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IP Litigation

Pleading Willfulness - One Year Post-Halo

June 28, 2017

IP Litigation

Pleading Willfulness - One Year Post-Halo

June 28, 2017

Back to Fish's Litigation Blog

 

Just over a year ago, the Supreme Court issued its decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016).  Halo abrogated the Federal Circuit’s two-part willfulness test, which the Federal Circuit laid out in Seagate in 2007.[i]  Before Halo, plaintiffs were required to show “that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent” and that risk of infringement “was either known or so obvious that it should have been known to the accused infringer” in order to receive enhanced damages under 35 U.S.C. § 284.  In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) abrogated by Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016).

The Supreme Court stated that the Seagate test was “unduly rigid” and “excludes from discretionary punishment many of the most culpable offenders, such as the ‘wanton and malicious pirate’ who intentionally infringes another’s patent—with no doubts about its validity or any notion of a defense—for no purpose other than to steal the patentee’s business.”  Halo, 136 S. Ct. 1923, 1932 (2016).  Instead, § 284 instead “allows district courts to punish the full range of culpable behavior,” and courts should consider the individual facts of each case, reserving enhanced damages for “egregious cases typified by willful misconduct.”  Put differently, conduct warranting enhanced damages is reckless, willful, wanton, malicious, committed in bad faith, deliberate, consciously wrongful, flagrant, or characteristic of a pirate.  Id.  In his concurrence, Justice Breyer commented that “the Court’s references to ‘willful misconduct’ do not mean that a court may award enhanced damages simply because the evidence shows that the infringer knew about the patent and nothing more.”  Id. at 1936 (Breyer, J., concurring).

The Supreme Court did not weigh in on the effect of its decision on pleading willfulness.  Nor has the Federal Circuit discussed what is required to adequately plead willfulness under Fed. R. Civ. P. 8.  As such, determining what plaintiffs must allege to make out a willfulness claim has been left to district courts, leading to disparate results.  So far, courts seem to have taken two approaches:  (1) a plaintiff must only allege that the defendant had knowledge of the asserted patent, or (2) a plaintiff must allege “something more” than knowledge, i.e. egregious conduct.  Below, we discuss cases that apply each of these approaches.  Additionally, we consider how courts have responded to claims of willful infringement based on conduct that occurred after the complaint was filed.

Only Knowledge Required

One of the first post-Halo opinions on pleading willfulness was rendered by district court in Global Tech Led, LLC v. Every Watt Matters, LLC, No. 15-cv-61933-BLOOM/Valle, 2016 U.S. Dist. LEXIS 183122, at *16 (S.D. Fla. July 29, 2016).  Plaintiff Global Tech alleged that the defendants were aware of the parent patent application over two years before the complaint was filed.  The district court stated that “allegations that the defendant continued to infringe, despite actual notice of the infringement” supports an inference of willfulness.  To support this determination, the court cited to a pre-Halo decision from the Middle District of Tennessee, which itself relied on Seagate.  Based on this allegation, the Global Tech district court concluded that the plaintiff had adequately pleaded willfulness.  It does not appear that the plaintiff alleged any specific egregious conduct to support its willfulness claim, aside from continued infringement.

Similarly, the magistrate judge in Raytheon Co. v. Cray, Inc., No. 216CV00423JRGRSP, 2017 U.S. Dist. LEXIS 56729, at *12-13 (E.D. Tex. Mar. 13, 2017), report and recommendation adopted, No. 216CV00423JRGRSP, 2017 U.S. Dist. LEXIS 55664 (E.D. Tex. Apr. 12, 2017), noted that “a claim for willful infringement must merely allege that infringement was ‘intentional or knowing.’”  Because the plaintiff alleged knowledge of the patents-in-suit, the court concluded that the plaintiff had adequately pleaded willfulness.

Willfulness Requires More Than Allegation of Knowledge

In contrast to Global Tech and Raytheon, several courts have required more specific pleadings, granting motions to dismiss when plaintiffs have failed to plead more than mere knowledge.  The district court in CG Tech. Dev., LLC v. Big Fish Games, Inc., No. 216CV00857RCJVCF, 2016 U.S. Dist. LEXIS 115594 (D. Nev. Aug. 29, 2016), for example, granted the defendants’ motion to dismiss the plaintiff’s willfulness claim for failure to state a claim.  According to the court, the plaintiffs merely stated “conclusory allegations” that the defendant knew of the patents and continued to use its infringing products.  Id. at *43-44.  Referencing Justice Breyer’s concurrence, the court held that “alleging that Defendant only knew about the patent is insufficient to constitute willful infringement.”  Id. at *44.

