Amicus Curiae Brief — Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 356 (2015) (No. 14-1513)

Court, U.>.

Nos. 14-1513; 14-1520 —

IN THE OFFICE OF THE CLERK

Supreme Court of the United States

HALO ELECTRONICS, INC., et a/.,

Petitioners,

v.

PULSE ELECTRONICS, INC., et al.,

Respondents.

On Writs oF CERTIORARI TO THE UNITED STATES

Court oF APPEALS FOR THE FEDERAL Circuit

—_—_—_—_

-—--

BRIEF OF MENTOR GRAPHICS CORP.,

MICROSOFT CORP. AND SAP AMERICA,

INC. AS AMICI CURIAE IN SUPPORT OF

NEITHER PARTY

JOHN D. VANDENBERG

Counsel of Record

SALUMEH R. Lorscu

KLARQUIST SPARKMAN, LLP

121 S.W. Salmon Street, Suite 1600

Portland, Oregon 97204

(503) 595-5300

john.vandenberg@klarquist.com

Counsel for Amici Curiae

December 14, 2045

263082 é

(R00) 274-3321 © (NON) 349-6859

1

TABLE OF CONTENTS

Page

inca icecccsaecnnnuves i

TABLE OF CITED AUTHORITIES .............. iii

INTEREST OF AMICI CURIAE .................. l

ES hid ind oul ct enenieaiosenvaukes 1

SUMMARY OF ARGUMENT...................5- 4

codecs pienibiembekeieebebedacanawe 5

I. THE COURT SHOULD RESTORE

TRIAL JUDGES’ DISCRETIONARY

POWER TO INCREASE PATENT

PR usiccnedessus cudendeensdascses 5

A. Congress Granted Trial Judges The

Discretionary Power To Award More

Than The Actual Damages .............. 5

B. The Federal Circuit Has Vetoed

Much Of The Discretionary Power

Congress Granted Trial Judges .......... 8

C. The Policies That Have Guided This

Court’s Interpretation Of Other

Patent Act Provisions Should Guide

Its Interpretation Of This Provision ...... 9

vw

Table of Contents

Page

D. Trial Judges Should Consider The

Behavior And Posture Of Both

DE a6benndessunaneesesndéeseueisel 13

E. Trial Judges Should Consider The

Parties’ Behavior Both Pre-Complaint

And Post-Complaint ................... 16

F Four Scenarios Illustrate Application

Of These Guidelines ................... 17

Il. WILLFUL INFRINGEMENT IS NOT

SET Sadndebuuadodsccusnéscuess 20

A. There Is No Statutory Right To A

Jury Trial Of Willfulness............... 20

B. There Is No Seventh Amendment Right

To A Jury Trial Of Willfulness.......... 20

1. Historically, Juries Apparently

Did Not Decide Willfulness

PORE 6 sc cccesscoessesees 21

2. Functionally, Juries Are IIl-

Suited To Decide Willfulness In

En ctuseéecencsenceciod 23

C. The Federal Circuit Has Not

Conducted The Required Seventh

Amendment Analysis .................. 26

END Se ccccccccesvscesscvecesesocevecs 27

it

TABLE OF CITED AUTHORITIES

Page

CASES

Aronson v. Quick Point Pencil Co.,

a Pe 10

Birdsall v. Coolidge,

EE eS eT 6, 14

Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,

no ceaucenueseseas 24-25

Clark v. Wooster,

a 15

Feltner v. Columbia Pictures Television, Inc.,

a cee esaeeebecansace’ 22

Gen. Motors Corp. v. Dailey,

OB F.2d SES Gth Cir. IGB7) .. cece ccccecees 14

Halo Elecs., Inc. v. Pulse Elecs., Inc.,

169 F.3d 1871 (Fed. Cir. 2014). ............c0000. 27

Hammerquist v. Clarke’s Sheet Metal, Inc.,

658 F.2d 1319 (9th Cir. 1981)...............0008. 26

In re Seagate Tech., LLC,

497 F.3d 1360 (Fed. Cir. 2007) (en banc)... .. passim

Jurgens v. CBK, Ltd.,

80 F.3d 1566 (Fed. Cir. 1996) ........ pciieceonsd 27

Ww

Cited Authorities

Page

Lear, Inc. v. Adkins,

RG EE RS a ee er ere 12

Markman v. Westview Instruments, Inc.,

I «so vn ceneessesses 20, 21, 23, 27

Mayo Collaborative Servs. v.

