Clearstone FTO’s Enhanced Sharing Capabilities Make Collaboration Seamless and Smart

We’re excited to announce that Clearstone FTO has been recently enhanced with powerful new features to greatly improve collaboration between patent counsel and R&D. These changes are already having a tremendous impact on our users’ ability to organize and share carefully curated information with numerous stakeholders in the patent clearance process, and have been referred to as “life-saving.”

The Clearstone FTO platform has always provided an efficient way for patent counsel to solicit and capture input from subject matter experts by using status indicators, comments, and review sharing functionality. Now, that capability goes further by utilizing the status indicators as a basis to define the scope of review by collaborators. Share recipients (“sharees”) now only see the patent documents for which their input is desired, and no others.

There are two new access-control profiles available within Clearstone FTO’s sharing functionality: Technical Review and Counsel Review.

Enhanced user access levels.

With Technical Review, users can limit access within a particular patent review so that the sharee only sees patents that have at least one claim that is marked with status “Need Technical Info.” Any patent that does not have this status indicator among its claims will not be visible to the sharee. This access profile has been extremely useful for streamlined collaboration between attorneys and engineers, for example, so that engineers are not exposed to any more information than they need to see.

With Counsel Review, users can limit access within a particular patent review so that the sharee only sees patents that have at least one claim that is marked with status “Counsel Review.” Any patent that does not have this status indicator among its claims will not be visible to the sharee. This access profile has been helpful to identify and limit the patents that are sent to outside counsel for review (or from outside counsel to in-house counsel), for example, or when non-attorneys perform some part of the clearance process and wish to limit the scope of review by counsel.

These enhanced access profiles are available to all users with Professional or Team/Enterprise accounts and may be used with any collaborator, including sharees with Standard (free) accounts.

For more information, reach out to us at info@clearstoneip.com.

ClearstoneIP Selected by LexisNexis for 2019 Accelerator Cohort

ClearstoneIP is proud to announce that it has been selected from a record number of applicants to participate in this year’s LexisNexis Legal Tech Accelerator.

“The Legal Tech Accelerator is an extension of the company’s long-standing support of the legal startup community worldwide and helps power legal market innovation, whether inside or outside its business. The program leverages the industry-leading market expertise and deep knowledge of LexisNexis’ and Lex Machina™ in the legal, technology and startup domains. Participants receive hands-on mentoring and guidance throughout the program, which is based in the Menlo Park, CA offices of Lex Machina and at the Raleigh Technology Center for LexisNexis on the Centennial Campus of North Carolina State University.” (press release)

With a growing user community that includes startups and Fortune 500 companies, ClearstoneIP is pioneering the modern industry standard for patent clearance management. The LexisNexis Accelerator is a significant opportunity to gain insight, experience, and best practices from some of the legal tech industry’s most innovative and accomplished thinkers.

ClearstoneIP is excited to work with LexisNexis as it takes the next step in its growth and continues to develop the first commercial platform dedicated to the patent clearance and freedom-to-operate process.

How An Early Patent Investigation Helped CalAmp Avoid $6 Million in Enhanced Damages

A recent Federal Circuit case, Omega Patents v. CalAmp, underscores the importance of conducting early patent investigations and how they can help avoid enhanced damages due to willful patent infringement.

CalAmp entered the appeal owing $9 million in compensatory and enhanced damages for willful patent infringement after a jury trial ($15 million total after attorney’s and additional fees). The Federal Circuit vacated the entire willfulness judgment and its associated enhanced damages and remanded for a new trial in part because of technical issues relating to the jury verdict.

But before sending the case back to trial, the Federal Circuit made a point to note the importance of CalAmp’s early pre-suit patent investigation efforts and the associated evidentiary errors committed by the district court. When the district court properly considers the evidence, CalAmp will stand a much better chance of escaping the $6 million in enhanced damages.

