Trends in Enhanced Damages and Willfulness in Patent Cases Mindy Sooter Partner, Wilmer Cutler Pickering Hale & Dorr

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1 Trends in Enhanced Damages and Willfulness in Patent Cases Mindy Sooter Partner, Wilmer Cutler Pickering Hale & Dorr The Patent Act provides two mechanisms meant to deter bad behavior in patent cases: fee shifting in exceptional cases under 35 U.S.C. 285, and enhanced damages for willful infringement under 35 U.S.C Both of these statutes are worded broadly, both have been in place for decades, and both have historically placed discretion squarely in the hands of district courts. In recent years, however, the Federal Circuit constructed multi-pronged and rigid tests for both provisions, making each type of monetary deterrent difficult to obtain. The Supreme Court recently rejected the Federal Circuit s frameworks under both statutes, deeming them too rigid, loosening the standards, and returning discretion to the district courts. In the sections that follow, I first describe the state of the law prior to the Supreme Court s intervention, and the Supreme Court s decisions. I then describe several ensuing Federal Circuit decisions implementing the Supreme Court s new guidance for each statute. Finally, I summarize each section with key takeaways and practice pointers. 1) Fee Shifting in Exceptional Cases under 35 U.S.C. 285 a) Octane Fitness and Highmark i) Overview On April 29, 2014, the Supreme Court decided Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct (2014). In Octane Fitness, the court interpreted 35 U.S.C. 285, which states, in its entirety, that [t]he court in exceptional cases may award reasonable attorney fees to the prevailing party. In its interpretation, the Court rejected the test from Brooks Furniture Mfg., Inc. v. Dutailier Int l, Inc., 393 F.3d 1378 (Fed. Cir. 2005), in which the United States Court of Appeals for the Federal Circuit had held that [a] case may be deemed exceptional under 285 only in two specified circumstances: when there has been some material inappropriate conduct, or when the litigation is both brought in subjective bad faith and objectively baseless. Id. at In Octane Fitness, the Court held that the Brooks Furniture framework is not consistent with the text of 285. ii) Background Section 285 calls for shifting of attorneys fees in exceptional cases. It was enacted in the 1952 codification of the Patent Act, to award fees to a prevailing party when appropriate to address unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which made a case so unusual as to warrant fee-shifting. Id. at For over fifty years, courts applied the statute in a discretionary fashion based on the totality of the circumstances in a given case. 1

2 In 2005, however, the Federal Circuit decided Brooks Furniture, and laid out a more rigid and mechanical formulation for determining when a case is exceptional and warrants fee shifting. Octane Fitness, 134 S. Ct. at In Brooks Furniture, the Federal Circuit held that a case is exceptional under 285 only when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed. R. Civ. P. 11, or like infractions. Id. (citing and quoting Brooks Furniture, 393 F.3d at 1381). The Federal Circuit went on to hold that [a]bsent misconduct in conduct of the litigation or in securing the patent, fees may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless. Id. The Federal Circuit subsequently clarified that litigation is objectively baseless only if it is so unreasonable that no reasonable litigant could believe it would succeed, ilor, LLC v. Google, Inc., 631 F.3d 1372, 1378 (2011), and that litigation is brought in subjective bad faith only if the plaintiff actually know[s] that it is objectively baseless, id., at In Octane Fitness, ICON, an exercise equipment manufacturer sued Octane Fitness for patent infringement, alleging that certain of Octane s elliptical exercise machines infringed one of ICON s patents. Octane Fitness, 134 S. Ct. at The district court granted Octane s motion for summary judgment, and Octane moved for attorneys fees under 285. Applying the Brooks Furniture standard, the District Court denied Octane s motion. Id. It determined that Octane could show neither that ICON s claim was objectively baseless nor that ICON had brought it in subjective bad faith. As to objective baselessness, the District Court explained that although it had rejected ICON s infringement arguments, they were neither frivolous nor objectively baseless. Id. The court also found no subjective bad faith on ICON s part, dismissing as insufficient not only the fact