Goodbye Seagate , Hello Halo : Effects of the Evolving Willfulness - - PowerPoint PPT Presentation

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Donna M. Meuth

Associate General Counsel Intellectual Property Eisai Inc. February 27-28, 2017

Yelee Y. Kim

Partner Arent Fox LLP

Goodbye Seagate, Hello Halo: Effects of the Evolving Willfulness Standard on Life Science Patent Filings

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Topics

1.What was law before Halo? 2.What changed with Halo? 3.Development of best internal practices to minimize risk of willfulness

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35 U.S.C. §284

• Upon finding for the claimant the court shall award the claimant

damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

• When the damages are not found by a jury, the court shall assess
• them. In either event the court may increase the damages up to three

times the amount found or assessed. Increased damages under this paragraph shall not apply to provisional rights under section 154(d).

• The court may receive expert testimony as an aid to the determination
• f damages or of what royalty would be reasonable under the

circumstances.

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In re Seagate Technology (Fed. Cir. 2007)

• Removal of affirmative duty of care
• Two-prong test:
• 1st part: Objective recklessness
• Infringer acted despite an objectively high likelihood that its

actions constituted infringement of a valid patent

• No regard to the subjective state of mind of the accused infringer
• 2nd part: Subjective knowledge of infringement risk
• The objectively defined risk was either known or so obvious that

it should have been known to the accused infringer

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In re Seagate Technology (Fed. Cir. 2007)

• Both prongs needed to be met
• Clear and convincing evidence
• Usual scenario
• Objectively reasonable defense to infringement was

fulfilled even if accuser was unaware of that defense at the time

• Record developed during litigation

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Halo Electronics v. Pulse Electronics (U.S. 2016)

• Halo rejects Seagate’s Test
• “The principal problem with Seagate’s two-part test is that it

requires a finding of objective recklessness in every case before district courts may award enhanced damages.”

• “Such a threshold requirement excludes from discretionary

punishment many of the most culpable offenders, such as the ‘wanton and malicious pirate’ who intentionally infringes another’s patent – with no doubts about its validity of any notion of a defense – for no purpose other than to steal the patentee’s business.”

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Halo Electronics v. Pulse Electronics (U.S. 2016)

• What changed?
• No more “objective recklessness requirement”
• No “clear and convincing standard”
• Now preponderance of the evidence
• Appellate review of enhanced damages: abuse
• f discretion

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Post-Halo Standard

• Subjective willfulness determined
• Knowledge of infringer measured at time of

infringement

• Subjective willfulness alone can support award
• f enhanced damages
• Proof that the defendant acted despite a risk of

infringement that was either known or so obvious that it should have been known to the accused infringer

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Post-Halo Standard

• If willfulness is established, the question of

enhanced damages is left to district court’s discretion

• Objective reasonableness of accused infringer’s

positions can be relevant for the district court when exercising its discretion

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Post-Halo: WBIP v. Kohler (Fed. Cir. 2016)

• WBIP, LLC v. Kohler Co. (829 F.3d 1317): CAFC

affirms district court’s enhanced damages

• Defendant had pre-suit knowledge of patents in suit
• Products were marked
• Defendant and plaintiff were only two companies in the market
• Defendant received inquiry regarding its knowledge of plaintiff’s patents
• CAFC determined no abuse of discretion by district court in

enhancing damages by 50%

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Development of best internal practices to minimize risk of willfulness

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Role of Patent Counsel

• Seeking advice of counsel not required to avoid enhanced damages,

but may demonstrate the reasonableness of the accused infringer’s actions.

• Request for advice, and the attorney’s response, will help the court

analyze the "particular circumstances of the case" and the reasonableness of moving forward.

• Counsel to help corporate decision-makers assess the relative risk.
• Assess the scope of, and how a court is likely to construe patent claims.
• Help avoid potential disputes.
• Business leaders can rely on the advice offered by the attorney to

support their decisions.

• This may hold true, even if the patent analyzed—contrary to the attorney’s

advice—is found infringed and not invalid during litigation.

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Avoiding Willfulness – Patent Clearance Search

• Search patents in the relevant field, determine how closely

they relate to the technology under consideration, and consider whether any change in strategy should be made in view of the results.

• Full opinion of counsel may not be necessary for each patent that

search reveals.

• Knowing what patents others hold that relate to technology can help

the business decide whether to pursue an opportunity, to modify its product/process, to seek a license, or to invest elsewhere.

• By engaging in a patent-clearance analysis, the business can

demonstrate that it took steps to avoid potential infringement, thereby reducing the likelihood of enhanced damages.

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Avoiding Willfulness – Patent Clearance Search (cont.)