The Federal Circuit found that the district court erred in two ways when it considered the willfulness issue:

  1. The court improperly excluded testimony by a CalAmp senior director, Gallin Chen, relating to CalAmp’s state of mind prior to the alleged infringing acts. Despite being allowed to testify that he “was the ‘main person’ tasked with investigating the patent landscape,” “discussed his findings with his superior . . . who was part of CalAmp’s executive team,” conducted searches to “see the lay of the land,” Chen was not permitted to state his conclusions as to whether the asserted patent claims were infringed or invalid. The appeals court rejected the trial court’s application of expert witness (FRCP 26) and hearsay rules and held that “Chen’s testimony on this issue was clearly relevant.”
  2. The district court also erred in excluding testimony by CalAmp’s outside counsel, David Bailey, as to the analysis he provided and conveyed to CalAmp executives regarding noninfringement and invalidity of the asserted patents. The Federal Circuit said that Bailey should have been allowed to present a reasonable explanation as to how he arrived at his conclusions in order to demonstrate CalAmp’s mental state as to these issues. The appeals court drew a noteworthy line, however, with respect to Bailey’s post-suit written opinions – opinions performed after the suit was filed were properly excluded since they were not contemporaneous with the infringing activity.

Takeaways:

  • Patent analysis by non-attorneys, including conclusions of non-infringement and invalidity, is probative and relevant to an accused infringer’s state of mind at the time of the alleged activity. Chen was not an attorney but had responsibility for freedom to operate analysis. The Federal Circuit held that his conclusions, which indicated a subjective state of mind on the part of CalAmp, were relevant to willfulness under Halo.
  • Testimony regarding prior verbal opinions of non-infringement or invalidity can be relevant and admissible, but it is usually better to document these positions. Although the Federal Circuit rejected a hearsay objection that the district court sustained to exclude testimony about conversations, documentary evidence of such opinions would have avoided the issue altogether and is almost always more credible.
  • The exclusion of Bailey’s post-suit written opinions as to non-infringement and invalidity reinforces the criticality of performing and documenting patent investigations as early as possible in a product’s development and launch cycle. Opinions and patent analysis conducted at the beginning of alleged activity are admissible to show good faith non-infringement and invalidity positions, while after-the-fact opinions usually are not relevant.

Federal Circuit Vacates Enhanced Damages Award Against Cisco Because No Willfulness Before Knowledge of Patent

The Federal Circuit issued an interesting decision involving willful infringement last week, in particular relating to evidence needed to support a period of time during which the alleged willful activity took place. In SRI International, Inc. v. Cisco Systems, Inc., the appeals court found that SRI had not presented sufficient evidence to support a willfulness finding for activity that took place before Cisco had become aware of the patent-in-suit. The court vacated the district court’s award of enhanced damages (which doubled the $23 million damages verdict). The Federal Circuit remanded for further consideration as to whether substantial evidence supported willfulness after knowledge had been acquired.


The district court relied on two primary pieces of evidence asserted by SRI in finding Cisco’s infringement to be willful: (1) “key” Cisco employees did not read the patents-in-suit until their depositions; and (2) Cisco designed the products and services in an infringing manner and that Cisco instructed its customers to use the products and services in an infringing manner.

The fact that “key” Cisco employees did not read the patents-in-suit did not persuade the Federal Circuit that the conduct was willful because the identified individuals were engineers without legal training. The court suggested that its conclusion would have been different if Cisco’s lawyers had behaved in the same way: “[g]iven Cisco’s size and resources, it was unremarkable that the engineers—as opposed to Cisco’s in-house or outside counsel—did not analyze the patents-in-suit themselves.”

As to the second of SRI’s willfulness arguments, that Cisco designed products in an infringing manner, the appeals court noted that this point simply amounts to proof that the products infringed. That is, there is nothing further to show that Cisco had knowledge of the patents prior to 2012 and otherwise acted egregiously.

