WBIP, LLC. v. Kohler Co. (Fed. Cir. July 19, 2016) (Before O’Malley, Moore, and Chen, J.) (Opinion for the court, Moore, J.)
Westerbeke Corporation (WBIP) sued Kohler over a patent on an electric generator for use in houseboats. The claimed generator includes a gasoline powered engine that produces very low levels of carbon monoxide. Because engines must operate near the living quarters of houseboats, occupants are at a greater risk of carbon monoxide poisoning. The claimed generator used a combination of a catalyst and an exhaust cooling system to reduce carbon monoxide emissions. After trial, a jury concluded that Kohler infringed all asserted claims, and that the claims were not invalid as obvious or lacking a written description. The jury awarded $9.6 million in damages, and found that Kohler’s infringement was willful. The district court enhanced the damages by 50% for willful infringement, determined that the case was exceptional, and awarded attorney’s fees to WBIP. WBIP also moved for a permanent injunction against Kohler, which the district court denied. Both parties appealed.
The Federal Circuit affirmed the jury’s verdict that the asserted claims were not obvious. Kohler had identified two prior art references, one of which taught a cooled exhaust system suitable for use in marine environments, and another that taught the use of a catalyst to reduce the carbon monoxide content of the exhaust. Kohler then pointed to a U.S. Coast Guard safety standard that required marine engines to have cooled exhausts as a motivation to combine the catalyst system and the exhaust cooling system. The Federal Circuit held that whether a motivation to combine was sufficient to render a combination obvious was a question of fact for the jury. Finding no exceptional evidence that would prevent such a finding, the Federal Circuit affirmed the jury’s finding that the claims were not obvious.
Further, WBIP presented evidence showing secondary indicia of non-obviousness, including that the claimed invention solved a long-felt need, received industry praise, that the industry viewed the invention with skepticism, wrongly assuming it would not work, that the industry had widely copied the invention, and that it achieved a high degree of commercial success. The Federal Circuit held that the jury had sufficient evidence to find that the asserted claims were not obvious based on each and every secondary indicia of non-obviousness presented by WBIP. Further, finding that Kohler had not presented much – if any – detailed argument regarding its written description challenge, it also found that the jury had sufficient evidence to find the claims not invalid.
Kohler also appealed the finding of willfulness. It argued that it had objectively reasonable validity defenses that would prevent such a finding, and that WBIP had not presented evidence that it was subjectively aware of the asserted patents. The Court first held that an objectively reasonable validity defense was no longer an absolute bar to a finding of willfulness under the Supreme Court’s new standard in Halo Electronics. Subjectively reckless or intentional acts can be sufficient to support a finding of willfulness. Here, the district court found that Kohler’s defenses were not objectively reasonable, and that it was objectively reckless, which made its determination not an abuse of discretion. Further, even if Kohler had reasonable defenses in the litigation, such defenses are no longer a defense to willful infringement in view of Halo. Further, it found that the jury’s verdict was sufficient to show that WBIP had presented evidence that Kohler was aware of the asserted patents.
WBIP cross-appealed the district court’s denial of a permanent injunction. The district court denied WBIP’s request because WBIP was a much smaller manufacturer than Kohler, and it believed that an injunction might deprive the consuming public of a potentially life-saving product. Therefore, under the eBay standard, the public interest in providing generators that produced little carbon monoxide was sufficient to prevent an injunction from issuing. The Federal Circuit found that the district court abused its discretion in failing to issue a permanent injunction. While there is a public interest in safer generators, there is also a public interest in the security of patent rights. Further, WBIP presented evidence that it had sufficient production abilities to satisfy market demand for the product. Finally, in similar contexts, Congress has expressly indicated that permanent injunctions may issue to prevent infringement of other life-saving goods like pharmaceuticals. For these reasons, the Court vacated the district court’s denial of a permanent injunction for further analysis under the other eBay factors.
Under the Federal Circuit’s reading of Halo, companies can no longer rely solely on reasonable litigation-inspired defenses to prevent a finding of willfulness. Instead, if a company is aware that a competitor has patents that arguably cover its products, it may be wise to consider a “freedom to operate” review.