• Evidence of a request for an attorney’s advice, and the

advice received, will help an accused infringer explain its actions during future litigation—which may take place years later.

• If a company relies on the advice, it will benefit from being able to

demonstrate that it sought the advice, that it provided its counsel with all relevant information, and that the advice received was competent.

• Collecting this information and saving it for future use will serve a

client well.

• A formal letter from counsel setting forth the advice given, as well as

the bases for the analysis, should help bolster the company’s decision to proceed.

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Avoiding Willfulness – Patent Clearance Search (cont.)

• § 298 of the Patent Act provides that the "failure of an infringer to
• btain the advice of counsel … may not be used to prove that the

accused infringer willfully infringed."

• "it may well be expensive to obtain an opinion of counsel."
• Circumstances in which a business owner, scientist, engineer, or technician

might determine that a product does not infringe a particular patent without such action being "wanton" or "reckless."

• "Congress has … left it to the potential infringer to decide whether to consult

counsel."

• Balance costs and effort required to obtain legal advice versus the

risk presented by the patent.

• Greater potential of enhanced damages under Halo may change the balance.

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Avoiding Willfulness – Post Grant Patent Challenges

• Filing an IPR or PGR may relatively quickly

eliminate some or all of the problematic patent claims.

• Petitioners have been generally successful in post-grant

patentability challenges.

• While most PTAB petitions filed to date have

challenged patents already in litigation, this may change.

• Expect more PTAB petitions for patents not yet

asserted in court to avoid threat of enhanced damages.

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Avoiding Willfulness – Post Grant Patent Challenges (cont.)

• Draft, but delay filing, a petition for review.
• Provide a robust analysis of the scope and

patentability of the patent claims.

• May augment or, in some circumstances, replace

an opinion of counsel.

• Unfiled petition may be used as leverage in

licensing or settlement negotiations.

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Avoiding Willfulness – Post Grant Patent Challenges (cont.)

• Advantages of PTAB proceeding over an opinion.
• Provides more certainty; PTAB will decide whether to institute review

within six months of receiving the petition, and it will issue a final written decision 12 months later.

• Party seeking review will know whether the challenged patent claims

are patentable within a relatively short time.

• PTAB proceeding uses BRI and lower burden of proof as compared

to district court standards that would employ in opinion.

• Disadvantage of PTAB proceeding over an opinion
• If PTAB denies petition, is there an alternative defense?
• Unpatentability on basis can’t raise before PTAB?
• Non-infringement?

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Accused Infringer Beware – Willful Infringement/Enhanced Damages Claim More Likely

• Accused infringer cannot rely solely on the

presence of objectively reasonable defenses in the litigation to defeat a patent owner’s willful infringement claim.

• If the patent owner can show that the accused infringer

had knowledge at the time of the challenged conduct, the court can still find willful infringement even if the infringer’s defenses at trial are objectively reasonable.

• Willfulness decision likely now made by juries, not judges.

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Accused Infringer Beware – Willful Infringement/Enhanced Damages Claim More Likely (cont.)

• Accused infringers should build a record that the

company did not act in bad faith.

• Enhanced damages not appropriate if “the infringer

knew about the patent and nothing more.” Other circumstances needed to “transform[] simple knowledge into … egregious behavior, and that makes all the difference.”

• Required circumstances must show the defendant’s

conduct to be “either ‘deliberate’ or ‘wanton’.”

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Accused Infringer Beware – Willful Infringement/Enhanced Damages Claim More Likely (cont.)

• When company receives an infringement notice letter,

counsel should carefully consider letter and response.

• Although not required, more companies will likely obtain

an opinion letter from counsel regarding noninfringement and/or invalidity.

• Consider whether to take a license from a patent owner.
• Weigh cost of license versus cost of opinion and risk of willful

infringement/enhanced damages.

• If license not taken, the company should build a record

that supports the reasonableness of its decision, to show that the company did not act in bad faith.

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Level of Risk?

• Who are you – Size of company? In house counsel? Fierce

competitor of patent owner? What resources available?

• Who is patent owner – Competitor? NPE?
• How did you become aware of patent?
• Cease and desist letter – With specificity? Form letter?
• Patent Search?
• Response when learned of patent?
• When did you become aware of patent – Design stage? Pre-launch?

Post-launch?

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How To Reduce Risk?

• Review internal company policy and procedure?
• If none, consider establishing.
• Show behaved in good faith.
• Perform internal investigation.
• Involve in-house counsel, IP attorney.
• Scientists.
• Finance, Purchasing.
• Work product.
• Opinion.
• Claim charts.
• Record of what considered.
• Who does review, prepares work product?
• In house versus Outside Counsel.
• Consider level of risk.

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