Similarly, in Nanosys, Inc. v. QD Vision, Inc., No. 16-cv-01957-YGR, 2016 U.S. Dist. LEXIS 126745, at *24 (N.D. Cal. Sep. 16, 2016), the defendant argued that plaintiffs must allege more than mere knowledge of a patent.  The court held that “[a court] should consider the totality of the allegations to determine whether a claim of willfulness is plausible.”  Id. at *25.  Applying this standard, the court granted the plaintiffs leave to amend their pleading to “allege additional facts upon which they [could] bolster allegations showing willfulness beyond a claim of mere knowledge.”  Id. at *26.  The district court also noted that Halo did not address pleading standards at the motion to dismiss stage and that the Supreme Court’s decision allowed for “broad discretion to award enhanced damage awards for egregious infringement.”

More recently, the court in Cont’l Circuits LLC v. Intel Corp., No. CV16-2026 PHX DGC, 2017 U.S. Dist. LEXIS 23842, at *28 (D. Ariz. Feb. 21, 2017), determined that knowledge was not sufficient for a claim of willful infringement.  Instead, a plaintiff must show “the additional element of egregiousness.”  Because the plaintiff failed to make such a showing, the defendant’s motion to dismiss the willfulness claim was granted.

Pre-Filing and Post-Filing Willfulness

A few courts have also discussed the effect of Halo on the availability of pre-suit and post-suit willfulness.  In Seagate, the Federal Circuit held that a patentee can seek a preliminary injunction when an accused infringer’s post-filing conduct is “reckless”—this “generally provides an adequate remedy for combating post-filing willful infringement.”  497 F.3d at 1374.  The Federal Circuit further noted that “[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.”  Id.  Post-Halo, some courts have deviated from this holding, while others have continued apply Seagate.

In Simplivity Corp. v. Springpath, Inc., No. CV 4:15-13345-TSH, 2016 U.S. Dist. LEXIS 155017, at *60-62 (D. Mass. July 15, 2016), for example, the district court held that plaintiffs are no longer required to seek a preliminary injunction in order to obtain post-suit willfulness, as was required under Seagate.  Instead, the plaintiffs in Simplivity were able to make out a claim for post-filing willful infringement by alleging an “escalation” of infringing behavior after the suit was filed.  The court held that this escalation fell within Halo’s description of egregious conduct and supported a claim of post-suit willfulness.

The court in Princeton Digital Image Corp. v. Ubisoft Entm’t SA, No. CV 13-335-LPS-CJB, 2016 WL 6594076, at *40-41 (D. Del. Nov. 4, 2016) was more circumspect when it granted a motion to dismiss a claim for willful infringement.  Regarding the Seagate requirement that a patentee seek a preliminary injunction, the court noted that other courts have held that Halo abrogated the requirement and stated that it would “assume herein, without deciding, that a willful infringement claim based solely on post-filing conduct is cognizable.”  Id. at *40 n.20.   The court then held that the plaintiff had failed to adequately plead pre-suit willfulness because the complaint did not sufficiently allege knowledge of the patent-in-suit prior to service of the complaint.  The court also determined that the plaintiff had not articulated how the defendant’s conduct during the three-month period between service of the complaint and expiration of the patent amounted to an “egregious” case of willful infringement.

But in at least one case, a district court has granted a motion to dismiss under Rule 12(b)(6) when the willful infringement claim was based solely on post-filing conduct, expressly citing the Seagate preliminary injunction requirement.  Cooper Lighting, LLC v. Cordelia Lighting, Inc., No. 1:16-CV-2669-MHC, 2017 U.S. Dist. LEXIS 56140, at *5 (N.D. Ga. Apr. 6, 2017).  Noting that the Supreme Court in Halo did not discuss whether enhanced damages are limited to the alleged infringer’s pre-filing conduct, the court granted defendants’ motion to dismiss, holding that the willful infringement claim failed as a matter of law.

Looking Forward

Because data points for the willfulness pleading standard are still limited, and the Federal Circuit has not yet discussed the issue, it is not possible to answer conclusively what exactly a plaintiff must allege to support a willful infringement claim.  But based on district court decisions from the past year, it appears that the conservative approach to pleading willful infringement is to allege (1) that the defendant had knowledge of the asserted patent and (2) that the defendant’s conduct, after the defendant learned of the patent, went beyond mere use or sale of an infringing product and was “egregious” in some way, as in Simplivity.  Plaintiffs and defendants should also consider whether the facts of each case support claims of pre-suit willfulness, post-suit willfulness, or both, since some courts have shown that they are willing to allow claims for post-suit willfulness, even if a plaintiff cannot adequately state a claim for pre-suit willfulness.

Please continue check back for updates on post-Halo willfulness law and other important developments in the patent sphere.

[i] For discussion of the Supreme Court’s Halo decision, please refer to the following Fish blog post:  Enhanced Damages in Patent Cases to Depend on All Relevant Circumstances for “Egregious” Behavior.

Related Tags

Supreme Court
Federal Circuit
SCOTUS
Halo Electronics
Pulse Electronics

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