Eastern District Of Texas Grants Opposition To Enhanced Damages In “Garden-Variety” Patent Case
On April 22, 2021, the United States District Court for the Eastern District of Texas granted defendants’ motion opposing enhanced damages under 35 U.S.C. § 284. Wapp Tech Ltd. Partnership v. Seattle Spinco, Inc., No. 4:18-cv-469 (E.D. Tex. Apr. 22, 2021). The Court found plaintiffs’ argument that defendants did not present a good faith defense unpersuasive, and instead ruled that the case “was a ‘garden-variety’ patent case, rather than an egregious case of misconduct.”
Plaintiffs filed a complaint for patent infringement against defendants on July 2, 2018. A jury trial commenced in March 2021, in which the parties agreed that each side would have 10.5 hours to present evidence. At trial, defendants’ invalidity expert testified for just 37 minutes. After the close of evidence, plaintiffs moved for judgment as a matter of law under Fed. R. Civ. P. 50(a) (“JMOL”) on defendants’ invalidity arguments. Defendants conceded anticipation, obviousness, and enablement, noting that their defense was limited at trial by time constraints. The court granted plaintiffs’ motion for JMOL on invalidity. The jury ultimately awarded plaintiffs $172.5 million, finding that defendants willfully infringed each asserted patent. After trial, defendants filed an opening brief opposing enhancement of damages under 35 U.S.C. § 284, and plaintiffs responded by moving for enhanced damages.
The Court began its analysis by noting that enhanced damages are generally appropriate under
§ 284 in “egregious cases” of misconduct, including conduct that is “willful, wanton, malicious, [in] bad faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.” The Court further stated that it was not bound by the jury’s willfulness finding in awarding enhanced damages.
Plaintiffs argued that damages should be enhanced “because [defendants] did not present a good faith defense.” Plaintiffs focused on their successful motion for JMOL on invalidity. The Court disagreed, finding each of plaintiffs’ arguments unpersuasive.
First, contrary to plaintiffs’ argument, the Court ruled that defendants were adequately prepared to present an invalidity defense at trial, pointing to the case’s extensive discovery and numerous expert reports as proof of defendants’ diligence. The court found the fact that plaintiffs never moved for summary judgment or to exclude defendants’ invalidity defenses prior to trial as further proof that defendants were adequately prepared for trial.
Second, the Court disagreed with plaintiffs’ contention that it should only consider the trial record when evaluating the sufficiency of the defense. Citing to Supreme Court precedent, the Court held that “the enhanced damages analysis is inherently holistic and the district court exercises considerable discretion. … As such, the Court properly considers all circumstances of this case.” However, the Court’s analysis suggests that enhanced damages would not be appropriate even if the Court was constrained to relying on only the trial record. The Court emphasized that its JMOL ruling on invalidity may have been the result of defendants’ poor allocation of time at trial, rather than the merits of defendants’ argument: “[i]f [defendants] had better allocated [their] time, or requested additional time to present evidence at the pretrial conference, invalidity may have gone to the jury.” The Court also ruled that defendants’ concessions at JMOL related to certain invalidity defenses did not necessarily prove that they lacked a good faith defense—rather, “it is more reasonable for [defendants] to concede defeat than to fight the obvious.”
The court further cited the fact that it denied plaintiffs’ motion for JMOL on infringement as evidence that defendants presented a reasonable and legally sufficient noninfringement case. Accordingly, “[t]aken together, [defendants] mounted a good faith defense at trial.”
Finally, the court considered the factors from Read Corp. v. Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), which courts frequently use in determining whether enhanced damages are appropriate. Applying the Read factors to the present case, the Court ruled that enhanced damages were not proper because: (1) defendants’ formed a good faith belief that the patents were not infringed; (2) the parties’ pretrial disagreements never rose to an egregious or unprofessional level; (3) there was no evidence that defendants copied plaintiffs, intended to harm plaintiffs, or concealed misconduct; and (4) defendants presented a reasonable non-infringement case.
Accordingly, the Court ruled that the jury award of $172.5 million (which is “potentially the largest verdict in the history of this courthouse”) should not be enhanced.