Authored by D. Brian Kacedon, Jameson Q. Ma, and John C. Paul
Section 284 of the Patent Act provides that damages may be enhanced up to three times the compensatory award after a finding of willful infringement. A finding of willfulness does not, however, mandate an enhancement of damages particularly if the accused infringer's conduct does not merit a full enhancement. The district court for the Eastern District of New York, in Metso Minerals, Inc. v. Powerscreen International Distribution Limited, No. 2-06-cv-01446 (E.D.N.Y. Dec. 8, 2011), recently held that a full enhancement of damages was not appropriate in light of certain mitigating factors, especially the lack of litigation misconduct. Other mitigating factors found to weigh against full enhancement were that Metso presented a legitimate defense, the motivation for harm was not sinister, and Metso made no attempts to conceal the misconduct. Conversely, the court found that Metso's failure to obtain an exculpatory opinion of counsel before commencing the infringing activity, among other factors, justified a doubling of the damages award.
In March 2006, Metso initiated a patent-infringement suit against Powerscreen, seeking, among other relief, a trebling of monetary damages for willful infringement. At trial, the jury awarded Metso a verdict of $15.8 million and found that Powerscreen willfully infringed Metso's '618 patent. Metso subsequently requested an award of enhanced damages under 35 U.S.C. § 284.
The Metso Decision
After reviewing the evidence, the court concluded that a totality of the circumstances justified, not a tripling, but a doubling of the damage award. The judge considered the factors in Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992). The factors included: (1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; (3) the infringer's behavior as a party to the litigation; (4) the defendant's size and financial condition; (5) closeness of the case; (6) the duration of the defendant's misconduct; (7) remedial action by the defendant; (8) the defendant's motivation for harm; and (9) whether the defendant attempted to conceal the misconduct.
The court found that Powerscreen willfully and deliberately copied the '618 patent and did not form a well-supported, good-faith belief of noninfringement. At trial, Powerscreen officials admitted that they were aware of the '618 patent during design of the infringing mobile screeners. Powerscreen then contended after trial that it put forth compelling evidence that demonstrated it took a reasonable investigation of the scope of the '618 patent. But Powerscreen's opinion of noninfringement at the initial stages of development of its infringing screeners was based on one person's cursory understanding of the patent claims even though that person had no knowledge of U.S. patent law. Further, the General Manager of Powerscreen decided two years later that the accused screener did not infringe the '618 patent. The General Manager was similarly not familiar with U.S. patent law and did not read the patent. The court also noted that Powerscreen did not seek an exculpatory opinion of counsel before commencing the infringing activity. These facts, according to the court, strongly supported enhancing the damages award.
The court also found that Terex—one of the defendants, a multinational conglomerate, and parent of Powerscreen—was equally liable for infringement. The court considered a post-trial press release made by Terex, stating that the damage award of $15.8 million will not have a "material impact on Terex's consolidated business or overall operating results" as probative of the defendants' size and financial condition. The press release was used by the court as support for enhancing the damages award.
Powerscreen's duration of misconduct also weighed in favor of enhancing the damages award. Powerscreen continued to sell the infringing screeners during the entire 4.5-year pretrial period, during trial, and postverdict. The infringing activity spanned over 11 years. Even though Metso took 6 years from the date of infringement to file the action, a delay in filing was determined by the court not to be an excuse for infringement that continues to occur during trial and post-verdict.
Conversely, the lack of litigation misconduct was found to weigh against enhancing the damages award. Litigation conduct may refer to bringing unjustified suits, discovery abuses, failure to obey orders of the court, or acts that unnecessarily prolong litigation. While the court noted that the present case had been contentious, it found that Powerscreen did not engage in litigation misconduct. The court dismissed several references to inadequate compliance with certain Local Rules and stated that overly broad discovery requests do not necessarily rise to the level of litigation misconduct. The judge was unwilling to equate "vigorous advocacy" with litigation misconduct and found that this factor weighed against multiplying the damages award.
Various other factors did not weigh in favor of enhancing the damages award. First, the defenses raised by Powerscreen had enough merit to present a question of noninfringement to the jury, and there were genuine issues of material fact warranting a trial. Second, Powerscreen's motivation for harm was found not to be malicious, but to be for competitive reasons. Third, Powerscreen made no attempts to conceal the misconduct; the accused screeners were prominently displayed at trade shows, in press releases, in manuals, and in sales brochures. These factors were found to weigh against enhancing the damages award.
On balance, the court found that Powerscreen's conduct made it sufficiently culpable to warrant a doubling of the damage award. In particular, Powerscreen's willful infringement and failure to seek an exculpatory opinion of counsel with regard to the scope of Metso's patent weighed in favor of enhancing the damages award. The court also determined a full tripling of the damages award was inappropriate due to the presence of mitigating factors, particularly the lack of litigation misconduct.
Strategy and Conclusion
This opinion illustrates the variety of factors to be considered when assessing the damages for willful infringement and particularly noted that accused infringers may be able to mitigate potential liability for willful infringement by refraining from litigation misconduct and obtaining an opinion of counsel before engaging in potentially infringing activity. The court indicated that relying on the opinion of in-house counsel or engineers may not mitigate potential liability for willful infringement if those persons are not knowledgeable and familiar with U.S. patent law.
While submitting press releases downplaying the business effect of damage awards may boost investor confidence, such releases may be used by the court as evidence of a company's financial condition and warrant enhancing of the damages award. Companies should weigh the benefit of easing investors' concerns with potentially increasing damages liability.
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