However, it was undisputed that Cisco was aware of the patents-in-suit as of May 2012 (when SRI sent a notice letter to Cisco) and that Cisco could still face enhanced damages based on its behavior after that date upon remand. But two impediments may make this determination on remand rather difficult: (1) as the Federal Circuit noted, JMOL proceedings are not the ideal mechanism to evaluate when, if ever, willful infringement began; and (2) the jury trial took place prior to the Supreme Court’s Halo decision, which critically changed the willfulness standard. As a result, it appears unlikely that the factual record in the case will sufficiently support a finding of willful infringement under current law, without further proceedings.

Deloitte Survey Highlights Value of Legal Tech for In-house Legal Departments

Deloitte recently published a survey of 300 in-house legal department executives in nine different countries about their transformations in making better use of advances in technology to maximize efficiency, reduce cost and free up lawyers’ time to work more closely with the organization as a trusted business partner.

Risk management functions lead the way in readiness and adoption, which aligns well with our mission at ClearstoneIP to bring efficiencies and insight in patent risk management (i.e., freedom-to-operate and patent clearance).

The entire survey is worth a read, but here are a few interesting snippets:

  • “Legal’s core missions of risk management and compliance involve a number of time consuming, repetitive tasks that leave little time to focus on innovation, strategy and value creation. These can often be alleviated through legal technology solutions that leverage process automation, artificial intelligence and advanced analytics.”
  • “Between 50-68% of respondents, depending on the sector, say automation and process design could help reduce costs significantly and create efficiencies.”
  • “As a whole, legal will become strategic, replacing rigid silos with more fluid structures so that in-house lawyers can transition to “business partnering,” which allows Legal to participate in the achievement of the organization’s objectives.”

Key Takeaways From AIPLA Panel on Halo

Last week at the AIPLA Annual Meeting I had the pleasure of participating in a panel discussion on the topic of Defending Against Willful Infringement Post-Halo. Moderated by Jesse Adland, in-house counsel at AMD, and joined by Natalie Morgan of Wilson Sonsini, Sarah Guske of Baker Botts and the Honorable Judge Kewalramani of the Central District of California, each of the panel members presented a different aspect of life after Halo v. Pulse.

Natalie started us off with an excellent historical summary of the willful infringement doctrine. I followed with a look at pre-suit considerations to best position ourselves to defend against willfulness. Sarah then discussed various things to keep in mind and plan for during litigation, citing various data-based findings. Judge Kewalramani concluded with a unique from-the-bench perspective of pleadings trends and how recent plaintiffs have survived or failed on motions to dismiss.

Here are some of the most important takeaways I gleaned from the discussion:

Doctrinal Trends ― The Uncertain Scope of Waiver

From Natalie’s historical summary it was evident that one of the most uncertain areas in the current doctrine is the scope and treatment of waiver of the attorney-client privilege. For example, did Halo have any impact on Seagate’s exclusion of trial counsel from waiver? Will there be a mechanism to allow defendants to waive privilege for purposes of defending against willful infringement while maintaining privilege for the underlying infringement case?

The waiver issue bears heavily on both pre- and post-litigation considerations as attorneys try to understand the circumstances under which privilege will be protected. For now, we know that trial bifurcation is available at the courts’ discretion to resolve the Quantum dilemma, but it remains to be seen whether it is something that counsel can rely upon.

Pre-Suit Considerations ― Create a Record of Diligence As Early As Possible

In my presentation on pre-suit considerations, I emphasized the important underlying theme of creating a record of diligence as early as possible. Timing matters. Whether the infringer, when they knew of the other’s patent, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed is one of the most important factors in determining willful infringement.

The best way to demonstrate compliance with this factor is to make sure that known patents are reasonably investigated as soon as possible. That includes whether the patents become known through routine clearance efforts or upon notice from the patentholder. A reasonable investigation does not require a formal counsel opinion or even an attorney in some situations, as some post-Halo cases have declined to enhance damages when the investigation was performed by a competently trained engineer. It is important to show that a designated decision-maker has reviewed the patent and its claims in relation to the accused product and has arrived at non-infringement or invalidity positions, or both.

