Federal Circuit Clarifies Standards for Willful Patent Infringement and Enhanced Damages
Published: October 21, 2021
Willful patent infringement can result in enhanced, and in some case treble, damages but not in every instance. Because the standard for finding willful infringement has traditionally been lower than that for enhancing damages, a finding of willful infringement does not guarantee an award of enhanced damages. However, a 2019 Federal Circuit opinion caused confusion, suggesting the standards were essentially the same. SRI Int’l, Inc. v. Cisco Sys., Inc. (“SRI II”) 930 F.3d 1295 (Fed. Cir. 2019). In SRI Int’l, Inc. v. Cisco Sys., Inc. (“SRI III”) (Fed. Cir. 2021), the Federal Circuit acknowledged the confusion and clarified these standards.
In the original SRI case, the jury found that Cisco willfully infringed. The judge then doubled the damages award. In the first appeal (SRI II), the Federal Circuit found that prior to Cisco learning of the patents, “the record is insufficient to establish that Cisco’s conduct rose to the level of wanton, malicious, and bad-faith behavior required for willful infringement” (emphasis added). Consequently, the Federal Circuit remanded the case to the district court to determine whether the evidence supported the jury’s finding of willful infringement for the period after Cisco received notice of the patents.
Following the Federal Circuit’s language, the district court on remand determined that the evidence did not support the jury’s verdict of willful infringement because the conduct did not rise to the level of “wanton, malicious, and bad-faith behavior.” Finding no willful infringement, the question of enhanced damages was moot. However, the district court did award attorneys’ fees. SRI appealed.
On appeal the Federal Circuit stated that “[t]o eliminate the confusion created by our reference to the language ‘wanton, malicious, and bad-faith’ …, we clarify that it was not our intent to create a heightened requirement for willful infringement. Indeed, that sentence … refers to ‘conduct warranting enhanced damages,’ not conduct warranting a finding of willfulness.”
This clarification is consistent with prior Supreme Court and Federal Circuit opinions that teach willfulness and enhanced damages are separate concepts with separate standards. “The concept of ‘willfulness’ require[s] a jury to find no more than deliberate or intentional infringement.” In contrast, “[t]he sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.” See SRI III. “Although willfulness is a component of enhancement, ‘an award of enhanced damages does not necessarily flow from a willfulness finding.’” The district court has the discretion to determine whether enhanced damages are appropriate.
In SRI III, the Federal Circuit determined that, applying the proper standard, Cisco’s infringement was willful and then reviewed the district court’s original award of double damages.
The district court had explained that “enhancement was appropriate ‘given Cisco’s litigation conduct, its status as the world’s largest networking company, its apparent disdain for SRI and its business model, and the fact that Cisco lost on all issues during summary judgment and trial, despite its formidable efforts to the contrary.’” The Federal Circuit noted that this explanation properly evaluated the factors in Read Corp. v. Portec, Inc., “including at least ‘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.’” As a result, the Federal Circuit reinstated both the jury’s willfulness verdict and the district court’s award of double damages.
It is important to note that in determining enhanced damages, a court can consider not only the conduct pertaining to the willful infringement, but also other conduct, such as “the infringer’s behavior as a party to the litigation.”
In SRI’s case against Cisco, “SRI presented evidence that Cisco’s invalidity defenses were unreasonable,” and that “Cisco did not have any reasonable basis for non-infringement. The jury also found that Cisco had induced infringement, which Cisco did not appeal. The district court found that “[t]here can be no doubt from even a cursory review of the record that Cisco pursued litigation about as aggressively as the Court has seen in its judicial experience. While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.” “Cisco’s litigation strategies … created a substantial amount of work for both SRI and the court, much of which work was needlessly repetitive or irrelevant or frivolous.” Although unrelated to the finding of willful infringement that triggered the potential for enhanced damages, this litigation conduct was a factor in the decision to enhance damages.