Washington Journal of Law, Technology and Arts Volume 11, Issue 4 Winter 2016
End OF THE Parallel Between Patent Law's § 284 Willfulness AND § 285 Exceptional Case Analysis
Don Zhe Nan Wang(fn*) © Don Zhe Nan Wang
ABSTRACT
Patent law's "willful infringement" analysis under 35 U.S.C. § 284 and the "exceptional case" analysis under 35 U.S.C. § 285 are largely considered parallel, and essentially identical. In 2014, the Supreme Court of the United States drastically changed the standards for the § 285 exceptional case analysis in its Octane Fitness, LLC v. ICON Health and Fitness, Inc. and Highmark Inc. v. Allcare Health Management System, Inc. decisions. This prompted two federal circuit judges to call for similar changes to the § 284 willful infringement analysis. On October 19, 2015, the Supreme Court granted certiorari to review whether such a change is warranted. This Article examines the legal and policy arguments on both sides and concludes that, while a drastic change of the substantive standard of the willful infringement analysis is unlikely, a change of the standard of review is possible. Consequently, the parallel between § 284 willfulness and § 285 exceptional case analysis will likely come to an end.
TABLE OF CONTENTS
Introduction .................................................................................. 313
I. The Historical Parallel Between § 284 Willfulness and § 285 Exceptional Case Analysis ................................................... 315
A. Section 285 Exceptional Case Jurisprudence ................. 315
B. Section 284 Willfulness Jurisprudence .......................... 317
II. The Interplay Between § 284 Willfulness and Pre-Octane § 285 Exceptional Case Analysis ......................................... 319
III. The Arguments for Maintaining the Current § 284 Willful Infringement Jurisprudence .................................................. 321
A. Section 284 Enhancement Focuses on Commercial Behavior While § 285 Focuses on Litigation Expenses .321
B. Section 284 Willfulness and Pre-Octane § 285 Exceptional Cases Developed Independently Through Case Law ..... 323
C. The Parallel and Overlap Between § 284 and § 285 Jurisprudence are Overstated .......................................... 324
IV. Policy Concerns Revealed in the Supreme Court's Recent Patent Cases Support the Current § 284 Analysis ................ 325
A. The Supreme Court's Heightened Interest in Patent Law ................................................................................. 325
B. Both Octane Fitness and Highmark Reflect The Court's Concerns Over Patent-Exceptionalism and Pro-Patent Bias ................................................................................. 327
C. Maintaining the Current Substantive Standard of § 284, but Changing the Appellate Review Standard Comports with the Supreme Court's Concerns ............................... 328
Conclusion ................................................................................... 329
Practice Pointers ........................................................................... 330
INTRODUCTION
Section 284 of the U.S. Patent Act grants federal judges the discretion to enhance damages up to three times the amount found by a jury or assessed by a court in patent infringement actions.(fn1) The U.S. Court of Appeals for the Federal Circuit has established that "an award of enhanced damages [under § 284] requires a showing of willful infringement."(fn2) Section 285 of the Patent Act allows a court to award attorney fees to the prevailing party "in exceptional cases."(fn3) The analyses used in these two areas of law have long been considered parallel and at times even identical.
