Willful Patent Infringement

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Willful Patent Infringement

Willful patent infringement is viewed as one of the most serious types of patent infringement.  When an infringer purposely infringes, additional damages are available to the patent owner.

What is Willful Patent Infringement?

Federal courts have differed over the threshold for finding a party culpable for willful patent infringement. In all cases, however, it boils down to knowingly infringing upon another’s invention. Certain courts have settled on the idea that infringement in addition to knowledge of the patent is enough while others require something more.

By engaging in a willful violation of someone’s exclusive rights, an infringer is showing a direct disregard for the law. Due to this, the patent owner could receive enhanced damages that far exceed what they could have otherwise been awarded. Additionally, defendants may have to pay court costs and attorney fees. Courts will often consider three factors when deciding on willful patent infringement cases:

  • Did the offending party have knowledge of the patent?
  • If knowledge of the patent existed, was there a good faith belief they wouldn’t face infringement liability (e.g. legal counsel said they wouldn’t)?
  • Was the belief in lack of liability reasonable when considering all circumstances?

The first factor is the simplest to understand, but it still has nuances. While a finding of willful infringement requires knowledge of the patent in question, some courts have begun defining this differently.  At times an infringement will be considered willful if the defendant should have known about the patent’s existence.

Infringing actions still generally must qualify as one of the following to signify willfulness:

  • Malicious.
  • Deliberate.
  • Consciously wrongful.
  • Done in bad faith.

Even if willful patent infringement is found by the jury, there’s no guarantee that the IP owner will receive enhanced damages. Judges still have the discretion of deciding whether a defendant’s actions were particularly egregious..

Willfulness in Direct vs Indirect Infringement

Not every case of patent infringement is the same, and one of the largest variances relates to direct versus indirect violations. While either form of infringement can be done willfully, proving the fact is simpler in certain situations.

Direct Patent Infringement

Any party that produces, sells, offers to sell, imports or uses a patented item or technology has committed direct infringement. This type of infringing activity involves a direct hand in misusing another party’s patent. For such a claim to be valid, the unauthorized device must include all elements of at least one of the claims of the patent or perform substantially the same function in substantially the same way.

A direct violation doesn’t mean that willful patent infringement has taken place. A company could create an invention on their own – only to later discover that a distinctly similar item has already been patented. Egregious conduct must be proven to sustain a finding of willful infringement.

Indirect Patent Infringement

Even if an entity doesn’t sell, manufacture or engage in other direct actions, they could still potentially be held liable for infringement. By inducing or contributing to the misuse of a protected invention, a defendant can be found guilty of indirect patent infringement. By assisting in these infringing activities – with the knowledge of a preexisting patent – they’re just as accountable as the direct violator.

Willful Blindness

In many industries, it’s often more profitable to roll out a product that features patented technology than it is to seek a license from the start.  Even if the company is later sued, what they pay in damages can be smaller than the profits they pulled in. Of course, this is only the case if their infringement of a patent registration wasn’t intentional. This has led corporations to institute a policy of ‘willful blindness.’ By actively avoiding searches of current patents, they maintain plausible deniability if they infringe a patent.

Courts have caught on to these actions, however, and if it can be proven that a company engaged in this activity, a finding of willful patent infringement can still be reached. Even though the defendant had no knowledge of the registered property, their actions were egregious enough to constitute willfulness.

Doctrine of Equivalents and Willfulness

While successful patent litigation cases typically require that all elements of a registration’s claim be met, this isn’t always the case thanks to the Doctrine of Equivalents. Instead of looking at an invention as a whole, courts will review the individual claim limitations. If the differences in the features of the patent claim and accused device are insubstantial, the court is likely to reach a finding of infringement.

This form of patent infringement often arises when competitors attempt to “design around” a patent. They recognize that an invention would be profitable for their company, but they don’t want to be held liable for damages. This results in an active effort to create an overtly similar item that manages to avoid literal infringement.

Three factors are typically considered in these cases:

  • Does the feature perform substantially the same function?
  • Is this function performed in substantially the same way?
  • Does this function achieve the same result as the patented item?

Courts have also decided that the Doctrine of Equivalents applies if the two inventions in question have elements that are essentially interchangeable. This is decided based on whether an individual in the field with ordinary skill would have recognized the interchangeability when the infringement began.

Fortunately for patent owners, the entirety of their property doesn’t have to be infringed under the Doctrine of Equivalents. Judges may decide that individual claims were violated willfully, and in these situations, they can award enhanced damages based on those specific infringements.

Willful Patent Infringement Damages

Patent infringement damages in cases of willful patent infringement can be substantial. In order to understand the potential for enhanced damages related to willful conduct, though, it’s important to first recognize the type of awards patent owners are eligible for.

Reasonable Royalties

When a defendant is required to pay damages in patent litigation, they are most often required to pay reasonable royalties. This is an amount that’s decided based on what the two parties may have agreed upon had infringing activities never taken place. This is essentially the court deciding the value of a license for the invention at the time infringement began.

These damages are typically calculated in one of two ways: hypothetical negotiation and analytical approach. The hypothetical calculation creates a legal fiction of what would happen had the two parties sat down and had a mutual willingness to discuss a fair royalty. The court will consider various pieces of evidence – including witness testimony, established royalties and the cost of comparable licenses.

An analytical calculation creates no legal fiction between the two parties. Instead, the projected profits of the infringer are focused on. This takes into account potential earnings, projected costs and other expense factors. The court will then decide what percentage of the earnings a patent holder would have been entitled to – applying this percentage to the actual profits made.

Lost Profits

The owners of a patent registration may also be entitled to the entirety of their lost profits. These awards are typically higher than reasonable royalties, but they’re also more difficult to receive in court. This is thanks to an evidentiary burden that requires proof of immediate causality. It must be shown that the infringing actions directly caused a loss of profits.

This can be a difficult burden to prove since various market factors can affect profitability. If any of these other factors could’ve resulted in lost profits, the court is likely to focus on reasonable royalties instead. Plaintiffs must show the demand for a product, an absence of non-infringing alternatives, the ability to meet the demand, and the profit that would’ve been earned.

Enhanced Damages

The largest potential award for willful patent infringement typically comes from enhanced damages. When the court believes that an infringer’s actions were willful, they have the ability to multiply the award by up to three times. This means a reasonable royalty finding of $500,000 can become a $1.5 million award.

While the Supreme Court acknowledged that ‘objective recklessness’ was an unfair hurdle in proving willful infringement, they also stated that enhanced damages should only be granted in the most egregious cases.

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