that ICON had never commercialized the patent-insuit, but also an exchange between two ICON sales executives, allegedly showing that ICON had brought the infringement action as a matter of commercial strategy. Id. The Federal Circuit affirmed the District Court, and Octane filed a petition for certiorari, which the Supreme Court granted. iii) The Supreme Court s Rejection of the Federal Circuit s Test In reversing the Federal Circuit, the Supreme Court held that the framework established by the Federal Circuit in Brooks Furniture is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts. Id. at The Court explained that the Federal Circuit s prerequisite that a district court find either litigation-related misconduct of an independently sanctionable magnitude or determine that the litigation was both brought in subjective bad faith and objectively baseless superimposes an inflexible framework onto statutory text that is inherently flexible. Id. The Supreme Court s holding turned entirely on the text of 285, which merely calls for fee-shifting in exceptional cases. Id. at The Court went on to analyze the ordinary meaning of exceptional, based on dictionary definitions. Id. at The Court recited definitions including: uncommon, rare, not ordinary, out of the ordinary course, unusual, or special. Id. The Court then went on to hold that, given the simplicity of the 2

3 statute, an exceptional case is simply one that stands out from others with respect to the substantive strength of a party s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. Id. The Court further held that district courts should consider fee-shifting on a case-by-case basis, based on their discretion, considering the totality of the circumstances. Id. The Court reasoned that the Federal Circuit s Brooks Furniture test was overly restrictive because requiring otherwise sanctionable conduct, or both objective baselessness and subjective bad faith is so demanding that it would appear to render 285 largely superfluous. 1,2 Id. at Following the Supreme Court s loosening of the Federal Circuit s previously strict test for fee-shifting, the Court remanded for further proceedings consistent with this opinion. Id. On remand, the district court found that the Octane Fitness case was exceptional because Icon s litigation position stands out as a particularly and unusually weak case on the merits and the case was litigated in a manner that stands out from more routine patent cases. ICON Health & Fitness, Inc. v. Octane Fitness, LLC, 706 Fed. Appx. 666, 668 (Fed. Cir. 2017). On appeal, the Federal Circuit affirmed this finding. Id. b) Federal Circuit Cases Following Octane Fitness Now, four years after the Octane Fitness and Highmark decisions, the Federal Circuit has had an opportunity to review district court rulings under the new, looser fee-shifting standard, applying an abuse of discretion standard rather than de novo review. Despite the Supreme Court s emphasis on the district courts wide discretion, the Federal Circuit has found multiple occasions to reverse. Below are a few exemplary decisions: AdjustaCam, LLC v. Newegg, Inc., 861 F.3d 1353 (Fed. Cir. 2017): In this case, the AdjustaCam sued Newegg and dozens of other defendants, dismissing most cases early in the litigation. Id. at AdjustaCam, however, maintained its case against Newegg through expert discovery before voluntarily dismissing its claims with prejudice. Id. at Newegg moved for fees, reciting these facts, and the Eastern District of Texas declined to award fees under 285. Id. The Federal Circuit reversed the Eastern District of Texas s denial of Newegg s fee motion. The Federal Circuit held that the district court abused its discretion by not awarding fees to Newegg for two independent reasons: (1) it failed to follow our mandate on remand; and (2) its decision was based on a clearly erroneous assessment of the evidence. Id. 1 The same day, the Supreme Court also decided Highmark Inc. v. Allcare Health Management System, Inc., 134 S. Ct (2014). In Highmark, the District Court had awarded fees to the accused infringer, and the Federal Circuit reversed in part, applying the Brooks Furniture test and reviewing de novo the District Court s finding of objective baselessness. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1749 (2014). The Supreme Court reversed and remanded, holding that a District Court s finding of exceptional case status should be reviewed under an abuse of discretion standard, not de novo. Id. 2 In Romag Fasteners, Inc. v. Fossil, Inc., 866 F.3d 1330 (Fed. Cir. 2017), the Federal Circuit adopted this same test for Lanham Act cases, which have an identical fee-shifting statute. See 15 U.S.C. 1117(a). Other circuits had also applied Octane Fitness to the Lanham Act s feeshifting statute. 3

