Pleading willful patent infringement takes different forms in different courts

Pursuant to 35 U.S.C. § 284, a court “may increase” a damages award on a finding of patent infringement “up to three times the amount found or assessed.” The standard for imposing enhanced damages under this section has emerged from case law over the years and historically relates to whether the infringement was found to be willful. In 2016, the Supreme Court dramatically altered the standard for awarding enhanced damages. Since then, district courts across the country have struggled with the pleading standards related to requests for enhanced damages. This past March, Judge William H. Alsup of the Northern District of California lamented the lack of appellate authority in this area. See Sonos, Inc. v. Google LLC, No. C 21-07559 WHA, 2022 WL 799367, at *2 (N.D. Cal. Mar. 16, 2022). Patent plaintiffs and defendants should heed how allegations of willful infringement and requests for enhanced damages are treated across jurisdictions.

Under In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007), a plaintiff seeking enhanced damages for patent infringement needed to show that the infringement was “willful” according to a two-part test that required proof that: (1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent; and (2) the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.” Id. at 1368-1371.

In 2016, the Supreme Court found the Seagate test to be too restrictive. It explained that the first prong of the test—requiring an objectively high likelihood of infringement—risked “exclud[ing] from discretionary punishment” one “who intentionally infringes another’s patent.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. 93, 104 (2016). The Supreme Court set aside the Seagate test, emphasized that district courts should exercise their discretion in awarding enhanced damages, and cautioned that “such punishment should generally be reserved for egregious cases typified by willful misconduct.” Id. at 106.

In 2020, the Federal Circuit explained the procedural relationship between a finding of willful infringement and an award of enhanced damages:

Under Halo the concept of “willfulness” requires a jury to find no more than deliberate or intentional infringement. The question of enhanced damages is addressed by the court once an affirmative finding of willfulness has been made. It is at this second stage at which the considerations of egregious behavior and punishment are relevant.

Eko Brands, LLC v. Adrian Rivera Maynez Enters., Inc., 946 F.3d 1367, 1378 (Fed. Cir. 2020) (cleaned up).

After Halo, one point of confusion is whether a patentee seeking enhanced damages needs to simply allege willful infringement, or whether she must additionally allege egregious behavior. Compare Fortinet, Inc. v. Forescout Techs., Inc., 543 F. Supp. 3d 814, 840 (N.D. Cal. 2021) (Judge Edward M. Chen) (must allege egregious behavior), and Finjan, Inc. v. Cisco Systems Inc., 2017 WL 2462423, at *5 (N.D. Cal. 2017) (Judge Beth Labson Freeman) (same), with Core Optical Techs., LLC v. Juniper Networks Inc., --- F. Supp. 3d ----, 2021 WL 4618011, at *3 (N.D. Cal. Oct. 7, 2021) (Judge Vince Chhabria) (egregiousness not required). In Sonos, Judge Alsup concluded that “once willfulness is adequately pled, the complaint need not go further and specify the further aggravating circumstances warranting enhanced damages.” Sonos, 2022 WL 799367, at *4. He explained that it “would be unreasonable to expect patent plaintiffs to be in a position to plead the full extent of egregious misconduct” at the outset of the case, when the best evidence of such misconduct is likely in the defendant’s sole possession. Id.

Another area on which courts diverge after Halo is the pleading standard for willfulness itself. While this was not disputed in Sonos, Judge Alsup explained that “[w] ith respect to willfulness, … specific intent to infringe [must] be pled with plausibility. This means that knowledge of the patent and knowledge of infringement must be pled with plausibility.” Id. at *2. “In other words, allegations of an infringer’s knowledge of the patent and of infringement must raise a plausible inference that the defendant had the specific intent to infringe.” Id. at *3.

Similarly, the District of Delaware requires patentees to plausibly plead that the accused infringer “(1) knew of the patent-in-suit; (2) after acquiring that knowledge, it infringed the patent; and (3) in doing so, it knew, or should have known, that its conduct amounted to infringement of the patent.” Valinge Innovation AB v. Halstead New England Corp., 2018 WL 2411218, at *13 (D. Del. May 29, 2018); see also 3Shape A/S v. Align Tech., Inc., No. CV 18-886-LPS-CJB, 2019 WL 1416466, at *4 (D. Del. Mar. 29, 2019).