Litigation Strategy ― Bifurcation is Best

Sarah followed up on the concerns that Natalie raised about privilege waiver, bifurcation, and general trial strategy. She highlighted the significant impact that willful infringement has when it is heard in the same trial as the underlying infringement case.

Sarah’s data showed that, in bifurcated trials, juries found willful infringement only 33% of the time, while willfulness in trials that were not bifurcated jumped up to an 81% occurrence rate. This data underscores the undue impact that willfulness-related issues (which involve a lot of derogatory characterizations of behavior and motive) can have on pure infringement issues (which are predominantly technical).

Pleadings ― Provide Facts That Support More Than Mere Knowledge

Judge Kewalramani concluded the panel presentations by providing unique insight into some of the issues that district courts are wrestling with in Halo’s aftermath. He touched on pleading requirements for willful infringement and the unclear importance of addressing the Read factors when assessing enhanced damages, among others.

A key observation that the Judge noted, and which has been a frequent subject of motions to dismiss, is that complaints are more likely to pass muster when they allege facts beyond mere knowledge of the asserted patent. To survive dismissals, complaints should provide a factual basis to suggest that the defendant ignored or otherwise failed to take reasonable action despite repeated attempts to engage by the patentholder.

 

If you’d like a copy of my presentation, please contact us.

Supreme Court Denies Cert in Arctic Cat: Willful Infringement Remains a “Knew or Should Have Known” Standard

Earlier this week, the Supreme Court issued an order denying certiorari in Bombardier Recreational Products Inc. v. Arctic Cat Inc. As a result, the holding of the underlying Federal Circuit case remains intact. We discussed this case and its implications in a blog post several weeks ago.

Specifically, the Federal Circuit held:

Halo did not disturb the substantive standard for the second prong of Seagate, subjective willfulness. Rather, Halo emphasized that subjective willfulness alone—i.e., 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,'” Halo, 136 S. Ct. at 1930 (quoting Seagate, 497 F.3d at 1371)—can support an award of enhanced damages.

Bombardier challenged this holding as amounting to a negligence standard. Arctic Cat disagreed, arguing that the language comes from longstanding Supreme Court precedent defining “recklessness.” Irrespective of the label, the fact remains that willful infringement continues to be assessed according to a “knew or should have known” standard.

What does this mean to innovators and manufacturers? While there are still very few cases that have actually tested the “should have known” portion of the standard after Halo, producers should consider the following items.

  1. First, a notion of slight comfort: mere knowledge of a patent has generally been insufficient to find subjective willfulness. A patentee must typically show that the accused infringer was in some way aware of a risk of infringement or that it was otherwise obvious. However, where the parties are close competitors who frequently assess each other’s patent portfolios, it may be possible for the patentee to demonstrate that the accused infringer should have known about the risk and therefore acted willfully even if it cannot prove direct knowledge of the patent-in-suit.
  2. A “should have known” test necessitates a comparison between an accused infringer’s behavior and what should be expected from reasonable participants in a similar position. Companies should therefore familiarize themselves with relevant industry customs and standards with respect to freedom-to-operate, clearance, and diligence investigations to ensure that they are acting reasonably. If standards are unclear, companies should think about generating internal policies that set forth clear processes for handling and investigating third-party patents.
  3. Well-documented records of investigation are key. It is important to establish early non-infringement and/or invalidity positions reflecting the beliefs of a competent decision-maker that is supported by a reasoned approach. The decision-maker need not be an attorney, but should be someone that has some degree of understanding as to how patents are interpreted.
  4. Consider privilege issues. In some cases courts will grant a bifurcated trial to separate liability issues from damages issues, which would allow a defendant to maintain privilege for the liability case while choosing to waive privilege to defend against a charge of willfulness, if it becomes necessary (this is to address the so-called “Quantum dilemma”). To prepare for the possibility that bifurcation may not be granted, companies should consider how they might build non-privileged documentation that supports a subjective belief of non-infringement, or to compartmentalize privileged information that is intended to be waived if necessary.

