CAFC: Reasonable Litigation Defenses No Defense to Willfulness; Permanent Injunction Denial Was Abuse of Discretion

federal-circuit-cafc-right-angleWBIP, 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.

[Troutman-Ad]

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.

[Troutman-About]

The Author

Joseph Robinson

Joseph Robinson has over 20 years of experience in all aspects of intellectual property law. He focuses his practice in the pharmaceutical, life sciences, biotechnology, and medical device fields. His practice encompasses litigation, including Hatch-Waxman litigation; licensing; counseling; due diligence; and patent and trademark prosecution. He has served as litigation counsel in a variety of patent and trademark disputes in many different jurisdictions, and has also served as appellate counsel before the Court of Appeals for the Federal Circuit. Joe also focuses on complex inter partes matters before the U.S Patent and Trademark Office, inventorship disputes, reexaminations and reissues. His experience includes numerous interferences, a particular advantage in new U.S. Patent and Trademark Office post-grant proceedings. He also counsels on patent–related U.S. Food and Drug Administration issues, including citizen petitions, Orange Book listing, and trademark issues. For more information and to contact Joe please visit his profile page at the Troutman Sanders website.

Joseph Robinson

Robert Schaffer is an intellectual property partner at Troutman Sanders. Bob applies more than 30 years of experience to IP counseling and litigation. His work includes patent procurement, strategic planning and transactional advice, due diligence investigations, district court patent cases, and Federal Circuit appeals. He regularly handles complex and high-profile domestic and international patent portfolios, intellectual property agreements and licensing, IP evaluations for collaborations, mergers, and acquisitions. In disputed court cases Bob’s work includes representing and counseling client in ANDA litigations, complex patent infringement cases and appeals, and multidistrict and international cases. In disputed Patent Office matters his work includes representing and counseling clients in interferences, reexaminations, reissues, post-grant proceedings, and in European Oppositions. For more information and to contact Bob please visit his profile page at the Troutman Sanders website.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 4 Comments comments.

  1. Paul F. Morgan July 30, 2016 9:34 am

    This Fed. Cir. decision spends an unusual thorough amount of ink on the 103 obviousness issue for many pages. But the decision affirms the jury decision and its supporting evidence.
    One wonders if and when a losing client is going to sue for malpractice, or at least dispute paying all their losing litigation bills, for a losing jury trial defense and appeal in a future patent suit somewhat like this? Not for losing the jury trial, but for their attorneys not strongly counseling an IPR, which would be much cheaper and where 103 would be decided by APJs, [not a lay jury inherently influenced by copying and willful infringement] and would be successful. There would be no shortage of IPR experts available to testify to that effect, and no jury sympathy for lawyers charging hundreds of dollars an hour for many hours and losing.

  2. Gene Quinn July 30, 2016 11:08 am

    Paul-

    I’m starting to hear more legal malpractice cases being brought or at least contemplated in the patent space. There is so much money at stake and clients are paying many tens of millions of dollars to lose. I think we are going to see a relative explosion in legal malpractice claims. They will never be huge in number, but I suspect soon we will realize that the days where such a claim was a rarity are gone.

    -Gene

  3. Paul F. Morgan July 30, 2016 2:17 pm

    Thanks Gene. It is indeed very hard to tell about the extent of malpractice claims in patent cases, as insurance companies have said that most such claims are quietly settled.
    On the other hand, I hear that many clients GCs or CPCs are reluctant to even suggest such claims, for fear that it might reflect negatively on the GC or CPC who hired that firm and was supposed to be monitoring it.
    Also, by now, I think there is little excuse for any large company CPC to not be aware of the cost and success rate advantages of using an IPR in some defense situations even if not so counseled by O.C. But a small company will not have that kind of in-house modern patent law knowledge and is dependent on O.C. advice, and rarely gets an independent second expert opinion from someone else not billing for the litigation.

  4. staff August 3, 2016 7:52 pm

    ‘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. ‘

    We agree and applaud the court for an exemplary decision. If inventors and small entities cannot enforce our property rights including the right to exclude competitors and all others from using our inventions without permission, we have no hope of commercializing the technologies we often risk all to develop and bring to market. This is a great step, but we still face many obstacles at the PTO and in some courts as overall it is far too hard, expensive and lengthy for us to get and enforce our patents as a result of the America Invents Act (known by inventors as the America STOPS Inventing Act, or ASIA for short as that is where it has sent all our jobs and in large measure why America can’t find a descent paying job) and various court decisions such as Alice which in our view illegally and unjustly strip us of Constitutionally acknowledged and protected property rights. Administrative review of issued patents for example, does not in our view square with fundamental and traditional property rights in America. To deny us access to the courts and American juries on questions of our most valuable property rights is unjust, unfair and in our view illegal. No one would have questions of their home ownership determined in an administrative review. Why then should we have our most valuable property rights determined so? There is good reason why Americans have for well over two centuries dating back to England claimed the right to a trial by a jury of our peers.

    Still, this is certainly a step in the right direction. The court got it right and we greatly appreciate their support and integrity.

    For our position and the changes we advocate to truly reform the patent system, or to join our effort, please visit us at https://aminventorsforjustice.wordpress.com/category/our-position/
    or, contact us at aifj@mail.com