4 at The Federal Circuit instructed: While the district court need not reveal its assessment of every consideration of 285 motions, it must actually assess the totality of the circumstances. The district court did not do this. In particular, there is no analysis of AdjustaCam s continued dubious press of litigation in the totality of the circumstances under the new standard set in Octane. Id. at Contributing to the Federal Circuit s decision was AdjustaCam s late supplementation of its expert reports, its frivolous infringement arguments following an adverse claim construction, the irregularities in its damages model, and its pattern of nuisance-value settlements. Id. at Checkpoint Systems, Inc. v. All-Tag Security S.A., 858 F.3d 1371 (Fed. Cir. 2017): In Checkpoint, the Eastern District of Pennsylvania awarded $6.6 million in attorneys fees costs, and interest to the defendant following the jury s finding of non-infringement and invalidity. Id. at The Court based its opinion on the fact that plaintiff performed insufficient pre-suit investigation, and based its infringement opinion on accused products manufactured in Switzerland, despite the accused products having been manufactured in Belgium. Id. The Federal Circuit reversed, observing that the Supreme Court has cautioned that fee awards are not to be used as a penalty for failure to win a patent infringement suit. Octane Fitness, 134 S. Ct. at 1753 (quoting Park In Theatres, Inc. v. Perkins, 190 F.2d 137, 142 (9th Cir. 1951)). It went on to explain that the legislative purpose behind 285 is to prevent a party from suffering a gross injustice : The exercise of discretion in favor of [awarding attorney fees] should be bottomed upon a finding of unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which makes it grossly unjust that the winner of the particular law suit be left to bear the burden of his own counsel fees. Checkpoint Systems, 85 F.3d at 1376 (citing S. Rep. No. 1503, 79th Cong., 2d Sess. (1946) (addressing the 70 precursor to 285)); see also Octane Fitness, 134 S. Ct. at 1753 ( The provision enabled [district courts] to address unfairness or bad faith in the conduct of the losing party, or some other equitable consideration of similar force, which made a case so unusual as to warrant feeshifting. (quoting Park In Theatres, 190 F.2d at 142)). In this case, despite the accused products originating from a different country than the products tested during pre-suit investigation, there was no evidence that the accused products differed from the tested products; to the contrary, the accused products were manufactured with the same machines as the tested products. Checkpoint Systems, 85 F.3d at Moreover, Checkpoint had already obtained judgments against All-Tag for infringement of a Swiss counterpart of the patent-insuit. Id. All in all, the Federal Circuit found that an exceptional case finding an abuse of discretion under these facts. SFA Systems, LLC v. Newegg Inc., 793 F.3d 1344 (Fed. Cir. 2015): In this case, the plaintiff sued Newegg and many other defendants, and voluntarily dismissed its claims against Newegg after claim construction, but before expert discovery. Id. at Newegg asked the Eastern District of Texas to award its attorneys fees, and the Court declined. Id. Newegg asked the Federal Circuit to reverse both the district court s summary judgment order as well as its refusal to award attorney s fees to Newegg, arguing that the District Court s summary judgment ruling was incorrect as a matter of law and its denial of Newegg s attorneys fees motion was clearly erroneous. Id. at 1345, Newegg argued to the Federal Circuit that in footnote 2 in Highmark, the Supreme Court states that [t]he abuse-of-discretion standard does not preclude 4

5 an appellate court s correction of a district court s legal or factual error: A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence. Highmark, 134 S. Ct. at 1748 n. 2 (quoting Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S. Ct. 2447, 110 L.Ed.2d 359 (1990)). First, the Federal Circuit declined Newegg s invitation to revisit the District Court s summary judgment ruling, and found that the district court did not abuse its discretion in concluding that SFA's litigation position was not one that stands out from others with respect to the substantive strength of [SFA's] litigating position. SFA Systems, 793 F.3d at Next, the Court evaluated Newegg s allegations that SFA Systems unreasonably