We will also be keeping an eye on Corning Optical Comms. LLC v.
PPC Broadband, Inc., in which a petition for writ of certiorari was filed last week. Corning presents essentially the same question as did Bombardier, and also asks whether courts must consider “all relevant circumstances” regarding the infringement, including evidence that the defendant’s position was objectively reasonable in assessing enhanced damages. At first glance, certiorari does not seem likely because one question was already denied in Arctic Cat and the other question does not raise much of a controversial issue. Courts will generally consider the nine Read factors when considering enhanced damages and factor 5 relates to “the closeness of the case,” which is effectively a test of objective reasonableness.

Arctic Cat v. Bombardier at the Supreme Court — Is Willful Infringement Determined by a Negligence Standard?

Currently making its way through the Supreme Court appeal process (petition for certiorari filed, not yet granted), Arctic Cat v. Bombardier is an important willful infringement case that implicates the standard of care applicable to potential infringers when investigating patent risk.

The current rule is that, in order to show willfulness and obtain enhanced damages, a patentee must demonstrate that the infringer acted despite a risk of infringement that “was either known or so obvious that it should have been known.” The phrase “should have known” suggests the existence of a duty of care against which an accused infringer’s actions will be compared.

Does that make it a “negligence” standard? Does it matter? That’s what this case is about.

Specifically, the question presented to the Supreme Court is whether the Supreme Court’s Halo decision changed the prior subjective willfulness inquiry under Seagate (in addition to eliminating the objective inquiry) or if it simply kept the subjective part as it was. Under Seagate, the subjective inquiry required the patentee to demonstrate that a risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” Bombardier argues that Halo changed this rule when the Court stated that “the subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.” Arctic Cat argues that this statement does not necessarily preclude a “should have known” standard and, further, that the statement is not a controlling holding. This “should have known” language made its way into the jury instructions at trial, which was the basis for Bombardier’s appeal to the Federal Circuit and beyond.

Background

The underlying facts as found by the district court include the following:

  • Bombardier knew about the subject patents before they issued and in fact had made a note in a file to reexamine the patent after its issuance.
  • Bombardier did in fact later learn of the patents about a month after they issued.
  • The only pre-suit investigation relied upon by Bombardier “consisted of one conclusory sentence on a page of handwritten notes” and pertained to the published application, not the issued claims.
  • Bombardier recognized a likelihood of infringement of Arctic Cat’s patents and attempted to purchase them through an intermediary (to remain anonymous).
  • After the patent purchase was unsuccessful and after years of infringing activity, Bombardier sought opinion of counsel regarding infringement and invalidity.
  • By the time the opinion was received, Bombardier had already known about the patents for 8 years, and had been selling infringing products for at least 5 years.

The jury found willful infringement, and the district court trebled damages to a total of $46 million after consideration of the Read egregiousness factors. The court found that seven of the nine Read factors weighed in favor of enhancement including factors 1 (copying), 2 (lack of investigation), 4 (size and financial condition of infringer), 5 (closeness of the case), 6 (duration of misconduct), 7 (remedial action), and 9 (attempt to conceal misconduct).

On appeal to the Federal Circuit, the panel found no error in the jury instruction that included the “should have known” language derived from Seagate and affirmed the district court’s award of trebled damages. Quoting its earlier post-Halo decision in WesternGeco L.L.C. v. ION Geophysical Corp., the appeals court reiterated that subjective willfulness can be shown with “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.”

Analysis

Bombardier’s primary argument is that the Supreme Court set out a new standard for subjective willfulness when it stated that “the subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages,” which does not include the “knew or should have known” phrase. Bombardier further argues that “knew or should have known” amounts to a negligence standard and, as such, should not be a basis upon which to award punitive damages.

