When is Infringement Willful: Is Pre-Lawsuit Knowledge of a Patent Required for Enhanced Damages?
Damages for patent infringement have reached new heights in recent years, passing even the one-billion-dollar mark. A jury recently awarded VLSI Technology $2.175 billion in damages against Intel Corporation for infringement of patents related to electronic device processor chips, which the U.S. District Court for the Western District of Texas upheld in denying Intel’s Rule 50(b) Motion for Judgment as a Matter of Law.[i] In addition to the substantial compensatory damages sometimes at issue in patent actions, the stakes can be tripled when the plaintiff can show that the defendant willfully infringed the patent(s) at issue.
Under 35 U.S.C. § 284,[ii] a district court has discretion to award enhanced damages up to three times the amount of damages originally assessed, “as a ‘punitive’ or ‘vindictive’ sanction for egregious infringement behavior … [described] as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.”[iii]
Of course, central to the “willfulness” analysis is the infringer’s knowledge of the plaintiff’s patent and thus that she is risking infringement.[iv] But an interesting question has arisen in the district courts: do claims for enhanced damages based on willful patent infringement require the defendant to have pre-lawsuit knowledge of the patent and of the risked infringement? Or, on the other hand, can the filing of a lawsuit itself give rise to knowledge sufficient to render willful continuing post-lawsuit infringements? District courts are divided on this question.
Some district courts hold that pre-lawsuit knowledge is required for a finding of willful infringement and an award of enhanced damages,[v] as illustrated in the ZapFraud v. Barracuda Networks case. In ZapFraud, the plaintiff filed its original complaint for patent infringement in September 2019.[vi] In April 2020, the plaintiff filed an amended complaint asserting willful infringement “since at least the filing of [the] action,” but did not plead the defendant’s pre-lawsuit willfulness or knowledge of the patent.[vii] In granting the defendant’s motion to dismiss the enhanced damages claims, a District Court in Delaware held that:
“[T]he operative complaint in a lawsuit fails to state a claim for willfulness-based enhanced damages under § 284 where the defendant’s alleged knowledge of the asserted patents is based solely on the content of that complaint or a prior version of the complaint filed in the same lawsuit.”[viii]
In arriving at its conclusion, the court explained that the purpose of filing a lawsuit is to seek relief for existing claims, not to form the basis for new claims.[ix] The court further reasoned that judicial economy and the limited constitutional authority vested in the courts “counsel against” permitting the filing of a lawsuit to form the basis for claims that did not exist pre-filing.[x] Requiring pre-lawsuit knowledge of a patent incentivizes patent holders at least to attempt to resolve patent infringement disputes through pre-litigation negotiation, potentially saving the courts and the parties valuable resources.[xi] Conversely, enhanced patent damages are not meant “to provide a financial incentive for opportunistic plaintiffs to spring suits for patent infringement on innocent actors who have no knowledge of the existence of the asserted patents.”[xii] Indeed, innocent infringers may have already invested substantial resources in developing and marketing their products by the time they discover the plaintiff’s patent.[xiii]
Other district courts, however, allow post-filing knowledge to form the basis for willful infringement and enhanced damages claims, although they limit such damages to the post-lawsuit infringement.[xiv] In Merrill Mfg. Co. v. Simmons Mfg. Co., for example, the defendant learned of the plaintiff’s patent five days after the plaintiff filed its patent infringement suit.[xv] The plaintiff claimed willful infringement arising out of the defendant’s continued manufacture and sale of the infringing product after the filing of the lawsuit.[xvi] In denying the defendant’s motion to dismiss the willfulness-based enhanced damages claim, a court in the Northern District of Georgia held that “allegations [of post-filing conduct] may support a claim for willful infringement.”[xvii] The court focused on the U.S. Supreme Court’s statement in Halo Elecs. that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct” and reasoned that the defendant’s post-filing conduct may evidence such culpability.[xviii] Other district courts have utilized similar reasoning, adding that an infringer should not be able to evade liability for post-filing infringement merely because it learned of the plaintiff’s patent through the lawsuit.[xix]
The division among district courts may continue until the Federal Circuit or the U.S. Supreme Court clarifies the requirement (or lack thereof) of pre-lawsuit knowledge in willfulness-based enhanced damages claims. In the meantime, litigants are wise to determine which of the rules may apply in their venue in determining litigation strategy.
