U.S. Supreme Court Eases Standards for Obtaining Enhanced Patent Damages for Willful Infringement

By Alexandra Cavazos, Ph. D.. A member of our Litigation Practice Group

The Patent Act permits a court to award damages to a successful plaintiff in an amount up to three times the actual damages suffered plus the plaintiff’s attorneys’ fees.  These “enhanced damages” under Section 284 of the Act have been part of U.S. patent law since its inception, but the standard for awarding them has shifted over time.  Enhanced damages were originally mandatory, but Congress later ordained a discretionary award in the belief that a defendant who acted out of ignorance of the law or with a good faith belief that no infringement was occurring should not punished in the same manner as a “wanton and malicious pirate.”

In re Seagate Technology, LLC  (2007) announced the Federal Circuit’s strict two-prong test for patentees seeking enhanced damages.  The first prong required the patentee to “show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.”  If the infringer made a reasonable invalidity or non-infringement argument during the litigation, the patentee could not meet this “objective” prong.  If the objective prong was met, the second Seagate prong required the patentee to show (also by clear and convincing evidence) that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.”

In 2015, the Supreme Court agreed to hear two cases—Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer Inc.—in order to decide if the Seagate test was consistent with the language of § 284. Earlier this month, the court disapproved the Seagate approach, giving renewed leverage to patentees who sue for infringement. (More...)

Assignor Estoppel May Apply to A Competitor That Never Owned (Or Assigned) the Patent

By Dorothy Wu Chiang. A member of our Patent Practice Group

 

 

 

When companies hire top talent away from competitors, they may very well also acquire patent exposure along with their new personnel through the doctrine of assignor estoppel. A recent decision in the Federal Circuit, MAG Aerospace Industries, Inc. v. B/E Aerospace, Inc., demonstrates how broadly assignor estoppel may be applied. In general, assignor estoppel prevents a company that sells a patent from challenging its validity in later litigation. However, under MAG, a company that never owned the patent may also be barred if it has hired an inventor named in the patent.

MAG Aerospace sued B/E Aerospace for infringement of three patents that named one of B/E’s leaders as an inventor. In this case, the inventor conceived of the patents well before joining B/E and had never worked for MAG; he invented the technology during his time at Evac International Oy, which later transferred the patents to MAG.

B/E defended the infringement claim in part by asserting that the patents were invalid.  The district court granted MAG summary judgment on that question, ruling that the doctrine of assignor estoppel prevented B/E from challenging the validity of the patents.

Assignor estoppel applies if a named inventor on a patent is “in privity” with the company being sued. In Shamrock Technologies, Inc. v. Medical Sterilization, Inc. (1990), the Federal Circuit held that the doctrine requires a court to consider a number of factors when determining whether this relationship exists, including:

• The inventor’s leadership role at the new employer;
• The inventor’s ownership stake in the defendant company/new employer;
• Whether the accused company changed course from manufacturing non-infringing goods to allegedly infringing activity after the inventor was hired;
• The inventor’s role in the allegedly infringing activities;
• Whether the inventor was hired to start the allegedly infringing operations;
• Whether the decision to manufacture the allegedly infringing product was made partly by the inventor;
• Whether the accused company began manufacturing the allegedly infringing product shortly after hiring the inventor; and
• Whether the inventor was in charge of the allegedly infringing operation.

MORE

The Federal Circuit Helps Software Developers Overcome Patent-Eligibility Rejections under Alice

By Bruce Sunstein. A member of our Patent Practice Group

 

The Federal Circuit’s recent decision in Microsoft v. Enfish has given software developers a new tool—valuable at least sometimes—to resist Alice rejections of patent applications for computer-related inventions.

Under Alice Corp. v. CLS Bank (2014),  the Supreme Court expanded on its finding of “implicit exceptions” to the patent laws, holding that patent claims too closely related to a law of nature, natural phenomenon, or abstract idea are ineligible for patenting, despite the broad scope of section 101, the provision that defines eligible subject matter. The stated justification is that such patent claims would preempt the law of nature, natural phenomenon or abstract idea—the patent-ineligible concept—to which they relate and hinder scientific and technical advancement.

Alice prescribes a two-step test for determining whether patent claims are invalid. Under the first step, one determines whether the patent claims are directed to the patent-ineligible concept, namely a law of nature, natural phenomenon or abstract idea. If the claims are deemed directed to the patent-ineligible concept, then, under the second step, one considers the elements of each claim, both individually and as an ordered combination, to determine whether the claim has elements beyond the ineligible concept that would transform the nature of the claim into a patent-eligible application.  Although, as we discussed here and here, the reasoning behind the Alice decision is flawed, it remains the law of the land.

The two-step test of Alice has led to an epidemic of instances in which courts have invalidated patents for computer-related inventions and the Patent and Trademark Office has similarly rejected applications for such inventions.

In Enfish, the Federal Circuit considered a novel database structure that enables the user to organize data that, in conventional formats, would occupy numbers of tables.  The new database structure permits the user to organize the data in a single self-referential table. The Federal Circuit held this structure to be patent-eligible. Remarkably, Enfish is only the second instance in which the Federal Circuit has found software patent claims to be patent-eligible since the Supreme Court’s 2014 decision in Alice. (The first time was in DDR Holdings, discussed here.)

Enfish held the patent claims eligible on the ground that they were not “directed to” an abstract idea. In other words, the claims survived the first step of the two-step Alice test, and therefore the second step did not have to be applied. (MORE)