Wednesday, September 09, 2009

Willfulness Can Still Be Pled Even If Preliminary Injunction Is Not Sought

When the Federal Circuit issued its Seagate decision on willful infringement, the court stated the following on post-filing willfulness:

It is certainly true that patent infringement is an ongoing offense that can continue after litigation has commenced. However, when a complaint is filed, a patentee must have a good faith basis for alleging willful infringement. Fed. R. Civ. P. 8, 11(b). So a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer's pre-filing conduct. By contrast, when an accused infringer's post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement . . . A patentee who does not attempt to stop an accused infringer's activities in this manner should not be allowed to accrue enhanced damages based solely on the infringer's post-filing conduct. Similarly, if a patentee attempts to secure injunctive relief but fails, it is likely the infringement did not rise to the level of recklessness.
The Seagate opinion went further to state that the position on preliminary injunctions was not a per se rule, and its application would depend on the facts of each case.

Nevertheless, many defendants have latched onto this language in the district courts in an effort to get the willfulness issue "off the table" early using 12(b)(6) motions.

Affinity Labs of Texas LLC v. Alpine Electronics, No. 9:08-CV-171 (E.D. Tex., Sept. 2, 2009, order) (R. Clark).

Affinity Labs commenced their case on August 29, 2008. In its initial complaint, Affinity Labs neither made a claim of willful infringement nor requested a preliminary injunction. At a subsequent Case Management Conference, Affinity Labs confirmed that it had not, at that time, made a willfulness claim, and stated that Defendants were unaware of the asserted patent until the case was filed. A few months later, Affinity Labs amended its complaint to raise a willfulness claim for the first time. Defendants moved to dismiss Affinity Labs’s claim of willful infringement on the grounds that Affinity Labs cannot base its claim entirely on Defendants’ post-filing conduct without first moving for a preliminary injunction.

The court rejected this argument:
It would make little sense to implement a per se rule where a patentee who relies solely on post-filing conduct for his willfulness claim is foreclosed from receiving enhanced damages if he does not also seek preliminary injunctive relief. Injunctive relief is not always appropriate under the facts of a case. See eBay, Inc. v. MercExchange . . .There is little difference between the situation where the court denies a preliminary injunction and that where counsel believes a motion for a preliminary injunction would be inappropriate and opts instead not to file one after considering his or her ethical obligations under Fed. R. Civ. P. 11.3 The Seagate court explicitly declined to apply a per se rule in the first situation, and the court sees no reason why a different result is mandated in the latter situation.

Defendants do not suggest that the facts alleged by Affinity Labs in its second amended complaint do not state a claim for willfulness; they merely contend that Affinity Labs cannot raise a willfulness claim based solely on post-filing conduct without first seeking a preliminary injunction. For the reasons discussed above, the court rejects this argument. Accepting the facts pled in Affinity Labs’s complaint as true, the complaint states a claim to relief that is plausible on its face. Defendants’ motion to dismiss for failure to state a claim is denied.
Read/download the opinion here (link)

The opinion also has a handy run-down of recent decisions on this same issue, where a majority of district courts also came out against the per se rule:

- ACCO Brands, Inc. v. PC Guardian Anti-Theft Prods., Inc., 592 F. Supp. 2d 1208, 1227 (N.D. Cal. 2008) - court concluded that Seagate does not hold “that only conduct after the patentee files for a preliminary injunction may be considered as a basis of a willfulness claim” and denied Defendants’ motion for summary judgment on willfulness.

- St. Clair Intellectual Property Consultants, Inc. v. Palm, Inc., 2009 WL 164751 at *1 (D. Del. Jun. 10, 2009) - granted Plaintiff’s request to file an amended complaint adding a willfulness claim and noting that “there is no per se requirement for a plaintiff to file for preliminary injunctive relief before raising a wilful infringement claim.”

- Krippelz v. Ford Motor Co., 2009 WL 799463 at *4 (N.D. Ill. Mar. 25, 2009) - rejecting Defendant’s argument that failing to move for a preliminary injunction waived any right to damages for willfulness, stating that “the proposition that failure to seek a preliminary injunction constitutes a forfeit of a claim for willful infringement is neither an absolute nor a general rule applicable to all patent cases.”

- Novartis Pharmas. Corp. v. Teva Pharmas. USA, Inc., 2009 WL 483865 (D.N.J. Feb. 25, 2009) - Plaintiff was denied a preliminary injunction, the court stated that it “agrees with [Plaintiff] that Seagate did not create a per se rule of dismissal, and finds that it may be possible for [Plaintiff] to show after discovery that [Defendant] acted in reckless disregard of the ‘objectively high likelihood’ that it was infringing on a valid patent.”

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