[i] VLSI Tech. LLC v. Intel Corp., No. 6:21-CV-057-ADA, 2022 U.S. Dist. LEXIS 83984, at *3-4 (W.D. Tex. Mar. 18, 2022) (citing ECF No. 564).
[ii] 35 U.S.C. § 284 states, in part: “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement … the court may increase the damages up to three times the amount found or assessed.”
[iii] Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. 93, 103-04, 136 S. Ct. 1923, 195 L. Ed. 2d 278 (2016).
[iv] See Arctic Cat Inc. v. Bombardier Recreational Prods., 876 F.3d 1350, 1371 (Fed. Cir. 2017).
[v] See, e.g., ZapFraud, Inc. v. Barracuda Networks, Inc., 528 F. Supp. 3d 247, 252 (D. Del. 2021); Boston Sci. Corp. v. Nevro Corp., 560 F. Supp. 3d 837, 843 (D. Del. 2021); Kaufman v. Microsoft Corp., No. 16 Civ. 2880 (AKH), 2020 U.S. Dist. LEXIS 14286, at *11-12 (S.D.N.Y. Jan. 22, 2020); Adidas Am., Inc. v. Skechers USA, Inc., No. 3:16-cv-1400-SI, 2017 U.S. Dist. LEXIS 89752, at *12-13 (D. Or. June 12, 2017); Wis. Alumni Research Found. v. Apple, Inc., 261 F. Supp. 3d 900, 917-18 (W.D. Wis. 2017); Cap Co., Ltd. v. McAfee, Inc., No. 14-cv-05068-JD, 2015 U.S. Dist. LEXIS 83522, at *5-6 (N.D. Cal. June 26, 2015); Cap Co., Ltd. v. Microsoft Corp., No. C14-1899 MJP, 2015 U.S. Dist. LEXIS 180874, at *9-10 (W.D. Wash. Apr. 6, 2015).
[vi] ZapFraud, 528 F. Supp. 3d at 248.
[vii] Id. at 249.
[viii] Id. at 252.
[ix] Id. at 251.
[xi] See id.
[xii] Id. at 251-52.
[xiii] See Wis. Alumni Research Found., 261 F. Supp. 3d at 918.
[xiv] See, e.g., Billjco v. Cisco Sys., No. 2:21-CV-00181-JRG, 2021 U.S. Dist. LEXIS 251455, at *24 (E.D. Tex. Nov. 30, 2021); Longhorn Vaccines & Diagnostics, LLC v. Spectrum Sols. LLC, No. 2:20-cv-00827-DBB-JCB, 2021 U.S. Dist. LEXIS 182717, at *21 (D. Utah Sept. 23, 2021); Merrill Mfg. Co. v. Simmons Mfg. Co., 553 F. Supp. 3d 1297, 1306 (N.D. Ga. 2021); Canon, Inc. v. Avigilon USA Corp., Inc., 411 F. Supp. 3d 162, 165-66 (D. Mass. Nov. 20, 2019); ZitoVault, LLC v. Int’l Bus. Machs. Corp., No. 3:16-cv-0962-M, 2018 U.S. Dist. LEXIS 234542, at *7 (N.D. Tex. Mar. 29, 2018); Progme Corp. v. Comcast Cable Commc’ns LLC, No. 17-1488, 2017 U.S. Dist. LEXIS 182484, at *34 (E.D. Pa. Nov. 3, 2017); Huawei Techs. Co. Ltd. v. T-Mobile US, Inc., No. 2:16-CV-00052-JRG-RSP, 2017 U.S. Dist. LEXIS 43240, at *24-25 (E.D. Tex. Feb. 21, 2017).
[xv] Merrill Mfg., 553 F. Supp. 3d at 1301.
[xvii] Id. at 1306.
[xix] See, e.g., Canon, Inc., 411 F. Supp. 3d at 165; Longhorn Vaccines & Diagnostics, LLC, 2021 U.S. Dist. LEXIS 182717, at *21.