Monday, February 14, 2011

Empirical Study on Willfulness Post-Seagate - The More Things Change, The More They Stay the Same

When the In re Seagate decision was issued by the Federal Circuit in 2007, the court set a higher threshold for demonstrating willful infringement in patent cases and introduced a two-part test for willfulness:

[T]o establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. The state of mind of the accused infringer is not relevant to this objective inquiry. If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk . . . was either known or so obvious that it should have been known to the accused infringer.
 Seagate changed willful patent infringement in three significant ways: (1) the burden of proof for establishing willfulness fell on the patentee, instead of the accused infringer, (2) the abandonment of the "affirmative duty of care" eliminated the requirement that an accused infringer must produce an opinion of counsel at rial, and (3) if an accused infringer relied on opinion of counsel, the waiver of attorney-client privilege typically did not extend to trial counsel.

 After Seagate, numerous litigators, commentators and bloggers predicted remarked that the Seagate decision created an "extraordinarily high burden" for proving willfulness and would "almost certainly . . . make proof of willful infringement much more difficult for patentees."

Now that 3 years have passed, how has Seagate affected willfulness in the courts?  Christopher Seaman from Chicago-Kent College of Law decided to take a look at this question and empirically evaluate the effects of Seagate.

And what did Seaman find?

(1) Despite a healthy uptick in decisions on pretrial motions, most willfulness claims are still decided at trial.

Before Seagate - 16.1% (pretrial), 77.4% (trial), 6.6% (posttrial)
After Seagate - 26.5% (pretrial), 65.3% (trial), 8.2% (posttrial)


(2)  Seagate itself only had a modest effect on findings of willfulness.

Before Seagate - 48.2% (66 of 137 cases)
After Seagate - 37.4% (64 of 171 cases)

Seaman also looked at the Knorr-Bremse decision, which eliminated the "adverse inference" rule for an accused infringer's failure to produce an opinion of counsel.  Interestingly, when this decision is combined with Seagate, the effect of willfulness is more pronounced:

Before Knorr-Bremse - 63.8%
After Knorr-Bremse, but before Seagate - 48.2%
After Seagate - 37.4%

(3)  Seagate dramatically reduced findings of willfulness by a judge, but had no effect on jury findings.

Before Seagate Jury - 60.2%
After Seagate Jury - 61.9%

Before Seagate Judge - 53.9%
After Seagate Judge - 15.5%

(4)  E.D. Tex. had the highest number of willfulness decisions; the District of Minnesota had the lowest.

Looking at districts with at least ten decisions, Seaman broke down the districts on willfulness and found

E.D. Tex - 52.3%
N.D. Ill. - 46.2%
N.D. Cal. - 43.8%
D. Del. - 41.9%
D. N.J. - 38.5%
E.D. Va. - 36.4%
C.D. Cal. - 30.8%
D. Mass. - 30.0%
W.D. Wis. - 30.0%
D. Minn. - 27.3%

(National Average = 42.2%)

(4) Producing opinions of counsel had almost no effect on willfulness.

After Seagate, when accused infringers offered an opinion of counsel as a defense, they were found willful 43% of the time (13 of 30 cases). When an opinion of counsel was not offered, however, willfulness was found at nearly the same rate—44% of the time (47 of 106 cases).

(5)  A "substantial defense to infringement" appears to be the most effective way to defeat willfulness.

One of the factors for determining willfulness is whether the accused infringer has a "substantial," "legitimate," or "credible" defense to the patentee's claims.  Thus, a substantial noninfringement defense, even if unsuccessful, may be sufficient to defeat a willful infringement finding.  Likewise, credible invalidity arguments can support a finding of no willfulness.  And other potential defenses, such as the existence of a license, may prevent a willfulness finding as well.
From the data, it appears that a substantial defense to infringement is the single best way to defeat a willfulness claim. The low odds ratio for this factor (0.121) suggest that an accused infringer is several times less likely to be found willful if it can establish that it had a substantial or credible defense to the patentee's infringement claim. Specifically, when a substantial defense existed, willfulness was found only 13% of the time (5 of 40 cases), compared to 57% of the time when no substantial defense was found (55 of 96 cases).217 This relationship is highly statistically significant (p = .000).

(6)  Evidence of copying remains an important consideration for willfulness after Seagate.

When a patentee offered evidence of copying by the accused infringer, willfulness was found almost two-thirds (62.7%) of the time. In contrast, when there was no evidence that the accused infringer had copied, willfulness was found less than a third (29.9%) of the time.  Copying was particularly important when judges made the final decision on willfulness, as the absence of any evidence of copying almost always (92.3%) resulted in a finding of no willfulness.

(7)  Attempts to "design around" a patent, by itself, was insufficient to prevent a willfulness finding.

Surprisingly, willfulness findings were slightly higher (51.7%) when the accused infringer offered evidence that it had designed around the patented technology, as opposed to 42.1% of the time when such evidence was not offered.  Seaman explains that this outcome may be tied to the fact that a "design around" defense is usually invoked by accused infringers as a defense to deliberate copying - nearly two-thirds of cases (65.5%) where the accused infringer attempted to prove a "design around" also included evidence of copying.


(8)  Enhanced damages were reduced for juries, but not judges

Jury Finds Willfulness Before Seagate - 81.1%
Jury Finds Willfulness After Seagate - 47.6%

Judge Finds Willfulness Before Seagate - 85.7%
Judge Finds Willfulness After Seagate - 87.5%

With regard to the amount of enhanced damages, less than a third of enhanced damages awards during the entire study period (both before and after Seagate) were for treble damages. In fact, most (over 70%) enhanced damages awards were for double damages or less.  The mean enhancement was found to be 207%.


- Read/download a copy of Christopher B. Seaman, "Willful Patent Infringement and Enhanced Damages After In re Seagate: An empirical Study" (link)

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