The Software IP Report

Objectively Reasonable Defenses Do Not Preclude Finding of Willful Patent Infringement

By George Schooff

Categories: Patent Infringement, The Software IP Report

The Federal Circuit has held that even if an accused infringer’s defenses to patent infringement are objectively reasonable, Supreme Court precedent does not preclude a willful infringement finding, or enhancing damages.  WBIP, LLC v. Kohler Co., Nos. 2015-1038, 2915-1044 (Fed. Cir. July 19, 2016).

In WBIP, the district court decided the willful infringement question under the Federal Circuit’s Seagate standard.  Under Seagate, proof of willful infringement required “clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent” and that “this objectively-defined risk . . . was either known or so obvious that it should have been known.”  In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007).  The jury found that WBIP had proven by clear and convincing evidence that Kohler’s infringement was willful, and the trial judge concluded that Kohler’s defenses at trial were objectively unreasonable, enhancing WBIP’s damages by 50%.

Kohler appealed, arguing the Federal Circuit should reverse the willful infringement judgment for two reasons.  First, that its invalidity defenses to the patents in suit—obviousness and lack of written description—were objectively reasonable.  Second, that WBIP did not present evidence to the jury that Kohler knew of the patents in suit.

As an initial matter, the Federal Circuit pointed out that in Halo Electronics, Inc. v Pulse Electronics, Inc., 136 S. Ct. 1923 (2016), the Supreme Court had overruled the Seagate decision, albeit after this particular case was argued.  And, per Halo, its review of trial judge’s decision to enhance damages was subject to an abuse-of-discretion standard.  Moreover, a party seeking enhanced damages carries a preponderance of the evidence burden of proof rather than proof by clear and convincing evidence.

Against this backdrop, the Federal Circuit turned to Kohler’s first argument—that its defenses were objectively reasonable.  The Federal Circuit first noted that, under Halo, an accused infringer’s subjective bad faith can alone support an award of enhanced damages, and that an accused infringer’s knowledge must be assessed at the time of the challenged conduct.  In other words, an accused infringer can’t insulate itself from enhanced damages by creating an (ultimately unsuccessful) invalidity defense after engaging in the culpable conduct.  Thus, “[p]roof of an objectively reasonable litigation-inspired defense to infringement is no longer a defense to willful infringement.”

For its part, Kohler did not dispute that its invalidity defenses were created during litigation, after it began engaging in culpable conduct.  Instead, relying on Seagate, Kohler argued the objective recklessness standard required analysis of all of an accused infringer’s non-infringement and invalidity defenses even if they were developed for litigation.  Unfortunately for Kohler, the Federal Circuit concluded that the Supreme Court’s intervening decision in Halo was to the contrary.

As for Kohler’s assertion that WBIP failed to submit evidence that it knew of the patents in suit at the time it was infringing, the Federal Circuit confirmed that “[k]nowledge of the patent alleged to be infringed continues to be a prerequisite to enhanced damages.”

Kohler, however, did not contest that it had pre-suit knowledge of the patents.  In fact, Kohler admitted it was aware of the patents prior to the lawsuit’s filing in its Undisputed Statement of Facts in support of its Motion for Summary Judgment.  In addition, WBIP presented at evidence at trial that it marked its patented products with the patents in suit since the patents issued.  Based on these facts, the Federal Circuit concluded the jury had substantial evidence from which it could properly find Kohler’s pre-suit knowledge of the patents.