litigated the case. Despite agreeing with Newegg that a pattern of litigation abuses characterized by the repeated filing of patent infringement actions for the sole purpose of forcing settlements, with no intention of testing the merits of one s claims, is relevant to a district court s exceptional case determination under 285, and to the extent a district court discount[s] the motivations behind a patentee s litigation history, the district court was wrong, the Court explained that it need not evaluate and determine all issues of law decided by the district court de novo as part of its review. SFA Systems, 793 F.3d at Ultimately, the Federal Circuit declined to override the district court s determination, finding that Newegg s failure to make a record supporting its characterization of [plaintiff s] improper motivations was fatal to Newegg s argument. Id. at Gaymar Industries, Inc. v. Cincinnati Sub-Zero Products, Inc., 790 F.3d 1369 (Fed. Cir. 2015): In Gaymar, plaintiff accused defendant of patent infringement, and the defendant invalidated all claims in an inter partes reexamination. Id. at Defendant filed a motion for attorneys fees, and the district court decided, after Octane Fitness, not to rest its decision on the reasonableness of Gaymar s litigation position, but instead decided to award fees based in significant part on its finding that the prevailing party s own litigation misconduct resulted in unclean hands and precluded an exceptional case finding. Id. at The Federal Circuit vacated the ruling and remanded, explaining that [t]o be sure, the conduct of the parties is a relevant factor under Octane s totality-of-the-circumstances inquiry, including the conduct of the movant, but we conclude that the district court committed clear error here in finding misconduct by [defendant]. Id. at The Federal Circuit analyzed the examples of alleged misconduct by the moving party, which largely consisted of minor inconsistent statements over the course of the multi-year litigation, and found that the basis on which the district court had focused amount to sloppy argument, at worst. Id. at The Court continued, saying [w]hile such sloppiness on the part of litigants is unfortunately all too common, it does not amount to misrepresentation or misconduct, and it is important that the district court be particularly careful not to characterize bad lawyering as misconduct. Id. Having found that none of the examples cited by the district court constitutes litigation misconduct, the court reversed the denial of attorneys fees and remanded, ordering the district court to reconsider its decision on the totality of the circumstances under Octane. Id. Rothschild Connected Devices Innovations, LLC v. Guardian Protection Services, Inc., 858 F.3d 1383 (2017): In Rothschild, plaintiff sued over fifty defendants, including ADS, in the Eastern District of Texas. Id. at ADS then sent Rothschild a Rule 11 notice, demanding that Rothschild withdraw its complaint because the asserted claims were invalid under 35 5

6 U.S.C Id. Rothschild complied, moving to voluntarily dismiss its complaint, but ADS opposed, cross-moving for its attorneys fees. Id. The Eastern District of Texas denied ADS s motion, explaining that Rothschild s dismissal was precisely the response that Rule 11 was designed to cause. Id. ADS appealed, arguing that (a) the District Court failed to properly assess the weakness of Rothschild's litigating position ; (b) the District Court failed to consider Rothschild's willful ignorance of the prior art"; (c) Rothschild engaged in vexatious litigation by bringing suit solely to extract a nuisance payment ; and (d) the District Court failed to consider the totality of the circumstances as required by Octane. Id. at The Federal Circuit agreed with ADS on its first three arguments, finding that the District Court abused its discretion, and remanding. First, the Federal Circuit faulted the District Court for failing to consider Rothschild s willful ignorance of the prior art. Id. at The Court noted that the District Court failed to account for the fact that Rothschild simultaneously insisted the patent was valid, while at the same time asserting it had not analyzed the prior art. Id. Second, the Court faulted the District Court for ignoring the fact that Rothschild sued fifty-eight defendants, alleging infringement by a wide variety of technologies, and settling the suits for nuisance value amounts. Id. at Finally, the Court found that the District Court erred as a matter of law by finding that an attorney fee award under 285 in this case would contravene[] the aims of Rule 