cisco instructed their customers to use the products in a manner that was infringing, and that Cisco engineers did not read the patent before their depositions.  The district court upheld that jury’s finding that this amounted to willful infringement.

On March 20, 2019, the Federal Circuit reversed that finding, holding that Cisco’s conduct did not rise “to the level of wanton, malicious, and bad-faith behavior required for willful infringement.”  The meeting with inventor and sale of the products happened before Cisco had notification of the asserted patent, and it is not unusual for engineers in a large company not to read all patents of others in the industry.   There was insufficient evidence that this was the bad faith behavior that the Halo court indicated would allow for a finding of willful infringement.

That opinion can be contrasted with the Federal Circuit’s 2017 decision in Arctic Cat Inc. v. Bombardier Rec. Prods., where the Federal Circuit refused to disturb a jury’s finding of willful infringement despite a jury instruction that the standard for willful infringement was whether the defendant knew or should have known that its action constituted the standard for willful infringement.  The jury had reviewed evidence that the defendant knew about the asserted patents, waited years before seeking advice of competent counsel, and tried to buy the patents through a third party,

The SRI decision also contrasts with the Federal Circuit’s prior decision in WBIP, LLC v. Kohler Co., which shows the fine line that patent defendants must walk.  In that case, the defendant admitted it has pre-suit knowledge of the patents which issued in 2008 and 2010, but only because the plaintiff and defendant were the only companies competing in that space before the patents issued, had knowledge of the space and in 2010 received a licensing inquiry about the patents.  The Federal Circuit affirmed that the jury could have inferred that the behavior constituted willful infringement.

As shown by various decisions at the district court, juries have wide latitude to determine what is and is not “bad faith” behavior.  For example, in Milwaukee Elec. Tool Corp. v. Snap-On Inc., the jury found that a letter from a patentee citing 61 patents, including the 3 that were eventually part of a lawsuit, sent three years before the case was filed was not sufficiently researched and analyzed by the defendant, so that the defendant was found to be a willful infringer.

Since this issue is clearly a jury issue, and the jury can evaluate factual issues regarding behavior from even before the patent issued, it is difficult for companies to understand their obligations when faced with notification of a patent.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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