A corporation that is accused of infringing a patent that, before the accusation, it did not know existed, should be safe from an award of treble damages for "willful" patent infringement, but a recent decision shows that is not always the case, at least not in the Eastern District of Texas. In Motiva Patents, LLC v. Sony Corp., 2019 U.S. Dist. LEXIS 166549 (E.D. Tex. Sept. 27, 2019), Defendant HTC argued that it could not have infringed willfully because, prior to the lawsuit, it lacked knowledge of the patent it was allegedly infringing. The court, though, held that HTC's policy of forbidding its employees even to read patents could be deemed "willful blindness." As explained below, besides making it more difficult to get rid of willful infringement allegations at the motion to dismiss stage, the case is of interest because the court's application of the willful blindness doctrine in the factual scenario before it could conflict with other patent law principles.
The Plaintiff in Motiva sought treble damages under 35 U.S.C. Section 284, which provides that in patent cases "the court may increase the damages up to three times the amount found or assessed." (Emphasis added.) The language of Section 284 "contains no explicit limit or condition," Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923, 1931 (2016), on what the court "may" do, but the court's discretion to enhance damages under Section 284 is limited by "sound legal principles." Id. at 1932. "These principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement." Id. at 1935 (emphasis added).
The Supreme Court has "eschew[ed] any rigid formula" for determining what conduct is "egregious." Id. at 1934. "Willfulness" is the usual term for the conduct that justifies enhanced damages, but, as the Court noted in Halo, "[t]he sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, or . . . characteristic of a pirate." Id. at 1932.
For conduct to be deserving of one of those adjectives, it would seem necessary to prove that, at the time of infringement, Defendant knew that there was a patent. Indeed, the Court in Halo noted that "culpability is generally measured against the knowledge of the actor at the time of the challenged conduct." Id. at 1933.
In Motiva, there was no allegation that Defendant HTC knew about the patent before the lawsuit was filed. Rather, the complaint alleged that HTC had a policy of forbidding its employees to read patents of others, which meant it was "willfully blind" toward Motiva's patent rights. 2019 U.S. Dist. LEXIS 166549, at *6. HTC moved to dismiss, arguing that "willful blindness is insufficient to state a claim for willful infringement." Id. at *33. The court disagreed, holding that, under well-established law, willful blindness is tantamount to actual knowledge (id.), and that the policy alleged by Plaintiff was enough to plead willful blindness (id. at *26-28).
That ruling is problematic for two reasons. First, the court did not acknowledge a distinction between i) general knowledge that there are documents called patents and there is a risk that patents can be infringed, versus ii) a specific reason for Defendant to believe that this particular plaintiff had a patent covering Defendant's product. The ruling thus appears to be inconsistent with the reasoning of Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (2011) -- ironically, the case on which the court in Motiva primarily relied.
Global-Tech addressed inducing another to infringe a patent, which, like direct infringement, is prohibited by patent law (35 U.S.C. Section 271(b)). Global-Tech held that the knowledge element of inducement of infringement can be met by a showing of willful blindness, which occurs when defendants "deliberately shield[ ] themselves from clear evidence of critical facts that are strongly suggested by the circumstances. The traditional rationale for this doctrine is that defendants who behave in this manner are just as culpable as those who have actual knowledge." Global-Tech, 563 U.S. at 766. For the willful blindness doctrine to apply, "1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact." Id. at 769 (emphasis added). The Court contrasted willful blindness with "'deliberate indifference' to a known risk that a patent exists," and stated that the latter, which would allow "a finding of knowledge when there is merely a 'known risk' that the induced acts [were] infringing," was the wrong standard. Id. at 766, 770.
Motiva, arguably, applied the "deliberate ignorance" or ignoring a "known risk" standard of which the Supreme Court disapproved in Global-Tech, in that it was not alleged that HTC subjectively believed there was high probability that it was infringing Motiva's patent (or anyone's patent). The court in Motiva did not address this seeming disparity between the language in Global-Tech and the allegations in the complaint.
Second, the Motiva decision is difficult to reconcile with the principle that marketing a product without exercising due care as to whether that product infringes any patents is generally not considered to be behaving "willfully." There is, for instance, no affirmative duty "of due care" requiring one to seek legal counsel on whether a new product will infringe patents. In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). See also 35 U.S.C. Section 298 (enacted in 2011) (the defendant's failure to obtain a legal opinion on whether it infringes cannot be used as evidence of willful infringement). The parade of synonyms for willfulness in Halo -- "wanton, malicious, bad-faith, deliberate, consciously wrongful, or . . . characteristic of a pirate" suggests that willfulness is more than a lack of due care.
The opinion in Motiva did not explain why, as between i) a company's failure to act with due care and check for patents before launching a product, and ii) a company's creation of a formal policy that it does not check for patents before launching a product, there is such a conceptual difference that the latter can be considered willful behavior.
In defense of the Motiva ruling, one could argue that the formal policy is evidence of culpability because its purpose is not to avoid an improper act (infringement) but merely to escape financial consequences for that act. A litigant though, could reply that a blanket policy that employees should not look for and read patents has a benign purpose, in that it protects the company from unnecessary factual disputes over what it did and did not know. There is caselaw holding that, for an employee's knowledge of patent to be imputed to the employer, the employee "must have some connection to the decision willfully to infringe." Potter Voice Technologies, LLC v. Apple Inc., 24 F. Supp. 3d 882, 886 (N.D. Cal. 2014). However, how "connected" to the decision must the employee be? Does the employee have to be the ultimate decision-maker, or just be involved in product development? Does it matter when the employee encountered the patent, i.e., whether there was a time gap between seeing the patent and the development of the infringing product? Does it make a difference, in imputing "knowledge" of the patent, if the employee saw the patent, but only read the abstract (the short summary of the subject of the patent), and did not follow up by reading the actual patent claims? Rather than spend money to litigate these fascinating questions, a company may believe that it makes more sense to avoid the issue entirely through a policy of not reading patents at all.
At the moment, Motiva is the sole authority on the willfulness of a company policy against reading patents. It is also worth noting that the district court in Motiva merely decided a motion to dismiss, and determined there was a plausible claim of willfulness, not that a claim of willfulness was proven. The case, though, does caution corporations not to count on an affirmative, company-wide policy of avoiding patents as a way of easily avoiding claims of willful patent infringement.