The Federal Circuit Clarifies the Test for Willful Infringement
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The Federal Circuit's recent precedential decision in SRI Int'l., Inc. v. Cisco Sys., Inc. (Fed. Cir. 2021) clarified the test for willful infringement. The appeal arose from a jury verdict, which found that Cisco products infringed claims of SRI's asserted patents. The jury awarded compensatory damages over $23 million and found that Cisco's infringement was willful. Following the verdict, Cisco filed a motion for judgement as a matter of law (JMOL) of no willful infringement and SRI sought attorney fees and enhanced damages.
The district court determined that substantial evidence supported the jury's willfulness finding and, because of Cisco's aggressive conduct during the litigation and the creation of work that was "needlessly repetitive or irrelevant or frivolous," SRI was awarded attorney fees and enhanced damages.
Cisco appealed the district court's denial of JMOL of no willful infringement and its grant of enhanced damages and attorney fees. In the first appeal, the Federal Circuit vacated the district court's denial of JMOL of no willful infringement and remanded the case for the district court to decide, in the first instance, whether the jury's finding of Cisco's willful infringement after it received notice was supported by substantial evidence. The district court's award of enhanced damages was also vacated and remanded because of being "predicated on the finding of willful infringement." In addition, the Federal Circuit vacated the award of attorney's fees because it was "partly based on the finding of willful infringement." In its remand decision, the Federal Circuit instructed the district court to determine whether the adjudged infringer's "conduct rose to the level of wanton, malicious, and bad-faith behavior required for willful infringement."
On remand, the district court vacated the jury verdict of willful infringement and granted Cisco's JMOL of no willful infringement. SRI appealed these judgements to the Federal Circuit.
In its latest decision in this dispute, the Federal Circuit reinstated the jury verdict of willful infringement and reversed the district court's JMOL of no willful infringement. More importantly, the court clarified the standard used for finding willful infringement.
The Court made clear that it was not their intent to create a heightened requirement for willful infringement. The Court stated that the language "wanton, malicious, and bad-faith" from the Supreme Court's holding in Halo Elecs. Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016) refers to conduct for enhanced damages, not conduct warranting a finding of willfulness. The Court stated "the concept of ‘willfulness' requires a jury to find no more than deliberate or intentional infringement."
The Court noted that the standard for willfulness is lower than what is necessary for conduct warranting enhanced damages, which requires "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or…characteristic of a pirate."
The Federal Circuit also reinstated the award for enhanced damages finding that the district court appropriately considered the factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), including "the infringer's behavior as a party to the litigation," the infringer's "size and financial condition," the infringer's "motivation for harm," and the "[c]loseness of the case." The Federal Circuit also found that the award of attorney fees was appropriate. The court noted that an award of enhanced damages is not necessarily required by a willfulness finding. However, in this case, the court determined that Cisco's litigation conduct warranted the award of double damages. Furthermore, because of Cisco's litigation conduct, the Federal Circuit agreed with the district court's finding that the case was exceptional and justified an award of attorney fees.
In this decision, the Federal Circuit clarifies that there are two different tests for willfulness and enhanced damages. Willfulness is the lower standard of the two, and requires "no more than deliberate or intentional infringement." While enhanced damages flows from a finding of willfulness it requires egregious conduct on the part of an infringer. The conduct is measured from the date an adjudged infringer has notice of infringement.
We have many attorneys who can provide counsel on willful infringement. Please feel free to contact us if you have any questions regarding this issue or other Intellectual Property concerns.
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