Last week the United States Court of Appeals for the Federal Circuit issued a decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. While the decision is no doubt important to the parties involved, this decision may have more far reaching implications for patent reform in 2015 and beyond. The issue of particular interest in this case was willful infringement. In a concurring opinion, Judge O’Malley, who was joined by Judge Hughes, wrote that she felt constrained by the Federal Circuit’s precedent in In re Seagate and Bard Peripheral Vascular v. W.L. Gore, but that recent Supreme Court decisions call into question the continued viability of that precedent.
As such, Judges O’Malley and Hughes have urged the Federal Circuit to reconsider en banc the standard for awarding enhanced damages under 35 U.S.C. 284.
If enhanced damages for willful infringement is back on the table any prospects for broad-based patent reform is dead. The America Invents Act (AIA) was famously and permanently stalled until the issue of willful infringement and damages was removed from the legislation. With the damages logjam broken the forces pushing for patent reform were able to coax the legislation across the finish line.
In advance of his presentation next week I reached out to Lemley to discuss what is going on and what accounts for the rise in patent damages observed in the Lex Machina report that will be released in conjunction with the panel discussion. I reached him yesterday at his office, and our conversation lasted approximately 30 minutes.
My first question to Lemley was why are patent damage awards increasing? Is this in response to any particular case or event? “An interesting question,” Lemley responded. “There is not a recent case that extends the scope of damages; if anything most of the cases seem to be moving in the opposite direction, such as doing away with 25% rule, for example.”
I would have to agree. I don’t believe any Federal Circuit or Supreme Court cases over the last year or two have made it more hospitable for patent owners seeking hefty damages. Indeed, it seems that the Federal Circuit has seemed to make it more difficult to achieve high damage awards. Lemley agreed: “Even as we are seeing the law get tighter we are seeing an increase in damage awards.”
Damages awards in district court patent cases continue rise, and at alarming rates for those who find themselves on the losing, infringer end of the lawsuit. According to data from Lex Machina, in 2013, average patent infringement awards increased 28% and median patent infringement awards increased 22% when compared with infringement damages awards during 2012.
According to data from Lex Machina’s recently released2013 Patent Litigation Year in Review, the 10 largest damages awards during 2013 ranged from a $1 billion award, to Monsanto from DuPont for infringement of a patent for genetically modified seeds, to just over $15 million, to Tomita from Nintendo for infringement of a video camera image system.
Table 26 from the aforementioned Lex Machina Year in Review shows the top 10:
The necessary legislative effort to curb bad actors in the patent industry has been “hijacked” by a small handful of very powerful global technology companies intent on forcing broader changes in the patent system to make it better serve their business interests.
Under the banner of “patent reform,” these giant firms have spent tens of millions of dollars on lobbyists and media relations to promulgate a series of dramatic but false claims about America’s supposedly-“broken” patent system — claims that are now almost universally accepted as true by the media, Congress, and the public at large.
In Parts 1 and 2 of this series, we examined the false claim that there is an “explosion of patent litigation greater than any in history” as well as the myth that non-practicing entities are a new breed of parasitic patent holder who contributes nothing to society. In fact, we showed that NPEs were consciously created by the U.S. Founding Fathers as a way to kick-start the fledgling American economy by involving as many people as possible — even those without the wealth or resources to commercialize their own inventions — to participate in innovation.
A Manhattan federal jury recently ordered Nintendo Co. Ltd. to pay Tomita Technologies International, Inc. (“Tomita”) over $30 million in damages in a patent infringement case that concerned certain 3D technologies. Tomita, which originally filed the claim against Nintendo back in June of 2011, claimed that Nintendo’s 3DS hand-held video game system (which launched in March of 2011) infringed on Tomita’s patent called “Stereoscopic image picking up and display system based upon optical axes cross-point information” (also known as the ‘664 patent), which is technology that shows 3D images that can be viewed without the use of special 3D glasses.
More specifically, the complaint alleged that Nintendo’s infringement of the ‘664 patent “has been, and continues to be willful;” however, the complaint did not outline exactly how the 3DS gaming system infringed the patent.
The fireside chat between Rader and Flanigan lasted nearly 60 minutes, and the Chief took questions from the audience. I found this entire presentation terribly interesting, but there were several things in particular that I have wanted to get to publishing, which did not neatly fit into the first article about patent litigation abuse. Namely, the Chief discussed the Supreme Court’s aversion to bright line rules and why they are really quite important in the commercial law context. He also discussed what the Federal Circuit has done to bring more certainty to damages, and he provided a razor sharp criticism of Judge Posner of the United States Court of Appeals for the Seventh Circuit.
