Willful Patent Infringement and Enhanced Damages After In Re Seagate: An Empirical Study

• Author: Christopher B. Seaman
• Position: Visiting Assistant Professor, Chicago-Kent College of Law
• Pages: 417-471

417

Willful Patent Infringement and

Enhanced Damages After In Re Seagate:

An Empirical Study

Christopher B. Seaman

ABSTRACT: Willful patent infringement is a critical issue in patent

litigation, as it can result in an award of up to treble (enhanced) damages.

In a 2007 decision, In re Seagate, the Federal Circuit significantly altered

the standard governing willful infringement by requiring the patentee to

prove at least “objective recklessness” by the accused infringer. Many

observers predicted that this heightened standard would result in far fewer

willfulness findings and enhanced-damages awards. To date, however,

there has been no comprehensive empirical study of Seagate’s actual impact

in patent litigation.

This Article fills that gap by analyzing six years of district-court decisions—

three years before and after Seagate—on willful patent infringement and

enhanced damages. Surprisingly, it determines that willful infringement

was found in only about 10% fewer cases after Seagate. In addition, after

Seagate, juries find willful infringement substantially more often than

judges at trial. However, enhanced damages are awarded less frequently

and in lower amounts when juries find willfulness compared to judges.

Finally, this Article evaluates the impact of several common factors on

willful infringement decisions after Seagate. Based on the empirical data

collected in this study, the existence of a “substantial” or “legitimate” defense

to infringement is the strongest predictor of a finding of no willfulness after

Seagate, while evidence of copying by the accused infringer was the strongest

predictor of willfulness. In contrast, the remaining factors studied—

 Visiting Assistant Professor, Chicago-Kent College of Law. Email:

cseaman@kentlaw.edu. This Article was a winner of the inaugural Samsung-Stanf ord Patent

Prize competition. It greatly benefited from comments and suggestions by Chris Buccafusco,

Paul Heald, Ed Lee, David O’Steen, Lee Petherbridge, Scott Salmon, and Dave Schwartz,

attendees at the 2010 Intellectual Property Scholars Conference at the University of California-

Berkeley School of Law, and participants at the Inaugural Samsung-Stanford Conference on

Patent Remedies at Stanford Law School in February 2011. I thank Brandon Dube for his

excellent research assistance and Lucy Moss of the Chicago-Kent College of Law Library for her

continued help. Finally, I thank the Stanford Intellectual Property Litigation Clearinghouse

(“IPLC”) for access to the invaluable Lex Machina database of intellectual-property litigation.

418 IOWA LAW REVIEW [Vol. 97:417

opinions of counsel, attempts to design around the patent, reexamination at

the PTO, and bifurcation of willfulness from liability at trial—had no

statistically significant effect on willfulness decisions.

I. INTRODUCTION ...................................................................................... 419

II. WILLFUL PATENT INFRINGEMENT .......................................................... 421

A. POTENTIAL CONSEQUENCES OF A WILLFULNESS FINDING .................... 421

B. EVOLVING STANDARDS FOR WILLFULNESS .......................................... 423

1. Underwater Devices: The Affirmative Duty of Due Care ......... 423

2. Knorr-Bremse and EchoStar: The Interregnum ....................... 426

3. In re Seagate: The Rise of Objective Recklessness ................. 428

III. ISSUES AND METHODOLOGY .................................................................. 431

A. RESEARCH QUESTIONS ...................................................................... 431

B. STUDY DESIGN .................................................................................. 433

IV. RESULTS AND DISCUSSION ..................................................................... 439

A. WILLFUL INFRINGEMENT .................................................................. 439

1. Seagate Resulted in More Summary Judgment Decisions

on Willfulness ......................................................................... 439

