Federal Circuit Clarifies that Willful Infringement Does Not Require Egregious Conduct

On September 28, 2021, in a precedential opinion, the United States Court of Appeals for the Federal Circuit, in SRI Int’l, Inc. v. Cisco Systems, Inc., Nos. 2020-1685, -1704, clarified its decision from a prior appeal in the same case to hold that a finding of willful infringement requires only deliberate or intentional infringement, not egregious, wanton, malicious, or bad-faith infringement conduct.

The District Court Initially Finds Willful Infringement, the First Appeal, and Remand to the District Court

SRI sued Cisco in the United States District Court for the District of Delaware, alleging infringement of two computer networking patents, U.S. Patent Nos. 6,711,615 and 6,484,203. A jury found that Cisco willfully infringed certain claims of the asserted patents and awarded SRI over $22.6 million in reasonable royalty damages. Following post-trial briefing, the district court awarded SRI attorney fees and costs, and based on the jury’s willful infringement finding, doubled the damages award. Cisco appealed to the Federal Circuit, which vacated the jury’s willfulness finding for the time period prior to May 8, 2012, the date on which Cisco first knew of SRI’s patents – reasoning that knowledge of an asserted patent is a prerequisite for willful infringement. The appeals court also vacated the enhanced damages and attorney fees awards, which were predicated on the willfulness finding.

On remand, the district court “reasonably” read the first appeal opinion as requiring egregious conduct, rising to the level of “wanton, malicious, and bad-faith behavior” for a finding of willful infringement. Based on this standard, the district court found insufficient evidence to find willful infringement and enhanced damages. SRI appealed again.

The Federal Circuit Reinstates Post-knowledge Willful Infringement and Enhanced Damages

On appeal for the second time, the Federal Circuit clarified that “willfulness requires . . . no more than deliberate or intentional infringement.” Its reference to “wanton, malicious, and bad-faith” (i.e., egregious) conduct in the first appeal related only to enhanced damages and not the underlying finding of willful infringement. The court clarified that while willful infringement is a component of enhanced damages, the two are separate inquiries and a finding of willful infringement need not necessarily result in enhanced damages. In so holding, the Federal Circuit sought to clarify a split among district court decisions on the issue of whether egregiousness was required for a finding of willfulness. See our prior coverage of this district court split, e.g., here (the District of Delaware diverging from its prior rulings and not requiring allegations of egregious conduct) and here (the Eastern District of Michigan requiring allegations of egregious conduct).

In this case, the court of appeals found sufficient evidence that Cisco’s infringement was willful based on the jury’s unchallenged findings of Cisco’s induced infringement and lack of reasonable noninfringement or invalidity defenses. Similarly, the Federal Circuit reinstated SRI’s award of enhanced damages based on Cisco’s litigation conduct (e.g., maintaining nineteen invalidity theories until the eve of trial but presenting only two at trial), Cisco’s status as the world’s largest networking company, and the fact that Cisco lost on all issues during summary judgment and trial, despite formidable efforts.

This decision may be instructive on the question of whether willful infringement requires egregious, “wanton, malicious, and bad-faith” infringing behavior by answering in the negative. It remains to be seen whether its latest guidance will harmonize district courts on the issue, especially where courts have remained split even after the Federal Circuit’s prior recitation of the same standard in Eko Brands, LLC v. Adrian Rivera Maynez Enters., Inc., 946 F.3d 1367, 1378 (Fed. Cir. 2020), which the court quoted in SRI Int’l, v. Cisco Systems. We will continue to monitor the issue and report as this ruling makes its way through the lower courts.

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