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2 Recent Developments in Patent and Post-Grant Practice November 3, 2016 Presented By: Russ Korn David Reed Sean Casey

3 Agenda I. Enhanced Damages after Halo II. Recent Developments in IPR Practice since Cuozzo III. Samsung v. Apple: Design Patent Damages at the Supreme Court IV. SCA Hygiene: Will Laches Survive?

4 Enhanced Damages For patent infringement, the court may increase the damages up to three times the amount found or assessed. 35 U.S.C. 284

5 History of Enhanced Damages Patent Act of 1793 Treble damages required in all cases Patent Act of 1836 Made enhanced damages discretionary Underwater Devices (Fed. Cir. 1983) Created a duty of care akin to negligence making opinions of counsel a necessity Seagate (Fed. Cir. 2007) En banc Federal Circuit overturned Underwater Devices for a standard based on recklessness

6 The Seagate Test for Enhanced Damages A plaintiff seeking enhanced damages under 284 must show that the infringement was willful. Two-part test for willfulness objective and subjective: First, the patent owner must show that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Second, the patent owner must prove that the risk of infringement was either known or so obvious that it should have been known to the accused infringer. Required clear and convincing evidence In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc).

7 Halo v. Pulse (S. Ct. 2016) The End of Seagate Halo v. Pulse: Halo sent 2 letters offering a license. Pulse engineer concluded the patents were invalid and Pulse proceeded to sell the surface mounted transformers. Jury found willfulness but district court found defense at trial not objectively baseless. Stryker v. Zimmer: Zimmer instructed design team to copy Stryker surgical devices. District court trebled $76 million damages to $228 million. Federal Circuit reversed willfulness, finding Zimmer had reasonable defenses at trial.

8 Objective prong of Seagate provided an out Ignored the knowledge or state of mind of the infringer at the time of the infringement. Not satisfied if accused infringer raises a substantial question as to validity or noninfringement based on the record developed during litigation. Someone who plunders a patent could escape any comeuppance under 284 based on his attorney s ingenuity.

9 Halo v. Pulse (S. Ct. 2016) The End of Seagate The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless. Rejected the objective prong of Seagate as unduly rigid and as impermissibly encumber[ing] the statutory grant of discretion to district courts.

10 Halo v. Pulse (S. Ct. 2016) The End of Seagate Rejects Seagate s threshold requirement of objective recklessness before district court may exercise discretion in awarding enhance damages. Rejects Seagate s requirement of clear and convincing evidence of recklessness; adopts preponderance of evidence standard. Rejects de novo review of objective recklessness; adopts abuse of discretion review.

11 What does Halo mean? Increased risk of enhanced damages. But the Supreme Court emphasized that enhancement still should be limited to egregious cases of misconduct beyond typical infringement. A colorable, post-hoc defense at trial will no longer insulate against enhanced damages, at least for presuit conduct. No threshold showing of objective recklessness to prevent willfulness allegations from reaching the jury.

12 Do I need an opinion of counsel? Accused infringer s pre-suit conduct is now of primary importance. Section 298 of the America Invents Act (2011) prohibits failure of an infringer to obtain the advice of counsel from being used to prove that an accused infringer willfully infringed. But, competent opinions of counsel may be used to defend against charges of willfulness.

13 Agenda I. Enhanced Damages after Halo II. Recent Developments in IPR Practice since Cuozzo III. Samsung v. Apple: Design Patent Damages at the Supreme Court IV. SCA Hygiene: Will Laches Survive?

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16 Institution stage About 20% of cases settle before the Board issues an institution decision Of the 80% of cases where the Board reaches an institution decision: About 70% have been instituted About 30% have been denied Trial stage About 30% of trials that are instituted settle after institution Where the Board reaches a final decision: 69% hold all claims unpatentable 16% hold some claims unpatentable 16% uphold the validity of all claims

17 IPR / CBM Timeline (Typical) 3 Mos. 3 Mos. 3 Mos. 3 Mos. 1 Mo. 12 Mos. 17

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19 Cuozzo v. Lee (S.Ct. 2016)

20 Cuozzo v. Lee (S.Ct. 2016) Decided June 2016 Addressed 2 issues: 1. Whether the Board s broadest reasonable interpretation standard is appropriate during IPR. 2. The extent to which courts may review the Board s institution decision on appeal. Had the potential to cause major disruption to postgrant practice by changing the claim construction and appellate review standards.

21 Cuozzo & Claim Construction Cuozzo argued IPR proceedings are like trials and so claim construction in IPR should parallel that utilized in trials (the Phillips, or plain meaning, standard) The Supreme Court disagreed: Board s regulation requiring BRI standard is a reasonable exercise of its rulemaking authority BRI helps ensure precision in drafting claims and prevents a patent from tying up too much knowledge, which, in turn, helps members of the public draw useful information from the disclosed invention and understand the lawful limits of the claim.

