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
SUMMARY

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... (see full summary)

 
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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.

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