2. Seagate and Willfulness Findings ........................................... 441

3. Jury Versus Judge on Willfulness ........................................... 444

4. Venue and Willfulness ........................................................... 449

B. FACTORS AFFECTING WILLFULNESS FINDINGS ..................................... 451

1. Opinions of Counsel .............................................................. 453

2. Substantial Defense to Infringement .................................... 455

3. Copying ................................................................................... 457

4. Design Around ....................................................................... 459

5. Reexamination ....................................................................... 460

6. Bifurcation .............................................................................. 462

C. ENHANCED DAMAGES ....................................................................... 464

1. Standard .................................................................................. 464

2. Enhanced Damages Before and After Seagate ...................... 465

3. Amount of Enhancement ...................................................... 468

V. CONCLUSION ......................................................................................... 471

2012] WILLFUL PATENT INFRINGEMENT & ENHANCED DAMAGES 419

I. INTRODUCTION

Willful infringement is a critical issue in patent litigation. A finding of

willfulness can result in an award of enhanced damages up to triple the

amount of actual damages proven by the patentee,1 as well as the possibility

of paying the patentee’s attorney’s fees.2 Indeed, penalties in the range of

tens of millions of dollars for willful infringement are not uncommon.3

Until recently, if a potential infringer had actual knowledge of a patent,

it was obligated to satisfy “an affirmative duty to exercise due care to

determine whether or not [it] is infringing.”4 Among other things, this duty

usually compelled an accused infringer to obtain a competent opinion of

counsel before engaging in potentially infringing acts.5 Failure to do so was

likely to result in a willfulness finding.6

However, in 2007, the Federal Circuit significantly altered the standard

governing willfulness with its en banc decision in In re Seagate Technology, LLC

(“Seagate”).7 Specifically, Seagate abandoned the “affirmative duty of due

care” requirement, instead requiring the patentee to demonstrate by clear

and convincing evidence that the accused infringer was objectively reckless

in its infringement.8 It also held that potential infringers were no longer

obligated to obtain an opinion of counsel.9 As a result, knowledgeable

observers asserted that Seagate would make proving willful infringement

much more difficult, ultimately resulting in far fewer willfulness findings and

enhanced-damages awards.10 To date, however, there has been no

1. 35 U.S.C. § 284 (2006) (stating that “the court may increase the damages up to three

times the amount found or assessed”).

2. Id. § 285.

3. See, e.g., Krippelz v. Ford Motor Co., 670 F. Supp. 2d 815, 824 (N.D. Ill. 2009)

(awarding approximately $21 million in enhanced damages for willful infringement) , appeal

docketed, No. 11-1103 (Fed. Cir. Dec. 7, 2010); i4i Ltd. P’ship v. Microsoft Corp., 670 F. Supp.

2d 568, 596 (E.D. Tex. 2009) (awarding $40 million in enhanced damages for willful

infringement), aff’d as modified, 589 F.3d 1246 (Fed. Cir. 2009), opinion withdrawn and superseded

by 598 F.3d 831 (Fed. Cir. 2010), aff’d on other grounds, 131 S. Ct. 2238 (2011); Final Judgment

at 2–3, DataTreasury Corp. v. Wells Fargo & Co., No. 2:06-CV-72 (E.D. Tex. Aug. 1, 2011)

(awarding $26.6 million in enhanced damages for willful infringement).

4. Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389 (Fed. Cir.

1983), overruled by In re Seagate Tech., LLC, 497 F.3d 1360 (Fed Cir. 2007) (en banc).

5. Id. at 1390.

6. See Kimberly A. Moore, Empirical Statistics on Willful Patent Infringement, 14 FED. CIR. B.J.

227, 239 (2004) (“If no attorney opinion is presented in defense of a willfulness charge, the

result is usually a finding of willfulness . . . .”).

7. In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), cert. denied, 552

U.S. 1230 (2008).

8. Id. at 1371.

9. Id.; see also Paul J. Heald, Optimal Remedies for Patent Infringement: A Transactional Model,

45 HOUS. L. REV. 1165, 1197 (2008) (“[Seagate] made clear that there is no affirmative duty on

the part of an exploiting firm to search for a patent, nor any duty to search for advice from

counsel on the validity of a patent that is uncovered if a search is done.”).

10. See infra notes 98–104 and accompanying text.