11['s]" safe-harbor provision. Id. at This is because Rule 11 is not the appropriate benchmark. Id. The Federal Circuit then remanded for the District Court to conduct additional proceedings consistent with [its] opinion, including those pertaining to the calculation of attorney fees. Id. 2) Enhanced Damages For Willful Infringement under 35 U.S.C. 284 a) Halo and Stryker i) Overview On June 13, 2016, the Supreme Court decided Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct (2016). In Halo, the court interpreted 35 U.S.C. 284, which provides that, in a case of infringement, courts may increase the damages up to three times the amount found or assessed. In its interpretation, the Court rejected the test for enhanced damages under 284 that the Federal Circuit previously adopted in In re Seagate Technology, LLC, 497 F.3d 1360 (2007) (en banc). Seagate set forth a two-part test for determining when a district court may increase damages pursuant to 284. The first prong of Seagate, required a patent owner to show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Id., at The second prong of Seagate required the patentee to demonstrate, again by clear and convincing evidence, that the risk of infringement was either known or so obvious that it should have been known to the accused infringer. Id. In Halo, the Court rejected the Seagate framework, holding that it was inconsistent with the text of 284. ii) Overview Discretionary awards of enhanced damages have been part of the Patent Act since Indeed, when the Patent Act was codified in 1952, Congress enacted 35 U.S.C. 284 with 6

7 the purpose of merely reorganization in language to clarify the statement of the statutes. Halo, 136 S. Ct. at The Supreme Court previously described 284 consistent with the history of enhanced damages under the Patent Act as providing that punitive or increased damages could be recovered in a case of willful or bad-faith infringement. Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 508 (1964). For over fifty years, courts continued to apply the statute in a discretionary fashion. In 2007, however, the Federal Circuit decided Seagate, and laid out a more formal multipart test for determining when a case warrants enhanced damages. Halo, 136 S. Ct. at Under Seagate, a plaintiff seeking enhanced damages must show that the infringement of his patent was willful. 497 F.3d, at The Federal Circuit announced a two-part test to establish such willfulness: First, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent, without regard to [t]he state of mind of the accused infringer. Id. at This objectively defined risk is to be determined by the record developed in the infringement proceedings. Id. Objective recklessness will not be found at this first step if the accused infringer, during the infringement proceedings, raise[s] a substantial question as to the validity or noninfringement of the patent. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc., 776 F.3d 837, 844 (C.A.Fed.2015). Second, after establishing objective recklessness, a patentee must show again by clear and convincing evidence that the risk of infringement was either known or so obvious that it should have been known to the accused infringer. Seagate, 497 F.3d, at Only when both steps have been satisfied could a district court proceed to consider whether to exercise its discretion to award enhanced damages. Id. Under the Seagate standard, an award of enhanced damages was subject to trifurcated appellate review. The first step of Seagate objective recklessness was reviewed de novo ; the second step subjective knowledge was reviewed for substantial evidence; and the ultimate decision whether to award enhanced damages for abuse of discretion. iii) The Supreme Court s Rejection of the Federal Circuit s Test In Halo, Halo had accused Pulse, an electronics manufacturer, of patent infringement. Halo, 136 S. Ct. at In 2002, Halo sent Pulse two letters notifying Pulse of Halo s patents, and offering to license the patents to Pulse. Id. Pulse s engineer determined that Halo s patents were invalid, and Pulse continued to sell the allegedly infringing products without a license. Id. In 2007, Halo sued Pulse for patent infringement. Id. A jury found that Pulse infringed and there was a high probability it had done so willfully. Id. The district court, however, declined to enhance the damages under 284 because it found that Pulse s invalidity defense was not objectively baseless, or a sham. Id. Therefore, the court held, Halo failed to satisfy the first prong of the Seagate test and was not eligible for enhanced damages. The Federal Circuit affirmed the District Court, and Halo filed a petition for certiorari. In a sister case to Halo, Stryker v. Zimmer, Stryker sued its competitor Zimmer for patent infringement. Id. at Stryker argued that Zimmer s pulsed lavage devices combinations of spray guns and suction tubes, used to clean tissue during surgery infringed Stryker s patents. Id. A jury found that Zimmer willfully infringed Stryker s patents, and trebled the damages, resulting in an award of over $228 million to Stryker. Id. In trebling the damages 7