In Halo Electronics, Inc. v. Pulse Electronics, Inc., a panel of judges from the U.S. Court of Appeals for the Federal District upheld a decision denying enhanced damages based on the determination that the defendant's infringement was not willful under 35 U.S.C. § 284.(fn4) Significantly, two judges concurred and urged the full court to reconsider the current willfulness standard in light of the Supreme Court's 2014 decisions in Octane Fitness, LLC v. ICON Health and Fitness, Inc. and Highmark Inc. v. Allcare Health Management System, Inc.(fn5)
The Halo concurrence argues that the Octane Fitness and Highmark decisions mandate a change of the current willfulness jurisprudence.(fn6) In Octane Fitness, the Supreme Court overruled the Federal Circuit's objective/subjective two-prong test for determining an "exceptional case" under 35 U.S.C. § 285.(fn7) The concurrence points out that the § 284 willfulness analysis entails a two-prong test that closely mirrors the now-overruled objective/subjective test for a § 285 "exceptional case." However, the circuit court denied the petition for an en banc hearing.(fn8)
On October 19, 2015, the Supreme Court granted certiorari to review whether the 2014 decisions on § 285 exceptional cases warrant a similar change to the § 284 willfulness analysis.(fn9) The case has been consolidated with Stryker Corp. v. Zimmer, Inc. to further consider (1) whether it is appropriate to predicate an award of enhanced damages on a finding of willfulness, and (2) whether the Federal Circuit should apply the abuse of discretion standard instead of the current de novo standard when reviewing § 284 enhanced damages determinations.(fn10)
This Article examines the legal arguments and the underlying policy implications of the upcoming Supreme Court review, and concludes that the possibility of a drastic change to the substantive standard of § 284 willfulness is rather low. It is true that the histories of § 284 willfulness and § 285 exceptional case present similar and paralleled patterns of development, and that many Supreme Court criticisms of the Federal Circuit's pre-Octane § 285 jurisprudence apply equally to the current § 284 framework. However, § 284 and § 285 are distinct areas of patent law, serving very different policy purposes, and therefore warrant different treatment. Most importantly, a drastic change of the current § 284 willfulness analysis will directly contradict the current initiative to counter the impact of so-called "patent trolls" on national patent enforcement trends. Consequently, although a change of the standard of review remains possible, a drastic change of the substantive standard of § 284 jurisprudence is unlikely.
I. THE HISTORICAL PARALLEL BETWEEN § 284 WILLFULNESS AND § 285 EXCEPTIONAL CASE ANALYSIS
Arguments for changing the current § 284 willfulness analysis largely hinge on the historical parallel between the jurisprudence of § 284 willfulness and § 285 exceptional case analysis.(fn11) Thus, an examination of the evolving histories of both sets of cases is instructive for further analysis.
A. Section 285 Exceptional Case Jurisprudence
Section 285 of the U.S. Patent Act provides that, in the context of patent infringement actions, "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party."(fn12) Before the creation of the U.S. Court of Appeals for the Federal Circuit, regional courts applied § 285 "in a discretionary manner, assessing various factors to determine whether a given case was sufficiently 'exceptional' to warrant a fee award."(fn13) For over two decades, the Federal Circuit followed this approach and instructed district courts to consider the "totality of the circumstances" when making an exceptional case determination.(fn14)
In 2005, the Federal Circuit radically changed course in Brooks Furniture Manufacturing, Inc. v. Dutailier International, Inc., applying a test that narrows the scope of analysis.(fn15) Under Brooks Furniture, a case is "exceptional" under § 285 only "when there has been some material inappropriate conduct related to the matter in litigation, such as willful infringement, fraud or inequitable conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation, conduct that violates Fed. R. Civ. P. 11, or like infractions."(fn16) Citing the Supreme Court's decision in Professional Real Estate Investors, Inc. v. Columbia Picture Industries, Inc. ("PRE"), the Federal Circuit held that "[a]bsent misconduct in conduct of the litigation or in securing the patent, sanctions may be imposed against the patentee only if both (1) the litigation is brought in subjective bad faith, and (2) the litigation is objectively baseless."(fn17) Courts typically refer to this two-part inquiry as the objective/subjective test. Further, exceptional cases must be established by clear and convincing evidence.(fn18)
On April 29, 2014, the Supreme Court overruled the Brooks Furniture standard for § 285 exceptional cases in Octane Fitness and Highmark.(fn19) In Octane Fitness, the Court criticized the objective/subjective test as "overly rigid" and "so demanding that it would appear to render § 285 largely superfluous."(fn20) The Court noted that the Federal Circuit imported its narrow exception for sham litigation, despite the fact that it "finds no roots in the [statutory] text of § 285."(fn21) The Court went on to point out that the only constraint on a court's discretion in assigning attorney fees under § 285 is that the case has to be "exceptional."(fn22) "[A]n 'exceptional' case is simply one that stands out from others with respect to the substantive strength of a party's...