Prometheus Labs., Inc.,

sd eeekeeeeadannueee 10

Nautilus, Inc. v. Biosig Instruments, Inc.,

ae ene eeenesekes 11

Pfaff v. Wells Elecs., Inc.,

a o deedeaenenawne 10

Read Corp. v. Portec, Inc.,

970 F.2d 816 (Fed. Cir. 1992). ..............ceeeee 4

Richardson v. Suzuki Motor Co.,

868 F.2d 1226 (Fed. Cir. 1989) ................ 9, 26

Schwarzel v. Holenshade,

21 F. Cas. 772 (S.D. Ohio 1866) (No. 12,506)....... 13

Seymour v. McCormick,

REE Ee rare eae re enemas 6

Shiley, Inc. v. Bentley Labs., Inc.,

794 F.2d 1561 (Fed. Cir. 1986) .................. 26

Vv

Cited Authorities

Page

Smith v. Wade,

EN, 6 cnc acuesahsneiasceuemaees 13

Swofford v. B&W, Inc.,

336 F.2d 406 (5th Cir. 1964) ................ 25, 26

Tull v. United States,

ee cenaneens 20-21, 27

Whittemore v. Cutter,

29 F. Cas. 1120 (C.C.D. Mass. 1813)

8 Ee 6

CONSTITUTIONAL PROVISIONS

EE WE a cc cdndavecsotecessas passim

STATUTES

SR TE PRR TD Ea es Dla, Faso 10

Ne TT nn ae oe ane 10

es ee eRe Geee 10

on cee ccetviscunses 4, 5, 8, 20

le oe een email 8

Pas OF PND 6 bbc inencecisesciscnennces 8

vt

Cited Authorities

Page

Act of Apr. 10, 1790, ch. 7, § 4, 1 Stat. 109........ 5, 6, 21

Act of Apr. 17, 1800, ch. 25, § 3, 2 Stat. 37,38 ......... 6

Act of Aug. 1, 1946, ch. 726, § 1,60 Stat. 778.......... 8

Act of Feb. 18, 1922, ch. 58, § 8, 42 Stat. 389.......... x

Act of Feb. 21, 1793, ch. 11, § 5, 1 Stat. 318............ 6

Act of July 19, 1952, ch. 950, 66 Stat. 792............. 8

Act of July 4, 1836, ch. 357, § 14, 5 Stat. 117......... 6,7

Act of July 8, 1870, ch. 230, § 55, 16 Stat. 198 ......... 7

Act of July 8, 1870, ch. 230, § 59, 16 Stat. 198 ......... 7

Act of Mar. 3, 1897, ch. 391, § 6, 29 Stat. 692.......... 8

RULES

ES oc ck csevedbcevncsscecesenne 1

oc ccepdndetenenadseneuses 1

OTHER AUTHORITIES

7 Donald S. Chisum, Chisum on Patents

DUE GED occ ccccccccccccccccesecs 26

vit

Cited Authorities

D. Dobbs, Handbook on the Law of

EE ocvaccccssvessesesesses

John B. Pegram, The Willful Infringement

Dilemma and the 7th Amendment, 86 J.

Pat. & Trademark Off. Soc’y 271 (2004).......

Mark A. Lemley, Jgnoring Patents, 2008

ls NU nd nhc usecedpecd<uasveses

Janice M. Mueller, Commentary: Willful Patent

Infringement and the Federal Circuit’s Pending

En Banc Decision in Knorr-Bremse v. Dana

Corp., 3 J. Marshall Rev. Intell. Prop. L. 218

A SHS ved nbndend dadboedsdesseesasecess

William C. Robinson, The Law of Patents for

Useful Inventions § 1069 (1890)..............

Page

1

INTEREST OF AMICI CURIAE'

Amici are innovative businesses with multiple roles in

our patent system. Each seeks patents on its inventions,

licenses its patents to others, and obtains licenses under

others’ patents. And, each has sued for and been sued for

alleged patent infringement. The current state of the law

of “willfulness” in patent cases disserves each of these

roles in our patent system. It penalizes companies for

seeking patents on their inventions and for licensing their

patents, and rewards patent owners for silently watching

an infringer’s business grow for years before asserting

infringement. Amici submit this brief to address these

important threshold points not addressed by the parties.

INTRODUCTION

The Federal Circuit has eroded a 180-year old

Congressional grant of discretionary power to trial judges

in patent suits. That grant gives the trial judge, not the

jury, discretion to award the owner of a patent more than

its actual damages from the patent’s infringement. This

discretionary power can serve core public policies of our

patent system, but only when exercised with sound judicial

discretion in view of the relevant circumstances—many

necessarily hidden from a jury. Yet, the Federal Circuit

1. Pursuant to Supreme Court Rule 37.6, counsel for amici

represent that they authored this brief in its entirety and that none

of the parties or their counsel, nor any other person or entity other

than amici, or their counsel, made a monetary contribution intended

to fund the preparation or submission of this brief. Pursuant to

Supreme Court Rule 37.3, Petitioners and Respondents have each

filed with the Clerk of the Court a letter granting blanket consent to

the filing of amicus briefs, other than the Respondents in 14-1520.

The consent from those Respondents is being submitted herewith.

yA

requires trial judges to submit to the jury an important

consideration in such a determination, viz., whether the

defendant had subjective intent to infringe. This and

other restrictions imposed by the Federal Circuit have no

basis in the statute or this Court’s Seventh Amendment

jurisprudence, and undermine core public policies of the

patent system. Accordingly, this Court should restore

a trial judge’s discretionary power to award more than

actual damages based on the judge’s own assessment of

the relevant circumstances.

In addition to overturning the Federal Circuit’s

error, the Court should guide trial judges in exercising

their discretionary power. Such guidance is particularly

needed because, while the Federal Circuit has strayed

from the correct statutory interpretation, it was trying to

solve real “practical concerns stemming from [its earlier]

willfulness doctrine... .” In re Seagate Tech., LLC, 497

F.3d 1360, 1369 (Fed. Cir. 2007) (en banc). Specifically,

the Court should guide trial judges to consider those

circumstances relevant to the core public policies of our

patent system—including the extent to which:

1. the patent owner:

a. implemented a scientifically or commercially

significant advance;

b. made reasonable, clear, and consistent

assertions about the patent’s scope;

e. diligently provided actual and clear notice

of the alleged infringement;

3

acted reasonably to mitigate its damages

from the infringement;

sued, when feasible, the source of the

accused technology—best positioned to

defend or change it—as opposed to a mere

customer; and

was harmed by the infringement beyond the

actual damages allowable under law;

2. the infringer:

independently developed its implementation,

as opposed to copying the inventor’s product

or implementation details in the patent;

contributed to the public domain by

invalidating claims or defeating overbroad

assertions of claim scope;

made reasonable and diligent contentions

that, if successful, would have contributed

to the public domain;

made reasonable efforts to license the patent

at a commercially reasonable price;

acted reasonably and diligently to work

around a direct competitor’s patent,

once it became clear that the accused

implementation likely infringed and would

not be licensed; and

q

f. was economically prejudiced by the patent

owner’s undue delay providing actual and

clear notice of the allegation of infringement;

and

3. the patent owner and infringer:

a. acted reasonably in the litigation.