8 award, the District Court noted that Zimmer had all-but instructed its design team to copy Stryker s products, and had chosen a high-risk/high-reward strategy of competing immediately and aggressively in the pulsed lavage market, while opt[ing] to worry about the potential legal consequences later. Id. [T]reble damages [were] appropriate, the District Court concluded, [g]iven the one-sidedness of the case and the flagrancy and scope of Zimmer s infringement. Id. Zimmer appealed, and the Federal Circuit vacated the award of treble damages, holding that Zimmer had presented reasonable defenses at trial. Id. In reversing the Federal Circuit, the Supreme Court held that the text of 35 U.S.C. 284 provides simply that the court may increase the damages up to three times the amount found or assessed. Id. The Court observed that this language contains no explicit limit or condition, and the word may clearly connotes discretion. Id. The Court clarified, however, that discretion is not whim and in a system of laws discretion is rarely without limits, even when the statute does not specify any limits upon the district courts discretion. Id. at The Court went on to say that although there is no precise rule or formula for awarding damages under 284, a district court s discretion should be exercised in light of the considerations underlying the grant of that discretion. Id. at The past 180 years of enhanced damages under the Patent Act have established that they are not to be meted out in a typical infringement case, but are instead designed as a punitive or vindictive sanction for egregious infringement behavior. Id. Some descriptions of type of conduct warranting enhanced damages include: willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or characteristic of a pirate. Id. Thus, enhanced damages are generally reserved for egregious cases of culpable behavior. Id. In throwing out the Federal Circuit s Seagate test, the Supreme Court held that like the Federal Circuit s Brooks Furniture test for 285 the Seagate test is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts. Id. (citing Octane Fitness, at 1755 (construing 285 of the Patent Act)). Moreover, the Seagate test may have the effect of insulating some of the worst patent infringers from any liability for enhanced damages. Id. The Court explained that the Seagate test mak[es] dispositive the ability of the infringer to muster a reasonable (even though unsuccessful) defense at the infringement trial. The existence of such a defense insulates the infringer from enhanced damages, even if he did not act on the basis of the defense or was even aware of it. Under that standard, someone who plunders a patent infringing it without any reason to suppose his conduct is arguably defensible can nevertheless escape any comeuppance under 284 solely on the strength of his attorney s ingenuity. Id. at This is incorrect, the Court reasoned, because culpability is typically evaluated at the time of the acts in question, not years afterwards. Id. Ultimately, the Court held that district courts should exercise their discretion without the rigid constraints of the Seagate test, but that in exercising that discretion to enhance damages, such punishment should generally be reserved for egregious cases typified by willful misconduct. Id. at Following this loosening of the previously strict test for enhanced damages, the Supreme Court remanded the case for proceedings consistent with this opinion. Id. at Justice Breyer wrote a concurrence, joined by Justices Kennedy and Alito. Id. In the concurrence, these justices emphasize that the discretion of district courts is not without limits. Id. Specifically, they first point out that a willfulness determination may not be made based on 8