Arctic Cat argues that the Supreme Court left the Seagate rule for subjective willfulness intact, and that the rule is not based on negligence at all but instead comes from a well-established definition of recklessness. After all, the lower court decisions as well as Halo itself do not recite the word “negligence” at all. Indeed, Halo specifically notes Supreme Court precedent regarding a “recklessness” standard, not negligence, stating that “a person is reckless if he acts ‘knowing or having reason to know of facts which would lead a reasonable man to realize’ his actions are unreasonably risky.”

This case wouldn’t be sitting in Supreme Court chambers if it were easy. On one hand, the phrase “knew or should have known” essentially requires a standard of care against which to compare an accused infringer’s actions. How would you know whether an actor “should have known” about something without applying some kind of duty of care or objective conditions that determine whether they acted appropriately or within reasonable risk? And if a duty of care exists and is breached, isn’t that the definition of negligence?

On the other hand, the phrase “knew or should have known” must be taken in its context. The context typically describes the thing that should have been known as an “unjustifiably high” or “unreasonable” or simply “high” risk of infringement as part of a definition of recklessness. Ultimately, whether the rule is called “negligence” or “recklessness” is largely beside the point because neither label is explicitly part of the rule.

Experienced patent practitioners’ ears are surely ringing at the suggestion of a duty of care with respect to others’ patents. They know that the Federal Circuit unceremoniously disposed of any notion of an affirmative duty of care in 2007 with the Seagate decision. But if a premise of installing the Seagate two-part willfulness test was eliminating the affirmative duty, and Halo overruled Seagate, doesn’t that leave open the possibility that an affirmative duty could re-emerge? Or maybe it still exists in some form, perhaps just not as stringent as the one that Seagate rejected?

The real crux of the issue is where to place the question of objective risk. With an affirmative duty to investigate like that which existed prior to Seagate, opinion of counsel essentially assured objectively reasonable risk at the front end. After Seagate, litigators in infringement suits were tasked with validating objectively reasonable behavior at the back end. So if Halo removed Seagate’s objective inquiry without implementing a duty of care, how do we now balance the requirement for competent patent investigation at the front end without overburdening innovation? In other words, today’s patent thickets can be extremely dense and companies must occasionally launch products at known risk — what is the proper mechanism, if any, to evaluate the reasonableness of that risk and what should be the consequences?

We’ll have more to say on this topic in coming weeks. The Supreme Court is scheduled to decide whether to grant certiorari in Arctic Cat on September 24, 2018.

ClearstoneIP to Attend Upcoming IP Law Events

ClearstoneIP will be attending two major IP community events this fall.
We’d love to meet you!

2018 IPO Annual Meeting, Chicago

First, it’s the 2018 IPO Annual Meeting in Chicago on September 23-25th. ClearstoneIP will be exhibiting as part of the IP Expo, showcasing our continually evolving cloud platform for managing the complexities of the patent clearance and freedom-to-operate process, Clearstone FTO.

Click here for program and registration information.

2018 AIPLA Annual Meeting, Washington DC

Then, we’ll be at the 2018 AIPLA Annual Meeting in Washington, DC on October 25-27th. ClearstoneIP’s CEO and Co-Founder, Gabe Sukman, will be speaking as part of a panel on the timely subject of:

Defending Against Willful Infringement Post-Halo

Learn what steps you can take, both pre-suit and during litigation, to minimize your risk of exposure to enhanced damages due to willful infringement.

Click here for program and registration information.

We hope to see you at these great events!

Federal Circuit Affirms: No Enhanced Damages Against Willful Infringer Who Intentionally Copied

The Federal Circuit last week affirmed a district court’s denial of enhanced patent infringement damages in Sociedad Espanola de Electromedicina y Calidad v. Blue Ridge X-Ray Co., limiting the total damages to just the $852,000 jury award.