The Eastern District of Texas, another patent litigation hotspot, formulates the test slightly differently, requiring knowledge of the patent plus “culpable conduct.” In June 2021, Chief Judge Rodney Gilstrap granted a motion to dismiss a claim of willful patent infringement because “while [it does] allege notice (and therefore knowledge) of the patents-in-suit, it does not allege any culpable conduct or any set of facts supporting an inference of culpable conduct.” Fractus, S.A. v. TCL Corp., No. 2:20-CV-00097- JRG, 2021 WL 2483155, at *4 (E.D. Tex. June 2, 2021). Conversely, Judge Robert W. Schroeder III in Soverain IP, LLC v. Microsoft Corp., No. 217CV00204RWSRSP, 2018 WL 1465792, at *3 (E.D. Tex. Mar. 26, 2018), found the “consciously wrongful” aspect of willful infringement to be adequately pled when the defendant “knew its competitors had licensed rights in the technology, yet intentionally chose to use the technology without a license specifically for gaining a financial edge over those competitors.”

Courts have also split over whether the allegations required to sustain a claim for “post-suit” willful infringement can be provided by the complaint itself. In Sonos, the alleged infringer, Google, argued “that a patent infringement complaint can never supply the knowledge required for willfulness, contending further that pleadings may assert rights but cannot create rights.” 2022 WL 799367, at *4. Judge Alsup generally agreed, “join[ing] those district courts that do not generally allow the complaint to serve as notice.” Id. at *5; but see MasterObjects, Inc. v. Amazon.com, Inc., No. C 20- 08103, 2021 WL 4685306, *6 (N.D. Cal. Oct. 7, 2021) (Judge Alsup) (allowing a second amended complaint to base its allegations of willful infringement on the notice provided by the original complaint).

In Sonos, Judge Alsup recognized and explained the rationale on both sides of the issue.

On one hand, “a well-pled, detailed complaint laying out a clear case of infringement could supply the knowledge (post-complaint) required for willfulness once a defendant has had a reasonable period of time to evaluate the complaint’s contentions.” Sonos, 2022 WL 799367, at *5. Judge Lucy Koh, formerly of the Northern District of California and now on the Ninth Circuit, and Judge Gilstrap have embraced this position. See Apple Inc. v. Samsung Elecs. Co., 258 F. Supp. 3d 1013, 1025-27 (N.D. Cal. 2017); BillJCo, LLC v. Cisco Sys., Inc., No. 2:21-CV-00181- JRG, 2021 WL 6618529, at *8 (E.D. Tex. Nov. 30, 2021).

On the other hand, Judge Alsup explained, “allowing the complaint to serve as notice would circumvent the worthwhile practice to send a cease-and-desist letter before suit.” Sonos, 2022 WL 799367, at *5. It would fail to encourage early notice of infringement and skip over the opportunity for out-of-court negotiations. Id. at *4-5. Consistent with this reasoning, Judge William H. Orrick, also of the Northern District of California, held that “post-suit knowledge [is] not relevant” to willful infringement. Illumina, Inc. v. BGI Genomics Co., No. 19-CV-03770-WHO, 2020 WL 571030, *6 (N.D. Cal. Feb. 5, 2020).

The District of Delaware is similarly divided on this issue. See ICON Health & Fitness, Inc. v. Tonal Sys., Inc., No. CV 21-652-LPS-CJB, 2022 WL 611249, at *3 & n.4 (D. Del. Feb. 7, 2022) (describing split). Chief Judge Colm F. Connolly, viewing 35 U.S.C. § 284 as a penalty provision, held that knowledge provided by any complaint in a lawsuit, whether initial or later amended, comes too late to support a claim of willful infringement in that lawsuit. See ZapFraud, Inc. v. Barracuda Networks, Inc., 528 F. Supp. 3d 247, 252 (D. Del. 2021). Judge Richard G. Andrews recently admitted to “having been on both sides of the issue,” but reasoned that willful infringement should be rare, whereas a rule that permits post-filing knowledge would make it ubiquitous. See Wrinkl, Inc. v. Facebook, Inc., No. 20-CV-1345-RGA, 2021 WL 4477022, at *6, 8 (D. Del. Sept. 30, 2021). Finally, Judge Leonard P. Stark, recently confirmed to the Federal Circuit, adopted Magistrate Judge Christopher Burke’s recommendation to allow a willful infringement claim to stand on knowledge provided by a prior filed complaint in the same lawsuit. See Valinge Innovation AB v. Halstead New England Corp., No. CV 16-1082-LPS-CJB, 2018 WL 2411218, at *13 (D. Del. May 29, 2018), report and recommendation adopted, No. CV 16-1082-LPS-CJB, 2018 WL 11013901 (D. Del. Nov. 6, 2018).

While the requirements for pleading enhanced damages remain unsettled, patentees should keep the varying standards in mind when selecting venues. But another type of advanced planning may be simpler. As Judge Alsup has suggested, “All this [motion practice] may well have been avoided with a simple notice letter.” MasterObjects, 2021 WL 4685306, at *7. Those who are accused of willful infringement should, in turn, carefully examine a complaint to ensure that it alleges the knowledge and intent often required and draw on the well-considered analyses provided by the lower courts to argue that it does not.