federal-circuit
2 Ways Courts Approach Willful Infringement After Halo
Republished with permission from Law360, New York (Original - January 18, 2017)
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Volume 48, Issue 2
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This article analyzes how district courts have addressed the sufficiency of pleading enhanced damages after Halo at the motion to dismiss stage. (The first article in this two-part series considered district court decisions on enhanced damages issued within the first six months after Halo.)
In Halo Electronics Inc. v. Pulse Electronics Inc., the U.S. Supreme Court rejected the “unduly rigid” framework first articulated in Seagate nearly a decade ago for awarding enhanced damages under 35 U.S.C. § 284 in the case of willful patent infringement.1 In doing so, the court noted that awards of enhanced damages were left to the discretion of the district court but have typically been reserved for “egregious” infringement behavior. In the wake of the new approach to willfulness and enhanced damages enunciated in Halo and the elimination of Form 18 in the Federal Rules of Civil Procedure,2 several district courts have addressed whether patentees sufficiently plead willful infringement at the motion-to-dismiss stage. We discuss here some of the divergent approaches district courts have taken with respect to this issue. As an initial matter, courts agree that a plaintiff must allege knowledge of the asserted patent as a prerequisite to alleging willful infringement. Once plaintiffs clear this hurdle, however, courts have generally taken two different approaches to the requirements for pleading willfulness. One approach sets a relatively low bar, requiring only that a patentee plead that the accused infringer had knowledge of the asserted patents that could potentially support a finding of egregiousness. And in these cases, some courts have taken a broad view of what constitutes “knowledge” of the patents. The other approach sets a relatively high bar, requiring that the complaint contain allegations of egregious conduct. District courts taking the second approach typically cite to Justice Stephen Breyer’s concurring opinion in Halo stressing that enhanced damages be reserved for “cases of egregious misconduct.”3 Litigants should be aware of these different approaches when they plead and respond to claims for willful infringement and enhanced damages. Group 1: Knowledge of the Patent Is Sufficient to Plead Enhanced Damages Some judges in the Eastern District of Texas, District of Delaware, Eastern District of Virginia, and the Eastern District of Tennessee have ruled that pleading presuit knowledge of the asserted patent is sufficient to allege willful infringement.4 “Knowledge” of the asserted patent can be a more complicated issue than it may initially seem, and some courts have imputed knowledge, at least at the motion-to-dismiss stage, when the details surrounding the alleged “knowledge” make it plausible that the defendant was aware of the patent. In the Eastern District of Texas case of Blitzsafe Texas LLC v. Volkswagen, the defendants argued that knowledge of a patent application — not the patent — was insufficient to allege presuit willfulness. The defendants further argued that the plaintiff had not alleged post-suit willfulness because plaintiff did not seek an injunction.5 The court denied the defendant’s motion to dismiss on both counts. For presuit willful infringement, the court reasoned that the defendant could have learned of the patent when the defendant cited the patent application in an inter partes re-examination proceeding, which occurred after the patent had issued.6 As for post-suit willfulness, the court denied the motion to dismiss because the complaint notified the defendant of the issued patent and it recited facts that stated a plausible claim of direct and indirect infringement. The court observed that the defendants had not ceased the allegedly infringing activities, which the amended complaint implied was characteristic of willful infringement. The court therefore found it plausible that the defendants could be “deliberately continuing to infringe despite notice they are infringing the asserted patents.”7 In the Eastern District of Tennessee case of Malibu Boats LLC v. Mastercraft Boat Company LLC , the plaintiff filed its complaint for patent infringement on the same day the asserted patent was issued and alleged enhanced damages based, in part, on the defendant’s knowledge of the notice of allowance and issue notification for the asserted patent.8 Citing Federal Circuit precedent, the court denied the defendant’s motion to dismiss noting that “pre-patent conduct may also be used to support a finding of willfulness.”9 Even in cases where motions to dismiss are granted, some courts suggest that the knowledge requirement may be met if there are sufficient factual allegations linking the defendant to the asserted patent. For example in Scripps Research Institute v. Illumina Inc., the plaintiff alleged that the defendant was aware of the asserted patents because the defendant previously licensed other patents from one of the named inventors.10 The court disagreed with the plaintiff that the defendant necessarily had knowledge of asserted patent because the inventor had over 80 patents and applications, and granted the motion to dismiss.11 However, the court suggested that factual assertions showing relatedness between the licensed patents and the asserted patent could tilt the willfulness allegation from possible to plausible.12 Some courts also distinguish between knowledge for pre-suit and post-suit willfulness. As discussed above, the court in Blitzsafe Texas LLC v. Volkswagen, separately considered presuit and post-suit willfulness, but ultimately found a basis for each of them based on the allegations in the complaint. In other instances, courts may dismiss presuit willfulness, but allow post-suit willfulness to proceed. For example, in DermaFocus LLC v. Ulthera Inc., the plaintiff alleged presuit knowledge of the asserted patent based on a citation to the asserted patent in an information disclosure statement filed by a founder of the defendant company. The court granted the defendant’s motion to dismiss presuit willfulness due to the plaintiff’s “implausible inferences related to pre-suit knowledge.”13 However, noting the “less rigid standard announced in Halo,” the court denied the motion concerning the plaintiff’s “general allegations of willful infringement,” thus allowing post-suit willfulness to remain in the case.14
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2 Ways Courts Approach Willful Infringement After Halo
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4 Factors Influencing Enhanced Damages After Halo
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