Federal Circuit Vacates Enhanced Damages Award
On July 10, 2018, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion in an appeal from a District Court decision in a patent-infringement case, affirming the District Court’s finding of patent validity, but vacating the District Court’s award of enhanced damages of two-and-a-half times the original damages amount. Polara Eng. Inc. v. Campbell Co., Appeal Nos. 2017-1974 and 2017-2033 (Fed. Cir. July 10, 2018). The CAFC found that the District Court wrongly assessed the closeness of the case, and remanded the enhanced-damages issue to the District Court for further consideration.
One of the defenses the accused infringer asserted at trial was a public-use bar. The patented invention was a pedestrian signal system used at crosswalks. The patent owner had installed two of the patented systems at public crosswalks near its plant, more than a year before it filed its patent application. The accused infringer argued that these installations were a public use and that the patent was therefore invalid. The jury, the judge, and ultimately the CAFC disagreed. The CAFC affirmed the finding of no invalidity, in part because it found there to have been substantial evidence that the installations were necessary to test the durability of the pedestrian signals.
The accused infringer had also asserted a non-infringement defense, which the District Court had rejected on summary judgment, and an obviousness defense, which the jury, the judge, and the CAFC all rejected.
The jury made a specific fact-finding that the infringement was willful. After that verdict was rendered, the District Court considered the enhanced-damages issue. The District Court considered several factors, including the closeness of the case, which it found to be a “neutral factor.” The District Court specifically found that while the obviousness defense “was a close call,” the other defenses, including the public-use defense, were “weaker.” The District Court elected to enhance damages to two-and-a-half times the original award.
The CAFC noted that the enhancement of two-and-a-half-times was “almost the maximum amount of enhanced damages” (the maximum being treble damages). The CAFC also noted that in its enhancement analysis, the District Court had not even mentioned the public-use defense. While the District Court had not mentioned it, and despite the CAFC’s affirmance of the experimental-use finding that negated the public-use defense, the CAFC itself decided that the public-use defense “presented a close question.” The CAFC stated: “We view the public use defense, which the court did not explicitly address, as a closer call than obviousness. Thus, to the extent the district court determined that the public use defense was weak in this case, the court clearly erred.” The CAFC therefore vacated the enhanced-damages award, and remanded the issue to the District Court for further consideration.
The CAFC can be read to indicate that the CAFC reevaluated the closeness of the case de novo and, disagreeing with the District Court’s view of the facts, found the case to have been a close one. It illustrates the importance of presenting the CAFC with the clearest possible findings of fact, and suggests that the CAFC will take a careful look at enhanced-damages awards that approach the treble-damages maximum.