The New Reality of Willful Infringement Post-Halo. Copyright Baker Botts All Rights Reserved.

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1 The New Reality of Willful Infringement Post-Halo Copyright Baker Botts All Rights Reserved.

2 Before June 2016, Seagate shielded jury from most willfulness facts Two Seagate prongs: 1. Objective prong clear and convincing evidence that the infringer acted despite an objectively high likelihood its actions constituted infringement of a valid patent 2. Subjective prong infringer knew or should have known about the risk of infringement In re Seagate Tech., 497 F.3d 1360, 1371 (Fed. Cir. 2007) 2

3 Halo eliminated the best way to keep willfulness from the jury Two Seagate prongs: 1. Objective prong clear and convincing evidence that the infringer acted despite an objectively high likelihood its actions constituted infringement of a valid patent 2. Subjective prong infringer knew or should have known about the risk of infringement In re Seagate Tech., 497 F.3d 1360, 1371 (Fed. Cir. 2007) 3

4 Willfulness now tried more often Before Halo, 31% of verdicts included willfulness After Halo, 52% of verdicts include willfulness (2012-May 2016) 4

5 And lowered the burden of proof [P]atent-infringement litigation has always been governed by a preponderance of the evidence standard.enhanced damages are no exception. Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923, 1934 (2016) (emphasis added) 5

6 Halo left us with vague fact issues The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or indeed characteristic of a pirate. Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923, 1932 (2016) 6

7 Halo left us with vague fact issues characteristic of a pirate malicious wanton consciously wrongful bad faith flagrant willful deliberate 7

8 Practical impact of Halo 1. Willfulness affects liability Paints the accused infringer and witnesses as unlikable Causes jury to doubt witnesses' credibility Leaves jury open to patent owner's trial theme and hostile to accused infringer's trial theme 2. Willfulness increases likelihood of enhanced damages Increases incentive for plaintiff to craft a litigation-misconduct story Support's a finding that a case "stands out from others" 8

9 Recent headlines focus on only second issue 9

10 Halo's impact on liability is the bigger issue 100% 75% 50% 52% 25% 0% jury trial infringement rate (willfulness not tried) 10

11 Willfulness increases risk of infringement 100% 85% 75% 50% 52% 25% 0% jury trial infringement rate (willfulness not tried) post-halo jury trial infringement rate (willfulness tried) 11

12 Willfulness increases risk of infringement 100% 85% 75% 60% 50% 25% 0% post-halo jury trial infringement rate (willfulness not tried) post-halo jury trial infringement rate (willfulness tried) 12

13 Infringement and willfulness intertwined 40 verdicts seeking willfulness since Halo 6 found no infringement 24 willful 10 not willful found infringement 71% willful 13

14 Separating decision making affects outcome not willful split decision maker 33% willful 24 willful 22 6 found infringement 71% willful single decision maker 79% willful 14

15 Strong correlation between infringement and willfulness all claims infringed 86% willful single decision maker 79% willful 3 3 mixed infringement verdict 50% willful 15

16 Willfulness affects all issues Jury Question: What are the repercussions of the decisions we make regarding willfulness and inducement? For example, if we decide that willfulness and inducement occurred, does that mean the monetary damages should be on the high side by the damages scale? Court: I think the answer to that is: You need to make your own decision about that. Johnstech Int'l Corp. v. JF Microtechnology, Case No. 14-cv (N.D. Cal. Sep. 27, 2016) 16

17 I have no trouble judging what s right and wrong. Just tell me the facts. Don t sugarcoat it. And I ll tell you what I think is just. Mock juror in patent case 17

18 Jury instructions parrot Halo... Barry v. Medtronic, Inc., Case No. 14-cv (E.D. Tex. Nov. 11, 2016) 18

19 ... and go further Barry v. Medtronic, Inc., Case No. 14-cv (E.D. Tex. Nov. 11, 2016) 19

20 ... and go further Barry v. Medtronic, Inc., Case No. 14-cv (E.D. Tex. Nov. 11, 2016) 20

21 ... and go further Barry v. Medtronic, Inc., Case No. 14-cv (E.D. Tex. Nov. 11, 2016) 21

22 ... and go further Barry v. Medtronic, Inc., Case No. 14-cv (E.D. Tex. Nov. 11, 2016) 22

23 ... and go further Barry v. Medtronic, Inc., Case No. 14-cv (E.D. Tex. Nov. 11, 2016) 23

24 Nearly identical instructions adopted in C.D. Cal. Polara Engineering, Inc. v. Campbell Co., Case No. CV (C.D. Cal. Jun. 29, 2016) 24

25 Nearly identical instructions adopted in C.D. Cal. Polara Engineering, Inc. v. Campbell Co., Case No. CV (C.D. Cal. Jun. 29, 2016) 25

26 Nearly identical instructions adopted in C.D. Cal. Polara Engineering, Inc. v. Campbell Co., Case No. CV (C.D. Cal. Jun. 29, 2016) 26

27 Similar instructions adopted in N.D. Cal. Johnstech Int'l Corp. v. JF Microtechnology, Case No. 14-cv (N.D. Cal. Sep. 26, 2016) 27

28 Similar instructions adopted in N.D. Cal. Fitness Anywhere LLC v. WOSS Enterprises LLC, Case No. 14-cv (N.D. Cal. Mar. 20, 2017) 28