SUMMARY OF ARGUMENT

The parties focus too narrowly. Intertwined with the

proper role of willfulness in a patent suit are the threshold

questions of who decides willfulness—trial judge or jury—

and what policies and circumstances are relevant when

exercising the discretionary power to increase damages

in a patent suit.

Congress has entrusted the power to award a patent

owner more than its actual damages, to the sound

discretion of the trial judge: “the court may increase the

damages up to three times the amount found [by a jury]

or assessed [by the court].” 35 U.S.C. § 284 (2012). And,

for good reason. This discretionary power can serve

core public policies of our patent system, but only when

exercised with sound judicial discretion in view of the

relevant circumstances.

The Federal Circuit, however, has vetoed muth

of this Congressional grant of discretionary power

to tril judges. Its restrictions on the exercise of this

power entrusted to trial judges harm our patent system

by penalizing companies for seeking patents on their

inventions and patent owners for licensing their patents,

5

and by rewarding patent owners for silently watching

an infringer’s business grow for years before asserting

infringement.

This judicial veto is most evident in the Federal

Circuit’s requirement that trial judges give the issue of

subjective willfulness to the jury—as the trial judges

did in the two cases before the Court. This is error. The

Federal Circuit has not justified this mandate under either

the statute or the historical or functional analysis required

by this Court’s Seventh Amendment jurisprudence. These

considerations demonstrate that willfulness was not a

jury issue in a patent suit before adoption of the Seventh

Amendment in 1791, U.S. Const. amend. VII, and should

not be one today.

The Court should restore the trial judge’s discretionary

power to award more than the actual damages from patent

infringement in view of the purposes of the patent system

and the trial judge’s own determination of the relevant

circumstances, including willfulness.

ARGUMENT

I. THE COURT SHOULD RESTORE TRIAL

JUDGES’ DISCRETIONARY POWER TO

INCREASE PATENT DAMAGES. ,

A. Congress Granted Trial Judges The

Discretionary Power To Award More Than

The Actual Damages.

From our first Patent Act, Act of Apr. 10, 1790, ch.

7, § 4, 1 Stat. 109, 111, to today, 35 U.S.C. § 284 (2012),

6

juries have been limited to awarding actual damages,

not punitive damages, for patent infringement. See, e.g.,

Birdsall v. Coolidge, 93 U.S. 64, 64 (1876) (“[Tjhe jury

are strictly limited in their finding to the actual damages

which the plaintiff has sustained by the infringement”);

Seymour v. McCormick, 57 U.S. 480, 489 (1853) (“[TJhe

Patent Act of 1836 confines the jury to the assessment of

‘actual damages.””); Whittemore v. Cutter, 29 F. Cas. 1120

(C.C.D. Mass. 1813) (No. 17,600) (Story, J.) (unlike some

other torts, “only the actual damages sustained can be”

awarded by the jury for patent infringement, which the

court will then treble.)

In addition to the actual damages assessed by a

jury, Congress initially provided that the infringer

automatically “shall forfeit to the person aggrieved,

the thing or things” that infringe. Act of Apr. 10, 1790,

ch. 7, § 4, 1 Stat. 109, 111. Congress soon replaced this

automatic-forfeiture provision with automatic trebling of

the patent owner’s actual damages. Act of Feb. 21, 1793, ch.

11, § 5, 1 Stat. 318, 322 (“pay to the patentee, a sum, that

shall be at least equal to three times the price . . . which

may be recovered”); Act of Apr. 17, 1800, ch. 25, § 3, 2 Stat.

37, 38 (“a sum equal to three times the actual damage

sustained by such patentee”). But, in 1836, Congress

replaced this automatic trebling with a more flexible tool

to account for the circumstances of a particular action.

Act of July 4, 1836, ch. 357, § 14, 5 Stat. 117, 123; see Jn re

Seagate Tech., LLC, 497 F.3d 1360, 1378 (Fed. Cir. 2007)

(en banc) (Gajarsa, J., concurring & Newman, J. joining)

(“It would appear [from the legislative history], then, that

the 1836 Act was intended to control not only the grant of

unwarranted patents, but also to restore the flexibility of

remedy that is the traditionz! judicial province.”).

7

For 180 years, Congress has empowered trial judges

to award in their discretion more than a patent owner’s

actual damages. While the exact language has varied

slightly, Congress consistently has chosen not to expressly

cabin the trial judge’s discretion, beyond capping the total

award to trebling of the actual damages:

1836: “[I}t shall be in the power of the court to render

judgment for any sum above the amount found by [the]

verdict as the actual damages sustained by the plaintiff,

not exceeding three times the amount thereof, according

to the circumstances of the case... .” Act of July 4, 1836,

ch. 357, § 14, 5 Stat. 117, 123 (emphasis added).

1870: “[T}he claimant [complainant] shall be entitled

to recover, in addition to the profits to be accounted

for by the defendant, the damages the complainant has

sustained thereby, and the court shall assess the same or

cause the same to be assessed under its direction, and the

court shall have the same powers to increase the same

in its discretion that are given by this act to increase

the damages found by verdicts in actions upon the case

....” Act of July 8, 1870, ch. 230, § 55, 16 Stat. 198, 206

(alteration in original) (second emphasis added).’

2. This section 55 concerned a suit in equity, but a counterpart

for suits in law was similar: “And whenever in any such action a

verdict shall be rendered for the plaintiff, the court may enter

judgment thereon for any sum above the amount found by the verdict

as the actual damages sustained, according to the circumstances

of the case, not exceeding three times the amount of such verdict,

together with costs.” Act of July 8, 1870, ch. 230, § 59, 16 Stat. 198,

207 (emphasis added).