9 evidence that the infringer had knowledge of the patent and nothing more. Id. (emphasis in original). Id. Instead, enhanced damages should be awarded only in egregious cases. Id. This is because they amount to a punitive sanction for engaging in conduct that is either deliberate or wanton. Id. The concurrence next points out that a court would not have discretion to use the accused infringer s failure to obtain advice of counsel as the basis for enhanced damages. Id. at Indeed, this is prohibited by 35 U.S.C Finally, the concurrence points out that enhanced damages may not serve to compensate patentees for infringement-related costs or litigation expenses. Id. at This is because the usual damages award without enhancement is already meant to compensate for these expenses. The concurrence, therefore, sought to clarify that the district courts discretion is not without boundaries. On remand of Halo, the district court declined to enhance damages despite the jury s finding of willfulness, finding that Pulse was not a pirate ; it had obtained opinion letters; it investigated validity and legitimately believed the asserted patent ot be invalid; and that Halo did not expressly tell Pulse it was infringing prior to suit. See generally Halo Elecs., Inc. v. Pulse Elecs., Inc., 281 F. Supp. 3d 1087 (D. Nev. 2017). On remand of Sryker, the Federal Circuit affirmed the jury s finding of willful infringement. Stryker, Corp. v. Zimmer, Inc., 837 F.3d 1268, 1279 (Fed. Cir. 2016), and the district court affirmed its prior enhancement of damages. Stryker Corp. v. Zimmer, Inc., 2017 WL , at *2 (W.D. Mich. July 12, 2017). WCM Industries, Inc. v. IPS Corporation, --- Fed. Appx. ----, 2018 WL (Fed. Cir. Feb. 5, 2018): In this case, the Federal Circuit recently evaluated whether a jury verdict finding willfulness under the Seagate standard was sufficient to support a willfulness finding under the new Halo standard WL , at *7. In its analysis, the Court observed that although Halo did away with the first Seagate prong, Halo did not disturb the substantive standard for the second prong of Seagate, subjective willfulness. Rather, Halo emphasized that subjective willfulness alone... can support an award of enhanced damages. Id. (citing Halo, 136 S. Ct. at 1933 ( The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless. )). The Court further observed that Halo also rejected the Seagate test s clear-and-convincing standard of proof and held that this inquiry should be governed by the less demanding preponderance of the evidence standard. Id. In its analysis, the Court rejected defendant s argument that its lack of pre-suit knowledge of the patents-in-suit precluded a finding of willfulness. First, the Court noted that there is no per se rule that pre-suit knowledge is required, but instead the Court must look to the totality of the circumstances presented in the case. Id. at *8 (citing Shiley, Inc. v. Bentley Labs., Inc., 794 F.2d 1561, 1568 (Fed. Cir. 1986)). Moreover, in this case, plaintiff had presented sufficient evidence for a reasonable jury to conclude that the defendant did know of the patents-in-suit, at least as early as the filing of a prior suit. Id. Moreover, there was evidence that the defendant s employees monitored plaintiff s products for decades and possessed catalogs and other literature indicating that [plaintiff s] products were marked with patent pending. Id. Further, plaintiff introduced evidence of a culture of copying at the defendant. 9

10 Id. Thus, the Court found that the jury had ample evidence to support the jury s finding of willfulness. Id. at *9. Exmark Manufacturing Company Inc. v. Briggs & Stratton Power Products Group LLC, 879 F.3d 1332 (Fed. Cir. 2018): In Exmark, the Federal Circuit vacated the District Court s enhanced damages, and remanded for determination whether a new trial on willfulness was necessary. 879 F.3d at There, the District Court had found, as a matter of law, that under Seagate s first prong, the defendant s litigation defenses were unreasonable, and precluded the defendant from presenting arguments regarding invalidity or how closely the prior art tracked the patent. Id. at The Federal Circuit reversed, reasoning that the subjective willfulness of the accused patent infringer is relevant under Halo, and thus, the district court no longer determines as a threshold matter whether the accused infringer s defenses are objectively reasonable. Id. at Instead, the entire willfulness determination is to be decided by the jury. Id. To the extent that decision excluded evidence relevant to defendant s state of mind at the time of the accused infringement, it does not comport with the standard articulated in Halo, which mandates that willfulness is an issue for the jury, not the district court. Id. The Federal Circuit remanded for a determination whether defendant had developed any views about the prior art at the time of accused infringement or whether the evidence only relates to [defendant