29 Instructions confuse juries Fitness Anywhere LLC v. WOSS Enterprises LLC, Case No. 14-cv (N.D. Cal. Mar. 21, 2017) 29

30 How will a juror expect the company to act? 30

31 Corporations are judged more harshly Participants in this experiment judged corporations more harshly and punished them more severely than individuals. Further, participants defined recklessness differently when considering an individual or a corporation as a defendant. Robbinette (1999) echoed this sentiment, noting that people often hold groups to higher standards of accountability because groups are seen as more effective than individuals. Sarah Thimsen, Jury Consultant 31

32 How to avoid an unwarranted willfulness verdict? 1. Respond to demands 2. Establish a credible evaluation process 3. Monitor privilege-waiver risks 4. Obtain opinion of counsel opinion as needed 32

33 How to avoid an unwarranted willfulness verdict? 1. Respond to demands 2. Establish a credible evaluation process 3. Monitor privilege-waiver risks 4. Obtain opinion of counsel opinion as needed 33

34 Responding to letters vague letters What makes a letter vague? No accused products identified No explicit accusations of infringement No specific patents identified No patents identified Entire portfolio listed Response to vague letters: Press for details sufficient to form a defense Ask for product information Ask for claim charts Work towards ability to make a reasonable decision on infringement and/or validity 34

35 Responding to letters detailed letters What makes a letter detailed? Identifies specific patents, claims, and accused products Includes clear infringement allegations Includes detailed claim charts Response to detailed letter: Evaluate claims and defenses Identify defenses in response Anticipate jury will see written response Select and prepare witness to testify 35

36 How to avoid an unwarranted willfulness verdict? 1. Respond to demands 2. Establish a credible evaluation process 3. Monitor privilege-waiver risks 4. Obtain opinion of counsel opinion as needed 36

37 Witness selection and story can offset the bias Frustration and distrust of corporations is palpable, no matter what the case themes are and no matter what the venue across the country people have learned you cannot trust corporations to do the right thing. Position your client as being distinct from that untrustworthy norm. Sometimes, all it takes is a single witness who is seen by the jurors as ethically solid, credible, knowledgeable and honest for them to find for that party. Keene Trial Consulting 37

38 Who will the jury really trust? Fiske, S.T. & C. Dupree, Gaining trust as well as respect in communicating to motivated audiences about science topics, Proc. of Nat. Academies of Sciences 111 Supp. 4 (2014) 38

39 Put another way People are getting smarter nowadays; they are letting lawyers, instead of their conscience, be their guide. Will Rogers 39

40 Selecting the right level apex-level witnesses Testifying themes the buck stops here I managed the process in this case My team was doing the right kind of work I didn t have do all of the decision-making, but I was involved or aware of it I did periodic check-ins with my team I doubled checked my team s work by looking at important documents with my own eyes I relied on the conclusions for business decisions (e.g., product changes) I reviewed opinions of counsel (if conducted and produced) I have my own product-development story Risks May lack personal knowledge of technical defenses Unable to fully address technical details 40

41 Selecting the right level technical witness Testifying themes I have the skills to do a serious investigation I was assigned the task of I reviewed the patents I reviewed patent owner's infringement allegations I reviewed expert reports on infringement I reported to apex-level witness, counsel, and experts Risks Insufficient seniority Appearance of bias towards his/her own engineering team Testimony may overlap with technical experts Room for contradiction 41

42 Best choice both apex and technical witnesses Multiple witnesses with different levels an advantage Validates the seriousness of the process Corroborates conclusions and reliance on the conclusions Lessens burden on one witness Shields apex-level witness from needing to recall too much detail Give jurors more witnesses to evaluate 42

43 How to avoid an unwarranted willfulness verdict? 1. Respond to demands 2. Establish a credible evaluation process 3. Monitor privilege-waiver risks 4. Obtain opinion of counsel opinion as needed 43

44 Balance risk of waiver against willfulness Full privilege protection few admissible facts Full waiver too many facts sweet spot 44

45 Truth or inability to prove the truth? Despite knowing of Plaintiff s patents since at least April 2011, Defendants never undertook any serious investigation to form a good-faith belief as to non-infringement or invalidity. Imperium IP Holdings v. Samsung Electronics Co., No. 4:14-CV-371 (E.D. Tex. Aug. 24, 2016) (emphasis added) 45

46 All defendant's communications regarding infringement waived Krausz v. Smith-Blair, Case No. 5:12-cv (E.D.N.C. Dec. 13, 2016) 46

47 How to avoid an unwarranted willfulness verdict? 1. Respond to demands 2. Establish a credible evaluation process 3. Monitor privilege-waiver risks 4. Obtain opinion of counsel opinion as needed 47

48 Opinions of counsel not required The failure of an infringer to obtain the advice of counsel or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed. 35 U.S.C

49 but jury instructions emphasize importance of opinions of counsel Polara Engineering, Inc. v. Campbell Co., Case No. CV (C.D.Cal. Jun. 29, 2016) 49

50 but jury instructions emphasize importance of opinions of counsel Barry v. Medtronic, Inc., Case No. 14-cv (E.D.Tex. Nov. 11, 2016) 50

51 Questions? Jeremy J. Taylor San Francisco Chris Ponder Palo Alto

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