8

1897 and 1922: “(T]he complainant shall be entitled to

recover, in addition to the profits to be accounted for by

the defendant, the damages the complainant has sustained

thereby; and the court shall assess the same or cause the

same to be assessed under its direction. And the court

shall have the same power to increase such damages, in

its discretion, as is given to increase the damages found

by verdicts in actions in the nature of actions of trespass

upon the case.” Act of Mar. 3, 1897, ch. 391, § 6, 29 Stat.

692, 694 (emphasis added); Act of Feb. 18, 1922, ch. 58,

§ 8, 42 Stat. 389, 392 (emphasis added).

1946: “The court shall assess said damages, or cause

the same to be assessed, under its direction and shall have

the same power to increase the assessed damages, in its

discretion, as is given to increase the damages found by

verdicts in actions in the nature of actions of trespass upon

the case... .” Act of Aug. 1, 1946, ch. 726, § 1, 60 Stat.

778, 778 (codified at 35 U.S.C. § 70 (1946 ed.)) (emphasis

added); see also 35 U.S.C. § 67 (1946 ed.) (counterpart

provision for suits in law).

1952: “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.” Act of July 19, 1952, ch. 950, 66 Stat. 792,

813 (codified at 35 U.S.C. § 284 (2012)) (emphasis added).

B. The Federal Circuit Has Vetoed Much Of The

Discretionary Power Congress Granted Trial

? Judges.

The Federal Circuit has effectively vetoed much of

this 180-year old statutory grant of discretionary power

9

to trial judges, imposing restrictions having no support

in the statute.

First, the Federal Circuit has taken from trial judges

one factor sometimes deemed dispositive of an increased-

damages determination—subjective willfulness of the

infringement. Richardson v. Suzuki Motor Co., 868 F.2d

1226, 1250 (Fed. Cir. 1989) (holding that a patent owner

has the right to jury trial of the issue of willfulness).

Second, the Federal Circuit has restricted trial judges

from relying on an infringer’s post-complaint positions

and behavior in certain circumstances. Seagate Tech.,

497 F.3d at 1374.

Third, when reviewing trial judges’ increased-

damages determinations, the Federal Circuit considers

only the infringer’s behavior, without balancing it with the

patent owner’s behavior. See Read Corp. v. Portec, Inc.,

970 F.2d 816, 826-28 (Fed. Cir. 1992).

C. The Policies That Have Guided This Court’s

Interpretation Of Other Patent Act Provisions

Should Guide Its Interpretation Of This

Provision.

This Court again is called upon to interpret a provision

of the Patent Act. When interpreting its provisions, this

Court consistently has considered the entire statutory

framework and its delicate balance among the competing

public interests of (1) the would-be inventor lured by the

promise of patent exclusivity; (2) the subsequent artisan

seeking to build on previous advances either by licensing

patented technology at a fair price or inventing around the

10

patent; and (3) the public desiring unencumbered use of

the public domain. See Aronson v. Quick Point Pencil Co.,

440 U.S. 257, 262 (1979). The Court has cited this delicate

balance again and again when interpreting the Patent Act,

including its following three conditions for patentability:

Section 102: “[T]he patent system represents a

carefully crafted bargain that encourages both the creation

and the public disclosure of new and useful advances in

technology, in return for an exclusive monopoly for a

limited period of time. The balance between the interest

in motivating innovation and enlightenment by rewarding

invention with patent protection on the one hand, and the

interest in avoiding monopolies that unnecessarily stifle

competition on the other, has been a feature of the federal

patent laws since their inception.” Pfaff v. Wells Elecs.,

Inc., 525 U.S. 55, 63 (1998).

Section 101: “Patent protection is, after all, a two-

edged sword. On the one hand, the promise of exclusive

rights provides monetary incentives that lead to creation,

invention, and discovery. On the other hand, that very

exclusivity can impede the flow of information that might

permit, indeed spur, invention, by, for example, raising the

price of using the patented ideas once created, requiring

potential users to conduct costly and time-consuming

searches of existing patents and pending patent

applications, and requiring the negotiation of complex

licensing arrangements.” Mayo Collaborative Servs. v.

Prometheus Labs., Inc., 132 S. Ct. 1289, 1305 (2012).

Section 112: “Section 112, we have said, entails a

‘delicate balance.’ On the one hand, the definiteness

requirement must take into account the inherent

11

limitations of language. Some modicum of uncertainty,

the Court has recognized, is the ‘price of ensuring the

5 incentives for innovation.’ . . . At the same

time, a patent must be precise enough to afford clear notice

of what is claimed, thereby “appris[ing] the public of what

is stil] open to them.” Otherwise there would be ‘[a] zone

of uncertainty which enterprise and experimentation may

enter only at the risk of infringement claims.” Nautilus,

Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2128,

2129 (2014) (citations omitted).

The Patent Act—including its grant of a discretionary

power to trial judges to award more than actual

damages—serves these competing public interests by

simultaneously advancing three core policies.

First, a primary purpose of our patent system is to spur

invention and public disclosure of inventions by promising

patent owners substantial economic advantages. Granting

trial judges the discretionary power to award more than

actual damages advances this core purpose. Without it, the

expense, burden and uncertainties of patent litigation too

often would negate the economic incentives of an award of

actual damages, thereby diluting the incentive to invent

and seek patents disclosing those inventions.

Second, an equally important purpose of granting a

patent—with clearly demarked boundaries—is to give

others an economic incentive to innovate in the same

area. Sometimes others are willing to pay a fair price for

a license to build upon previous inventions, but they also

are motivated to invent around the patent to avoid that

cost. Granting trial judges the discretionary power to

increase damages advances this core purpose also. For

12

example, among the factors trial courts should consider

are (1) whether the infringer independently developed

its product versus slavishly copied the patent owner’s

implementation, and (2) whether the patent owner

strategically watched in silence as the infringer built its

own innovations atop a feature the patent owner only later

accused of infringement.