s] litigation-inspired defenses, and for a new trial on willfulness if appropriate. Id. WesternGeco L.L.C. v. ION Geophysical Corporation, 837 F.3d 1358 (Fed. Cir. 2016): In this case, a jury found defendant s infringement to be subjectively reckless under the subjective prong of Seagate, but the District Court found the defendant s infringement was not willful because its defenses were not objectively baseless. WesternGeco, 837 F.3d at The Federal Circuit remanded for the Court to determine whether enhanced damages were appropriate in view of the jury s finding. Id. at The Federal Circuit instructed, however, that while Halo held that subjective willfulness alone might support an award of enhanced damages, [a]wards of enhanced damages... are not to be meted out in a typical infringement case, but are instead designed as a punitive or vindictive sanction for egregious infringement behavior. Id. at In other words, none of this is to say that enhanced damages must follow a finding of egregious misconduct. As with any exercise of discretion, courts should continue to take into account the particular circumstances of each case in deciding whether to award damages, and in what amount. Id. (citing Halo, 136 S. Ct ). Exergen Corporation v. Kaz USA, Inc., --- Fed.Appx. ----, 2018 WL (Fed. Cir. March 8, 2018): In Exergen, the District Court found that the objective prong of the Seagate test was not met, and that the defendant s infringement had therefore not been willful. Id. at * 9. Notwithstanding that determination, the District Court went on to analyze whether enhanced damages would be warranted by the Read factors set forth in Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992). Id. The District Court found that even if the infringement had been willful, enhanced damages would not be warranted by the Read factors. Id. The Federal Circuit affirmed, finding that [u]nder the circumstances of this case, the district court did not abuse its discretion in analyzing the Read factors, taking into account the overall circumstances of the case, and denying enhanced damages. Id. 10

11 Arctic Cat Inc. v. Bombardier Recreational Products Inc., 876 F.3d 1350 (2017): In this case, the defendant was found to have willfully infringed by the jury, and defendant appealed, arguing that the jury instructions were erroneous. The District Court had instructed the jury that Arctic Cat must prove by clear and convincing evidence that BRP actually knew or should have known that its actions constituted an unjustifiably high risk of infringement of a valid and enforceable patent. Arctic Cat, 876 F.3d at The defendant, BRP, objected to the or should have known language, arguing that it contradicted Halo. Id. The Federal Circuit rejected this argument, reciting its own prior words from WesternGeco L.L.C. v. ION Geophysical Corp., 837 F.3d 1358, 1362 (Fed. Cir. 2016): Halo did not disturb the substantive standard for the second prong of Seagate, subjective willfulness. Rather, Halo emphasized that subjective willfulness alone i.e., proof that the defendant acted despite a risk of infringement that was either known or so obvious that it should have been known to the accused infringer, can support an award of enhanced damages. Arctic Cat, 876 F.3d at 1371 (emphasis added). 3) Takeaways from the Federal Circuit s Application of Octane and Halo Given the Supreme Court s emphasis on the discretion that 35 U.S.C. 284 and 285 convey to district courts, one may have assumed, following Octane and Halo, that district court s exceptional case findings and enhanced damages awards would almost never be disturbed by the Federal Circuit. Such is not the case. Instead, the Federal Circuit has not hesitated to reverse district courts exceptional case findings. Similarly, the Federal Circuit is not afraid to provide guidance to district courts as to the circumstances that may give rise to findings of willfulness. While the Federal Circuit s opinions are instructive; however, questions remain. For example, while we know that 35 U.S.C. 285 allows fee shifting in exceptional cases, from whose perspective must a case be exceptional? One district judge may have different perspectives than another on what it takes for a case to be exceptionally weak. Likewise, under 35 U.S.C. 284, what are the circumstances under which an accused infringer s acts may be egregious even without pre-suit knowledge of the asserted patent. These questions and others will likely be answered as the Federal Circuit continues to apply Octane and Halo, notwithstanding the Supreme Court s guidance to afford deference to the district courts findings. 11