In a previous summary of post-Halo cases, we noted the remarkable facts in the underlying trial: the defendants were found to have intentionally copied the plaintiff’s patented design for an x-ray generator and the jury decided that they willfully infringed, but the court declined to award enhanced damages. Instead, the court decided that a brief patent analysis by a senior engineer in Korea was a sufficiently reasonable investigation per HaloIncidentally, according to the plaintiff this engineer “admitted unfamiliarity with basic patent law concepts such as anticipation and claim construction” and “used a Korean-English dictionary to help him review the English language patent.”

Now, we have long advocated that early competitive patent investigation (e.g., freedom to operate) is not only good for innovation but is also a critical component in helping avoid enhanced damages due to willfulness, but this case was still somewhat surprising. After reading through the appellate briefs, the picture is slightly clearer but it suffices to say that we would not recommend modeling your patent diligence policies after this non-precedential case.

We recommend, at a minimum, that the early patent analysis is performed or reviewed by at least one individual who has a fair degree of competence in both the relevant technical field as well as in basic principles of patent law and claim interpretation. That said, this case is still a testament to the broad notion that early patent investigation is looked upon very favorably by courts when deciding on enhanced damages.

What might have happened here?

Based on pure conjecture and without cynicism, I think this case is simply an example of judicial efficiency trumping process. Sure, the plaintiff had a fairly strong willfulness case, but it was also awarded reasonable royalties well in excess of what it actually argued at trial. The final $852,000 jury verdict is nearly three times as much as the highest amount of reasonable royalty damages argued at trial — $297,500. In fact, these excess damages were the subject of the defendant’s JMOL and subsequent cross-appeal at the Federal Circuit.

The district court (and the Federal Circuit, in turn) could have felt that, yes, the jury should not have awarded damages that were so far beyond the argued amount. But the plaintiff did have a pretty good willfulness case, which could have ended up tripling damages in any event. The resulting competing motions, defendant’s motion to reduce the damages verdict and the plaintiff’s request for enhanced damages, each had merit and would have essentially canceled each other out.

Also of note is that it appears that the above-noted characterizations of the engineer’s analysis (unfamiliarity with patent law and consulting a Korean-English dictionary) were not admitted as evidence at trial, so were not considered by the trial court in deciding the motion for enhanced damages.

Conclusion

I don’t want to overstate any takeaways from this particular case because it was, after all, a non-precedential Rule 36 summary affirmance (decision without opinion), but it is still useful and instructive.

The general takeaway is that the Federal Circuit found no abuse of discretion when a trial court denied awarding enhanced damages even when the jury found that the defendant willfully infringed and intentionally copied the plaintiff’s design. The trial court afforded a great deal of weight to the early pre-suit investigation by a senior engineer even though the only evidence of that investigation was a single undated document that included a very brief analysis and conclusion of non-infringement regarding the patent-in-suit.

In practical terms, Sociedad Espanola remains consistent with and supports these best practice points for patent diligence:

  • Certain patents can carry increased risk and should be investigated as soon as practicable after they become known within an organization. Factors that lead to increased risk include, for example, ownership by a close competitor, ownership by a litigious entity, or close proximity in a technical space.
  • The investigation should be performed, either primarily or secondarily, by a person or people with sufficient technical and legal competence. Cases have supported the notion that analysis by an engineer can be sufficient as a “reasonable investigation.” Out of further caution, we recommend that a patent professional, such as an agent or attorney, also perform or at least review the analysis.
  • Review by an attorney can carry the further benefit of establishing a privileged attorney-client communication (an upcoming article will discuss ways to preserve the attorney-client privilege while retaining the option to use the information to defend against willfulness under the new post-Halo paradigm).
  • Track patent analysis in a systematic way so that issues of authenticity and foundation are not in question (the evidence in Sociedad Espanola was somehow admitted, but certainly raised more than a few questions of authenticity/foundation when considering the deposition testimony). Internal policy directives and software tools should align to ensure that a collective patent review effort is best initiated, captured, and preserved.