Third, there is a strong public policy that interested

parties, including competitors and even patent licensees,

be able to challenge the validity and scope of patent

monopolies, in order to return to the public domain

whatever the patent (or unreasonable assertions of the

patent) had wrongly clouded or taken outright. For

example, “the important public interest in permitting full

and free competition in the use of ideas which are in reality

a part of the public domain,” led the Court to permit

patent licensees to challenge validity because otherwise,

“lilf they are muzzled, the public may continually be

required to pay tribute to would-be monopolists without

need or justification.” Lear, Inc. v. Adkins, 395 U.S. 653,

670 (1969). Granting trial judges the discretionary power

to award more than actual damages advances this core

purpose as well. For example, trial judges should consider

whether the infringer presented a strong challenge to the

validity or scope of some of the patent claims, and whether

the patent owner asserted an unreasonably broad scope

of some of the patent claims.

In sum, just as these core public policies guide

the interpretation and application of the statutory

conditions for patentability, so too should they guide the

interpretation and application of Congress’s grant to trial

judges of the discretionary power to award more than

actual damages.

13

D. Trial Judges Should Consider The Behavior

And Posture Of Both Parties.

Although designed primarily to punish and deter

wanton infringement, the discretionary power Congress

first granted trial judges in 1836 to award more than

actual damages is not a “punitive damages” provision per

se. Smith v. Wade, 461 U.S. 30, 36 n.5 (1983) (noting that

the 1870 Patent Act’s discretionary increased-damages

provision did not “enact[] a punitive damages remedy

as such, although [it] did create other forms of punitive

civil remedies . . . not available at common law”). Rather,

this discretionary power has a broader design and use.

Under certain limited circumstances, it can compensate

patent owners for losses not properly considered actual

damages. “In order to provide for cases in which a

verdict for the actual damages sustained would not afford

complete redress to the plaintiff, the law empowers the

court to increase the award of the jury to an amount

not exceeding three times that fixed by the verdict.”

William C. Robinson, The Law of Patents for Useful

Inventions § 1069 (1890) (citations omitted); accord D.

Dobbs, Handbook on the Law of Remedies 440 (1973)

(“This authority has been used partly as a penalty, as

where it is thought that the defendant acted in bad faith,

but it is clear that the provision permits an increase in

damages to cover the possibility that assessed damages

are insufficient because of proof difficulties.”).

Accordingly, trial judges exercising this discretionary

power considered the behavior and posture of both

parties. In Schwarzel v. Holenshade, 21 F. Cas. 772, 773

(S.D. Ohio 1866) (No. 12,506), an exclusive licensee of a

patent for a particular territory moved under the 1836

14

Act for trebling the damages awarded by the jury. The

trial judge declined, noting that the plaintiff was not one

who had toiled to make the invention practically useful

but rather had purchased its license under the patent.

Id. The trial judge cited as relevant factors the value

of the improvement, the plaintiff's efforts to make it

practically useful, whether the defendant’s infringement

was wanton and unjust, and whether the litigation was long

and vexatious—all to determine whether “the sum that

may be awarded by the verdict of a jury may be wholly

inadequate as a compensation for the wrongs and injuries

[plaintiff] has sustained.” Jd. See also Gen. Motors Corp.

v. Dailey, 93 F.2d 938, 942 (6 Cir. 1937) (affirming denial

of increased damages in part because the patent owner

had delayed filing suit).

This Court likewise recognized that the Congressional

purpose in empowering trial judges to award more than

actual damages was broader than punishing wanton

infringement. The Court identified some circumstances

where this power of trial judges might be required to

supplement the actual damages then allowable under the

law: “Examples of the kind may be mentioned where the

business of the infringer was so improvidently conducted

that it did not yield any substantial profits, and cases

where the products of the patented improvements were

sold greatly below their just and market value, in order

to compel the owner of the patent, his assignees and

licensees, to abandon the manufacture of the patented

product.” Birdsall, 93 U.S. at 69. The Court later identified

further circumstances: “the expense and trouble the

plaintiff has been put to by the defendant, and any special

inconvenience he has suffered from the wrongful acts

of the defendant” cannot be awarded as part of actual

15

damages, “but these are more properly the subjects of

allowance by the court, under the authority given to it to

increase the damages.” Clark v. Wooster, 119 U.S. 322,

326 (1886).

The legislative history of the 1836 Act supports

this widely held Nineteenth Century view of the

purposes behind Congress’s grant to trial judges of the

discretionary power to award more than actual damages.

In part, Congress moved from automatic trebling of

damages to a discretionary power to increase damages, in

response to abusive litigation under the former automatic-

trebling statute. See Seagate Tech., 497 F.3d at 1377-78

(Gajarsa, J., concurring & Newman, J. joining) (citing

legislative history criticizing pre-1836 patent law “which

led to abusive wielding of the treble-damages club by

undeserving patentees”).

Consistent with both this history and the core public

policies of our patent system, trial judges should consider,

among other things, the extent to which the patent owner

implemented the patented invention; acted diligently to

notify the infringer of the allegation of infringement;

and took reasonable and clear positions as to the scope

of its asserted patent. And trial judges should consider

the extent to which the infringer successfully narrowed

the asserted scope of the asserted patent or invalidated

some claims thereof; and either engaged in independent

development or made a legitimate effort to invent

around the asserted patent once it became clear that

infringement was likely and a license was unavailable at

a price it was willing to pay. Only by considering these

and the other relevant circumstances identified supra

in the Introduction, will trial judges’ exercise of this

16

discretionary power advance the public policies embedded

in the Patent Act.

E. Trial Judges Should Consider The Parties’

Behavior Both Pre-Complaint And Post-

Complaint.

