October 7, 2021 - Podcast

Our Podcast with BCLT and the comeback kid: SRI v. Cisco round II

At Federal Circuitry, we’ve started discussing interesting Federal Circuit cases and developments with the Berkeley Center for Law & Technology in their Expert Series Podcasts. Please find the first episode discussing SRI International v. Cisco Systems here (or directly on Spotify here).

We very easily could have done a case of the week post about SRI, as it’s an interesting case on so many levels—both on the process and law. Starting with a bit of process: SRI is a comeback case. A comeback case is one that gets remanded by the Court and then comes back to the Court after the remand. (It also can be one where the Court rules and the Supreme Court sends it back too, but that’s not the circumstance here.) When a case comes back to a court of appeals after being remanded to a district court or agency, different circuits have different rules on whether—and to what extent—the original panel judges get the case back. In the Federal Circuit, usually one or two of the original judges on the panel hear the case when it gets appealed again. Sometimes you can find comeback cases on the Federal Circuit’s list of “scheduled cases”—cases where a judge is being substituted into a panel are noted with a “+” sign. One reason (but not the only reason) a judge is being substituted into a “plus” panel can be to reconstitute some of the original panel that heard the case the first time it went on appeal.

SRI is a little unique because not only is it a comeback case, but it has all three of the original panel members on it the second time around: Judges Lourie, O’Malley, and Stoll. And both times Judge Stoll wrote the opinion, the first time in favor of the defendant and the second time in favor of the patent owner plaintiff.

What’s also interesting is what happened between the first and second times the case was decided by the Federal Circuit. While there were a lot of issues in the case, we’re just going to focus on one: willfulness. In round 1, the Court vacated and remanded the verdict of willful infringement that led to doubling the jury’s award of over $23 million. The Court concluded that “the record is insufficient to establish that Cisco’s conduct rose to the level of wanton, malicious, and bad-faith behavior required for willful infringement.” SRI I. And the Court noted that Cisco was unaware of SRI’s patent until May 2012, so there could be no willful infringement (and no enhanced damages) before that date. It thus remanded for the district court to determine whether the record supported willfulness after Cisco had knowledge of SRI’s patent and, if so, whether damages should be enhanced.

On remand, the district court faithfully applied the willfulness standard that the Federal Circuit made “clear” in SRI I. The district court did state, in “a side note,” that “the Court of Appeals is not entirely consistent in its use of adjectives to describe what is required for willfulness.” The district court noted that in other cases, the Federal Circuit stated that “no more than deliberate or intentional infringement” is required. Nonetheless, the district court did not find substantial evidence that Cisco’s infringement was “wanton, malicious, and bad-faith” to permit willful infringement and enhanced damages.

That brings us to round 2 in the Federal Circuit. The Court noted that “the district court reasonably read our opinion to require a more stringent standard for willful infringement than our other cases suggest—conduct rising to ‘the level of wanton, malicious, and bad-faith behavior.’” And rather than fault the district court or allow any confusion to persist, the Court stated:

To eliminate the confusion created by our reference to the language “wanton, malicious, and bad-faith” in Halo, we clarify that it was not our intent to create a heightened requirement for willful infringement. Indeed, that sentence from Halo refers to “conduct warranting enhanced damages,” not conduct warranting a finding of willfulness.

The Court then made clear that willfulness requires “a jury to find no more than deliberate or intentional infringement.” Applying that standard, the Court held that substantial evidence supports the jury’s willful infringement finding—reversing the district court, again (although this time for setting aside the jury finding rather than upholding it). As an outside observer, it definitely seems fitting and helpful that the same exact panel decided both cases, and could clarify—if not correct—what it said the first time around.

One final thought: the Court didn’t remand for the district court to decide whether enhanced damages were warranted for willful infringement. One might wonder, how can that be? After all, enhancement is not automatic; “[d]iscretion remains with the district court to determine whether the conduct is sufficiently egregious to warrant enhanced damages.” Yet here, the Court reinstated the original enhancement award, noting that the district court “properly considered this issue” in its original decision (before SRI I) and that “vacating and remanding for the district court to decide the issue anew would serve little purpose.” Reinstatement was justified in part because the “parties informed this court for the first time in this appeal” of further facts about the damages period supporting the district court’s enhancement, facts the Court was unaware of in the first appeal. Whether that makes some part of SRI I merely an advisory opinion is a metaphysical question that perhaps we should leave for another day.