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Trustees of Boston University v. Everlight Electronics Co., Ltd.

United States District Court, D. Massachusetts

July 22, 2016

TRUSTEES OF BOSTON UNIVERSITY, Plaintiff,
v.
EVERLIGHT ELECTRONICS CO., LTD., et al., Defendants. TRUSTEES OF BOSTON UNIVERSITY, Plaintiff,
v.
EPISTAR CORPORATION, et al., Defendants. TRUSTEES OF BOSTON UNIVERSITY, Plaintiff,
v.
LITE-ON INC., et al., Defendants.

          MEMORANDUM AND ORDER

          PATTI B. SARIS, Chief United States District Judge.

         INTRODUCTION

         The plaintiff, Trustees of Boston University (BU), seeks an award of enhanced damages pursuant to 35 U.S.C. § 284 on the ground that the defendants, Epistar and Everlight, willfully infringed the ‘738 Patent. At trial, the jury found that both defendants willfully infringed the patent.[1] The Court instructed the jury: “To prove willfulness, Boston University must persuade you by clear and convincing evidence . . . that the defendant actually knew, or it was so obvious that the defendant should have known, that its actions constituted an unjustifiably high likelihood of infringement of a valid patent.” Trial Tr. vol. 10, Docket No. 1600 at 28-29. This instruction was based on the subjective willfulness prong of In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc). BU argues that the jury’s willfulness finding is binding on the Court, that enhanced damages are required, and that the Court’s discretion lies only in deciding what amount of enhanced damages to award. The defendants respond that, because Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S.Ct. 1923 (2016), completely rejected the Seagate test, the Court should accord no weight to the jury’s finding of willful infringement because it was based on the wrong standard.

         After a hearing and a review of the record, the Court, in the exercise of its discretion, declines to award enhanced damages because the plaintiff has not demonstrated that the defendants’ actions constitute egregious misconduct. Therefore, BU’s motion for enhanced damages (Docket No. 1632) is DENIED.

         DISCUSSION

         After a finding of infringement, “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. The Federal Circuit employs a two-step process to determine whether enhanced damages are warranted:

First, the fact-finder must determine if an accused infringer is guilty of conduct, such as willfulness, upon which increased damages may be based. If so, the court then exercises its discretion to determine if the damages should be increased given the totality of the circumstances.

Mentor H/S, Inc. v. Med. Device Alliance, Inc., 244 F.3d 1365, 1380 (Fed. Cir. 2001) (internal citations omitted).

         Until the Supreme Court’s recent decision in Halo, courts evaluated willfulness under a two-part test with an objective and a subjective inquiry. See Seagate, 497 F.3d at 1371. Under the Seagate standard, to satisfy the objective prong, a patentee had to prove “by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Id. “The state of mind of the accused infringer [was] not relevant to this objective inquiry.” Id. This objective prong tended not to be met where an accused infringer relied on a reasonable defense to a charge of infringement. Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed. Cir. 2010). If the objective prong was satisfied, the patentee then had to “demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” Seagate, 497 F.3d at 1371.

         Halo reflects a sea change with respect to Seagate. In Halo, a defendant had intentionally copied the patentee’s products and chosen the “high-risk/high-reward” strategy of competing now and worrying about the legal consequences later. 136 S.Ct. at 1931. The Federal Circuit reversed the district court’s award of treble damages because the defendant raised reasonable defenses at trial. Id. Reversing the Federal Circuit, the Supreme Court held: “Awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a ‘punitive’ or ‘vindictive’ sanction for egregious infringement behavior.” Id. at 1931-32. Enhanced damages are “generally appropriate under § 284 only in egregious cases” of culpable behavior. Id. at 1932. The Court concluded that the Seagate test “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.” Id. (quoting Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749, 1755 (2014)). Requiring “a finding of objective recklessness in every case before district courts may award enhanced damages . . . excludes from discretionary punishment many of the most culpable offenders, such as the wanton and malicious pirate who intentionally infringes another’s patent.” Id. (internal quotation marks omitted).

         The Court eliminated the ability of an infringer to avoid enhanced damages by relying on an objectively reasonable defense that was created by his “attorney’s ingenuity” solely for litigation, and was not relied upon by the infringer at the time of infringement. See id. at 1933. Instead, “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.” Id. The Court also rejected Seagate’s requirement that willfulness be proven by clear and convincing evidence. Id. at 1934 (stating that § 284 “imposes no specific evidentiary burden, much less such a high one”). Finally, the Supreme Court was clear that § 284 “commits the determination whether enhanced damages are appropriate to the discretion of the district court, ” finding that the language of § 284 “clearly connotes discretion”. Id. at 1931, 1934 (internal quotation marks omitted).

         Justice Breyer’s concurrence also provides helpful guidance. “First, the Court’s references to ‘willful misconduct’ do not mean that a court may award enhanced damages simply because the evidence shows that the infringer knew about the patent and nothing more.” Id. at 1936 (Breyer, J., concurring) (emphasis in original). Justice Breyer noted that “while the Court explains that ‘intentional or knowing’ infringement ‘may’ warrant a punitive sanction, the word it uses is may, not must.” Id. (emphasis in original). “It is circumstance that transforms simple knowledge into such egregious behavior, and that makes all the difference.” Id. (internal quotation marks and alterations omitted).

         In addition to arguments addressed to the Halo egregiousness standard, both parties rely heavily on the factors listed in Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992). One court has relied on these factors post-Halo as “useful guideposts in determining the egregious [sic] of the defendant’s conduct.” Finjan, Inc. v. Blue Coat Sys., Inc., No. 13-CV-03999-BLF, 2016 WL 3880774, at *16 (N.D. Cal. July 18, 2016). While the Read factors remain helpful to this Court’s analysis, the touchstone for awarding enhanced damages after Halo is egregiousness.

         The defendants highlight the actions they undertook when Cree first accused Everlight of infringement in 2007. Everlight informed Epistar, its chip supplier, of Cree’s allegations, and, in response, Epistar hired two law firms to provide infringement opinions and obtained third-party testing of its accused products. Epistar determined that its chips did not infringe the ‘738 Patent for two reasons: (1) its chip’s buffer layer was composed of aluminum nitride, not gallium nitride; and (2) its buffer layer was single crystalline, not non-single crystalline as claimed in the ‘738 Patent. Epistar provided this analysis to Everlight, and, in January 2008, Everlight presented this non-infringement position to Cree along with samples of Epistar chips for further testing. After the January 2008 ...


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