The Federal Circuit has restricted trial judges’

discretion to consider an infringer’s post-complaint

actions as part of an enhanced-damages determination:

“when an accused infringer’s post-filing conduct is

reckless, a patentee can move for a preliminary injunction,

which generally provides an adequate remedy for

combating post-filing willful infringement. A patentee

who does not attempt to stop an accused infringer’s

activities in this manner should not be allowed to accrue

enhanced damages based solely on the infringer’s post-

filing conduct.” Seagate Tech., 497 F.3d at 1374 (citations

omitted).

The Court should remove this artificial restriction.

First, it does not make sense to condition a trial judge’s

discretionary power to award more than actual damages

upor the patent owner moving for a preliminary

injunction—which motion might, of course, be futile or

denied for a host of reasons unrelated to the merits.

Second, although the lack of pre-suit notice of the alleged

infringement is a proper consideration in an enhanced-

damages determination, it should not be a rigid barrier.

A patent owner may not give pre-suit notice if it acts

immediately upon issuance of the patent, or the parties

are longstanding competitors who have had previous

disputes. It is contrary to core purposes of the Patent Act

to direct the trial judge to ignore an infringer’s reckless

post-complaint activity.

17

Similarly, the trial judge should be permitted to

consider whether the patent owner was reckless or

overreaching post-complaint in asserting some of its

patent claims. Often, a patent or family of patents will

have dozens of claims, and the alleged infringer will have

successfully challenged the validity of some asserted

claims either in federal court litigation or in post-issuance

Patent Office proceedings. Or, the alleged infringer may

have successfully argued for a narrower claim scope

than that asserted by the patent owner. The trial court

rightfully shields the jury from these post-complaint

successes, but that does not render them irrelevant to the

willful infringement analysis.

In sum, trial judges should consider the parties’ post-

complaint and pre-complaint behavior, as the above patent

policies do not end with the filing of a complaint.

F. Four Scenarios Illustrate Application Of

These Guidelines.

Four scenarios illustrate application of the above

guidelines to advance public policies of our patent system.

The increased-damages provision should not be applied

to penalize companies for inventing and seeking patents

on their inventions. It is common today for a company with

hundreds or thousands of its own patented inventions to

be sued for patent infringement and read in the complaint

that its infringement was “willful” because the asserted

patent was one of thousands or tens of thousands of “prior

art” references cited during Patent Office examination

of those patents of the defendant. Typically, no one who

actually developed the technology accused of infringement

18

(as opposed to patent lawyers responsible for obtaining

patents) ever read the asserted patent. Nevertheless, as

an unwelcome “reward” for inventing and disclosing its

inventions in patent applications—thereby serving a core

public policy of our patent system—the defendant may

subject itself to a charge of “willful” patent infringement.

Under a correct interpretation of this statute, a trial judge

should consider the pro-patent-filing public policy of our

patent system when evaluating such a dubious basis for a

claim of willfulness.

The increased-damages provision should not be

used to unfairly penalize companies for licensing their

patents to competitors. Licensing is one way patents can

spread new technological advances beyond the customers

served by the patent owner. But, licensing one’s patent to

a competitor risks the competitor later repudiating the

license agreement and simultaneously filing a complaint

for declaratory judgment of patent invalidity or non-

infringement. Under current Federal Circuit rules, such

a licensee-turned-infringer can argue that it is immune

from an increased-damages award because there was

no “infringement” of the patent pre-suit on account of

the license. No matter how wanton and harmful the

infringement, the patent owner may be penalized for

having granted a license to its patent. Under a correct

interpretation of the statute, however, a trial judge would

be freed of this artificial restriction and permitted to

consider the post-complaint behavior of the parties.

The increased-damages provision should not be used

to reward patent owners for watching silently as the

infringer increases its reliance on the (later-accused)

technology as a foundation for later developments. Such

19

delay defeats the public policy favoring competitors

inventing around issued patents. Similarly, patent owners

who try to obfuscate the scope of their patent, refusing to

take clear positions on what their patent covers and does

not cover, defeat this policy as well. A trial judge should

hesitate to reward such patent-owner behavior with an

increased damages award.

The increased-damages provision should not be

used to penalize those who initially infringed a patent

innocently and then responded to an allegation of

infringement with a good-faith effort to either obtain a

license at a fair price or invent around the patent. For

example, a company may have been unaware of a patent

when it added a new feature to its product and even for

years after it sold the product. If the company was later

notified and sued, it would be entirely reasonable for the

company to take time to attempt to negotiate a fair price

for a license, or take some time to ascertain the scope and

validity of the patent and modify its product accordingly

to avoid infringement. A trial judge should consider any

such period of good-faith licensing negotiations or study

and re-design when assessing what portion, if any, of the

infringing activity was willful.

In sum, this discretionary power should be exercised

in light of the same public policies this Court has cited

again and again when interpreting the Patent Act, freed

of the restrictions the Federal Circuit has imposed without

regard to those policies and without basis in the statute.

20

Il. WILLFUL INFRINGEMENT IS NOT A JURY

ISSUE.

The Federal Circuit’s greatest erosion of the

discretionary power Congress granted trial judges to

award more than actual damages, is its rule that subjective

willfulness of the infringement is a question for the jury.

Under the statute and this Court’s Seventh Amendment

jurisprudence, willful infringement is not a jury question.

A. There Is No Statutory Right To A Jury Trial

Of Willfulness.

Plainly, there is no statutory right to a jury trial on

the issue of willfulness. Section 284 does not mention

willfulness. See Seagate Tech., 497 F.3d at 1377 (Gajarsa,

J., concurring & Newman, J. joining). Willfulness is not an

element of any liability theory or actual-damages theory

under the Patent Act. Instead, it relates solely to exercise

of the discretionary power of a trial judge to award more

than the jury’s actual damages award. For 180 years, the

Patent Act expressly has given that power to trial judges

not juries.

B. There Is No Seventh Amendment Right To A

Jury Trial Of Willfulness.