On Friday March 1, 2013 Judge Lucy Koh handed down her decision regarding various motions that were filed on behalf of Apple Inc. (“Apple”) and Samsung Electronics Co. (“Samsung”) over the past few months post-trial. Specifically, Apple requested additur, supplemental damages, and prejudgment interest, while Samsung moved for a new trial on damages or remittitur. Judge Koh determined that the “Court has identified an impermissible legal theory on which the jury based its award, and cannot reasonably calculate the amount of excess while effectuating the intent of the jury.” The total amount stricken from the jury’s award was $450,514,650 –pending a new trial on damages. The jury awards stands for the remaining 14 products for a total of $598,908,892 in favor of Apple.
Post-trial, Apple requested the Court to increase its damages award for five products because the jury gave an award less than what was calculated by Samsung’s damages expert. However, the Court pointed out that “Apple provide[d] no authority for the argument that the Court should not consider the jury’s specific findings.” Moreover, the Court stated that by doing so would be to violate the longstanding rule that the Seventh Amendment prohibits a judicial increase in a damages award made by a jury. See Dimick v. Scheidt, 293 U.S. 474, 486-87 (1935). Although Apple contends that this rule does not apply in this current case because there is no dispute about the proper amount of damages, the Court quickly and swiftly disagreed. In fact, the Court points out that “[t]he amount of damages is heavily disputed here, as evidenced by extensive testimony provided by both parties concerning the proper amount of compensation.” Additionally, the jury was not bound by either side’s damages testimony and therefore free to evaluate the testimony of both sides’ experts in arriving at its award. The Court denied Apple’s motion for an increase in the jury’s damages.
In January 2013, Taiwan’s InnoLux Corp. filed an appeal with the Federal Circuit, requesting the Court to overturn an award of enhanced post-judgment (“ongoing”) royalties that appeared to be enhanced, at least in part, because the trial judge took offense at an out-of-court remark made by the defendant’s CEO, after losing at trial.
Specifically, in the case of Mondis Technology v. ChiMei InnoLux Corp., et al., No. 2:11-CV-378 (E.D. Tex. Sept. 30, 2011), a jury found InnoLux liable for infringing certain computer monitor patents and ordered it to pay $15,000,000 in damages, plus royalties of 0.5% per monitor sold in the final months prior to judgment, for which sales figures had not yet been available.
Following the verdict, the defendant’s CEO was quoted in a Taiwan newspaper as having said, “The issue of patent infringement is being taken too seriously sometimes.”
High stakes design patent cases are rare. The recently tried Apple v. Samsung case[ii] is arguably the most important design patent case to be tried in a U.S. court, particularly if one defines importance in terms of monetary exposure. Now that the smoke has initially cleared on the field of battle in the district court, commentators can critically scrutinize the results i.e. “shoot the survivors.” The primary thesis of this paper is that no more than 6.4% of the $1.04B monetary award in the jury verdict[iii] can be enhanced for willful infringement, without being vacated and remanded on appeal. The reason for this assertion is that slightly less than 6.4% of the total monetary award is for infringement of only utility patents. Additionally, due to the lack of detail in the jury verdict regarding which Samsung products were used to commit willful infringement, it is quite possible that no enhancement of damages for willful infringement will survive an appeal.
The relative paucity of design patent jurisprudence regarding the legal remedy of damages and the equitable remedy of an accounting for the infringer’s profits, makes clear that while an award of damages for patent infringement may be enhanced under 35 U.S.C. § 284 for willful infringement, an award of profits under 35 U.S.C. § 289, may not be enhanced under Section 284.[iv] While this distinction may appear important to one who wishes to obtain an enhancement of the damages award for willful infringement, the jury verdict form in Apple v. Samsung leaves one clueless as to whether the monetary award for infringement of 18 Samsung devices was an award of damages, an award of profits, or some combination of the two.
By the time you are reading this I will already be off on a cross country voyage in search of some rest and relaxation. Renee and I are vacation bound, and off to our usual favorite vacation spot — Southern California. Newport Beach, Californiato be more specific.
We will be away from the crack of dawn on August 14 through the stroke of midnight on August 28. Business will seem to go on as usual though. I have written a number of articles in advance, which I will post over this two-week span. I have a number of excellent guest contributions, although I’m always looking for more if you want to contribute. I also have several interviews I’ve conducted over the past several weeks, which will publish over the course of the next several weeks. I will also inevitably author some contemporaneous original articles while away, particularly relating to the avalanche of final rules due out for the next wave of implementation of the America Invents Act. So stay tuned! I’ll be gone, but will have laptop and Internet access at the ready.
As I prepare to head out of the office I thought in this relaxing state of mind I might take the opportunity to offer my comments and analysis of the garbage passed off as Judge Posner’s opinion in Apple v. Motorola (June 22, 2012). I have so far successfully avoided writing anything, trying to distance myself in time and emotional state from the moment this ridiculous decision stream of wholly irrelevant dicta was handed down. But there is no way I am going to let the delusional anti-patent ramblings of Judge Posner ruin my vacation! I feel compelled to comment, so this cathartic expression of incredulity will hopefully wash away the bad and bring with it a sense of calming peace that will lead me into much needed rest and relaxation.