22 Cuozzo & Nonappealability The Patent Office s determination whether to institute an IPR shall be final and nonappealable. 35 U.S.C. 314(d) Court affirmed that institution decision is not appealable. Construing 314(d) against its plain meaning would undercut the important congressional objective of giving the agency significant power to revisit and revise earlier patent grants. Typical strong presumption favoring judicial review overcome here by clear and convincing evidence that Congress intended to bar review.

23 Cuozzo s Open Question Cuozzo did not present a constitutional challenge to the decision to institute petitioner s IPR, but the Court left the door open to such challenges. We need not, and do not, decide the precise effect of 314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond this section.

24 Post-Cuozzo Constitutional Challenges Cooper v. Lee and MCM Portfolio v. HP Both denied cert on October 11, 2016 Cooper v. Square Represents the final pending constitutional challenge Briefing completed October 2016 Petitioner argues that patents are private property rights such that administrative cancellation of patent claims through IPR, and not by an Article III court, is unconstitutional.

25 Interplay between IPR and District Court IPR remains a strong defensive tool for patent litigation. Preponderance of the evidence standard. But Broad claim construction standard. Board panel sophisticated with patent law. Estoppel may bar challenges based on prior art the challenger raised or reasonably could have raised. Adverse IPR decisions may be admissible. Limited IPR protections for confidential information.

26 Agenda I. Enhanced Damages after Halo II. Recent Developments in IPR Practice since Cuozzo III. Samsung v. Apple: Design Patent Damages at the Supreme Court IV. SCA Hygiene: Will Laches Survive?

27 Damages for Infringement of a Design Patent Whoever during the term of a patent for a design, without license of the owner, (1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or (2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties. 35 U.S.C. 289

28 Samsung v. Apple (S.Ct. 2016)

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30 Samsung v. Apple (S.Ct. 2016) The Federal Circuit held that 289 requires a court to award profits from the entire infringing product, even when only a small portion of the overall design is covered by the design patent at issue. The Supreme Court granted cert on a single issue: Where a design patent is applied to only a component of a product, should an award of infringer s profits be limited to those profits attributable to the component?

31 Samsung v. Apple (S.Ct. 2016) Oral arguments held October 11, Samsung argued that article of manufacture could be something less than the entire infringing product, and Apple ultimately agreed in its merits brief. Both sides focused on how a factfinder should determine what constitutes the relevant article of manufacture.

32 Samsung v. Apple (S.Ct. 2016) The Court appears inclined to overturn the Federal Circuit s whole-product rule. But, the Court had difficulty envisioning a workable test. The Court s decision will significantly affect the value of design patents, which has surged in the wake of the Federal Circuit affirming its whole-product rule.

33 Agenda I. Enhanced Damages after Halo II. Recent Developments in IPR Practice since Cuozzo III. Samsung v. Apple: Design Patent Damages at the Supreme Court IV. SCA Hygiene: Will Laches Survive?

34 Supreme Court s 2014 Raging Bull Decision Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct (2014). Copyright dispute between Raging Bull author and MGM Copyright statute has a three-year statute of limitations set forth in 17 U.S.C. 507(b). Supreme Court held an accused copyright infringer cannot use laches to further shorten the three-year time limit on damages.

35 Patent time limitation on damages Except as otherwise provided by law, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action. 35 U.S.C Compare copyright statute of limitations No civil action shall be maintained... unless it is commenced within three years after the claim accrued. 17 U.S.C. 507(b).

36 SCA Hygiene v. First Quality (S.Ct. 2016) The en banc Federal Circuit ruled 6 to 5 that laches remains a defense to patent infringement and could bar all pre-suit damages (but not post-suit damages) The Federal Circuit distinguished Raging Bull, holding that Congress codified a laches defense in [the Patent Act] that may bar legal remedies. But the statutory language only references unenforceability not laches specifically.

37 SCA Hygiene v. First Quality (S.Ct. 2016) The Supreme Court granted cert on a single issue: Whether and to what extent the defense of laches may bar a claim for patent infringement brought within the Patent Act s six-year statutory limitations period, 35 U.S.C. 286.

38 SCA Hygiene v. First Quality (S.Ct. 2016) Oral arguments held on November 1, Focus on whether Congress codified laches when it referenced unenforceability as a defense in the 1952 Patent Act. Several justices expressed skepticism that Congress intended laches to be included as a defense Justice Ginsberg, author of the Raging Bull decision, said that she saw little difference between the patent and copyright statutes of limitation.

39 Practical impact if laches does not survive Little risk to patent owner by sleeping on rights. Non-practicing entities may wait for damages to accrue before bring suit. Increases value of patents near end of term. Delay may not be consideration in decision whether to enter injunction.

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