There is no Seventh Amendment right to a jury

trial on the issue of willfulness of patent infringement

because+—as with claim construction—the jury need not

“shoulder this responsibility as necessary to preserve the

‘substance of the common-law right of trial by jury.”

Markman v. Westview Instruments, Inc. 517 U.S. 370, 377

(1996) (citations omitted) (emphasis in original); see Tull v.

21

United States, 481 U.S. 412, 426 (1987) (“The assessment

of civil penalties [for violation of the Clean Water Act] thus

cannot be said to involve the ‘substance of a common-law

right to a trial by jury,’ nor a ‘fundamental element of a

jury trial.””). As in Markman, 517 U.S. at 377-88, this

conclusion follows from both historical and functional

considerations.

1. Historically, Juries Apparently Did Not

Decide Willfulness In A Patent Suit.

Historically, it appears that willfulness was not

presented to juries in patent suits before 1791. Professor

Janice M. Mueller’s review of selected English patent

actions at law, from 1676 to 1834, suggested that

willfulness was not an issue presented to English juries.

“The early English cases discussed by the Markman

Court do not suggest that the notion of willfulness

even existed in 1791.” Janice M. Mueller, Commentary:

Willful Patent Infringement and the Federal Circuit’s

Pending En Banc Decision in Knorr-Bremse v. Dana

Corp., 3 J. Marshall Rev. Intell. Prop. L. 218, 224 (2004)

(“Mueller”); accord John B. Pegram, The Willful Patent

Infringement Dilemma and the 7th Amendment, 86 J.

Pat. & Trademark Off. Soc’y 271, 280 (2004) (“Pegram”)

(“No [pre-1791] case was found in which a British jury

addressed the issue of increased awards or punitive

damages in patent infringement cases.”).

Likewise, willfulness would not have been presented

to American juries before adoption of the Seventh

Amendment. The 1790 Patent Act did not permit juries

to award punitive or increased damages in patent cases.

See Act of Apr. 10, 1790, ch. 7, § 4, 1 Stat. 109, 111.

22

Under the later 1836 Act, which for the first time

gave trial judges the discretion to award more than

actual damages, it does not appear that juries were

asked to decide willful infringement. “Willfulness simply

was not part of the jury charge. Rather, the willfulness

determination seemed to be inextricably part of the

judge’s decision to enhance or not enhance the amount of

actual damages.” Mueller at 226 (discussing certain cases

cited in Professor Robinson’s 1890 treatise).

This historical record distinguishes the issue of

willfulness (and awarding more than actual damages)

in patent actions from statutory damages in copyright

actions. Cf. Feltner v. Columbia Pictures Television, Inc.,

523 U.S. 340 (1998) (finding a Seventh Amendment right

to trial by jury of the amount of statutory damages in

copyright actions). Unlike the Patent Act, the Copyright

Act gives copyright owners the option to elect an award of

statutory damages instead of actual damages and profits.

Id. at 342. An issue in Feltner was, in effect, whether a

copyright owner waived its right to a jury trial of damages

when it elected this alternative damages theory. The Court

ruled that it did not, in part because juries awarded, and

sometimes were authorized to determine the amount of,

statutory damages for copyright infringement both before

and after the 1791 adoption of the Seventh Amendment.

Id. at 349-54. Here, in contrast, the discretionary award

of more than the actual damages assessed by a jury in a

patent suit is a power unknown until 1836.

23

2. Functionally, Juries Are I1l-Suited To

Decide Willfulness In A Patent Suit.

“Functional considerations,” Markman, 517 U.S. at

388, likewise demonstrate that there is no Constitutional

right to a jury trial of willfulness in a patent infringement

suit. Trial judges are better positioned to determine

willfulness in light of “the statutory policies that ought to

be furthered by the allocation” between jury and judge.

Markman, 517 U.S. at 384. See Pegram at 283-84.

First, juries necessarily are shielded from many of

the circumstances relevant to willfulness. For example,

they learn little or nothing about pre-trial motion practice,

such as the strength of an infringer’s unsuccessful claim-

construction positions or its defenses based on those

positions. Trial judges naturally are reluctant to allow

defendants to present to the jury why the judge’s pre-trial

rulings were wrong. Juries do not learn of the infringer’s

success in invalidating and/or narrowing multiple claims

of the patent pre-trial. An infringer might, for example,

successfully invalidate a dozen broad claims pre-trial, or

in post-issuance Patent Office proceedings, but the jury

sees only the surviving asserted claims. Similarly, juries

typically do not learn of an infringer’s unsuccessful but

reasonable settlement efforts to obtain a license to the

patent, or whether the infringer faced inconsistent claim-

construction positions or infringement allegations from

the patent owner. Nor do they learn of any retroactive

changes in the governing substantive law, favoring one

party or the other, after the infringement began.

Second, a trial judge is better able to assess the

behavior of the infringer and patent owner, relative to the

24

public interests served by our patent system. Two typical

examples illustrate this functional advantage of judges

over juries in assessing willfulness.

As noted above, it is common today for a charge of

willfulness to be based on the mere citation of the asserted

patent as prior art during Patent Office examination of one

of the defendant’s own patents. A trial judge is much better

suited than a jury to appreciate the practical realities, and

public policies, of our patent system when evaluating such

a dubious basis for a claim of willfulness.

As a second example, a core purpose of our patent

system is to encourage workers in the field to read issued

patents and hopefully use them as springboards to further

advances. But, giving subjective willfulness to juries

undermines this purpose by penalizing skilled artisans

(and their companies) for looking at others’ patents. If

one of a company’s engineers read the asserted patent,

that will be argued to the jury as evidence of willful

infringement, even if the alleged infringer attempted

to license the patent at a fair value, or invented around

most of the patent claims. This is one oft-cited reason why

many companies prohibit their employees from looking

at patents. See, e.g., Mark A. Lemley, Ignoring Patents,

2008 Mich. St. L. Rev. 19, 21 (“Companies and lawyers tell

engineers not to read patents in starting their research,

lest their knowledge of the patent disadvantage the

company by making it a willful infringer.”) A trial judge,

again, is better able to appreciate this core public policy

when evaluating such an assertion of willfulness. A trial

judge will better appreciate that there are legitimate

reasons to look at a competitor’s patents, and even to

copy ideas described but not claimed in a patent. Bonito

25

Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141,

165 (1989) (federal patent laws grant a federal right to

copy and use “potentially patentable ideas which are fully

exposed to the public.”) These and other practical and

policy considerations make a trial judge more likely to

determine “willfulness” in a manner consistent with the

Patent Act’s policies.

Third, because willfulness properly can be adjudged

only after considering all of the relevant circumstances,

some of which play out during the litigation itself, it is best

considered post-verdict, as part of any enhanced-damages

motion and any attorney fees motion. Only then can the

trial judge fully assess and balance the behavior of each

party pre- and post-complaint as well as the adequacy of

the actual damages award, in the context of the patent

system’s core public policies. See Swofford v. B&W, Inc.,

336 F.2d 406, 413 (5th Cir. 1964) (“questions of willfulness,

deliberateness, and increased damages should properly

await final judgment.”).

Fourth, allowing juries to hear evidence of alleged

willfulness necessarily risks skewing the jury’s

deliberations on liability and damages. For example,

jurors might trade a finding of “no willfulness” for a

doubling of the damages awarded—without the trial judge

or appellate court knowing.

In sum, Congress entrusted this power to trial

judges—not juries—for good reasons.

26

C. The Federal Circuit Has Not Conducted The

Required Seventh Amendment Analysis.

For 26 years the Federal Circuit has maintained that

there is a right to a jury trial of willfulness—without

conducting the historical and functional analyses required

by this Court’s Seventh Amendment jurisprudence.

Prior to creation of the Federal Circuit, circuit courts

were divided on whether there is a Seventh Amendment

right to a jury trial of the issue of willfulness in patent

suits. Compare Swofford, 336 F.2d at 411-14 (no right)

with Hammerquist v. Clarke’s Sheet Metal, Inc., 658 F.2d

1319, 1326-27 (9th Cir. 1981) (willfulness is a question of

mental state for a jury); see 7 Donald S. Chisum, Chisum

on Patents § 20.03[4][b][vii] (2014) (citing conflicting

decisions).

In 1989—with scant analysis—the Federal Circuit

held that parties have a Seventh Amendment right to

trial by jury of the issue of willfulness of infringement of

a patent. Richardson, 868 F.2d at 1250 (“Absent sufficient

basis for directing the verdict, Richardson has the right

of jury determination of this factual question. Willfulness

of behavior is a classical] jury question of intent.”). Earlier,

in Shiley, Inc. v. Bentley Labs., Inc., 794 F.2d 1561, 1568

(Fed. Cir. 1986), a trial court had labelled as “advisory” the

jury’s finding on willfulness “to enable it to exercise the

court’s statutory discretion to award increased damages.”

The Federal Circuit faulted that, and held that, “if the jury

finding is that willful infringement did not occur and that

finding is not overturned on a motion for JNOV, no basis

for assessing increased damages for willful infringement

exists.” /d.

27

The Federal Circuit has strictly enforced this

restriction on a trial judge’s discretionary power to award

more than actual damages. For example, it has prohibited

trial judges from reweighing evidence that underlay a

jury’s finding on willfulness. Jurgens v. CBK, Ltd., 80

F.3d 1566, 1572 (Fed. Cir. 1996).

Rut, the Federal Circuit has maintained this position

without conducting the analysis mandated by this Court’s

Seventh-Amendment precedents, including Markman

and Tull. Judge O’Malley made this very point in her

concurring opinion in this case (Halo): “The mere presence

of factual components in a discretionary inquiry does not

remove that inquiry from the court to whom congress

reposed it. See Markman v. Westview Instruments, Inc.,

52 F.3d 967, 992 (Fed. Cir. 1995); aff'd, 517 U.S. 370 (1996)

(‘Even within the realm of factual questions, whether a

particular question must always go to a jury depends ‘on

whether the jury must shoulder this responsibility as

necessary to preserve the substance of common law right

of trial by jury. (quoting Twll, 481 U.S. at 417)).” Halo

Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371, 1386 (Fed.

Cir. 2014) (O’Malley, J., concurring & Hughes, J., joining).

CONCLUSION

The power Congress granted trial judges to award

more than the patent owner’s actual damages is not one to

be used often. Nonetheless, used properly it is an important

tool for balancing the competing public interests at the

heart of our patent system. When properly interpreted

to allow trial judges to consider the relevant behavior

and posture of both the infringer and the patent owner

both post-complaint and pre-complaint, this discretionary

28

power can further motivate inventors to seek patents,

others to license or invent around those patents, and

competitors to challenge patents improperly taking from

the public domain. Conversely, as misinterpreted and

misapplied by the Federal Circuit, this power to increase a

patent damages award can penalize companies for seeking

patents and patent owners for licensing their patents,

and reward patent owners for watching silently as an

infringer increasingly builds atop a later-accused feature.

To restore this grant to its proper, positive role, the Court

should overturn the Federal Circuit’s restrictions on

this discretionary power, return the issue of subjective

willfulness to trial judges, and guide trial judges in their

application of this discretionary power.

Respectfully submitted,

JOHN D. VANDENBERG

Counsel of Record

SALUMEH R. LoESCH

KLARQUIST SPARKMAN, LLP

121 S.W. Salmon Street, Suite 1600

Portland, Oregon 97204

(503) 595-5300

john.vandenberg@klarquist.com

Counsel for Amici Curiae

December 14, 2015