[This is the fourth in a series of postings regarding the various proposals in the Patent Act of 2005.]

Willful Infringement

The phrase treble damages strikes terror into the heart of all non-patentees. It further promotes a balancing act between maintaining an ostrich mentality and risking that curiosity will kill the cat. An individual who is about to invest in a new technology must choose between allocating resources to determine what is out there or putting on their darkest sunglasses for fear that they may come across a patent that may potentially cover what they are doing. Note that courts/juries decide whether or not a patent actually covers a given technology. A well-drafted freedom-to-practice opinion from a licensed patent attorney may protect one from a willful infringement claim but it will not necessarily protect one from a finding of infringement even when there is a good argument to the contrary.

One area that is still being considered is whether a court or a jury will be responsible for the willfulness determination. The changes proposed here seek to make sure that the infringer willfully infringed rather than fictionally assuming that they infringed because they (or more likely their attorneys) may have glanced at the patent at some point. The proposal would codify that a court may find an infringer guilty of willful infringementif the patentee presents clear and convincing evidence meaning that the fact-finder must be persuaded by the evidence that it is highly probable that the claim or affirmative defense is true – that:

  1. the infringer received written notice from the patentee either alleging specific acts of infringement AND the infringer, after a reasonableopportunity to investigate, infringes anyway;
  2. the infringer received written notice from the patentee educating the infringer with the specific claims of his patent and identifying the product/process which he believes infringes those claims AND the infringer, after a reasonable opportunity to investigate, infringes anyway;
  3. the infringer intentionally copied the patented invention with knowledge that it was patented;
  4. after being found guilty of infringement, the infringer CONTINUES to infringe;
  5. after being found guilty of infringement, the infringer is, again, found guilty of infringement of the same patent for behavior that is not substantially different from the original finding of infringement.

A good faith belief that the patent was invalid or unenforceable, based upon advice from a licensed patent attorney, may serve as a defense to willful infringement.

These proposed changes are good for the progress of the arts and sciences because they allow individuals to make a reasonable assessment a technology area and then make an educated decision about whether or not to proceed without being crippled with fear from the specter of increased damages.

Repeal of §271(f) for Software

Section 271(f) reads:

(1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

(2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial non-infringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Oh boy, is this a complicated one! Here’s the deal. United States Patent law allows the patentee to exclude others from making, using, selling, and exporting the patented invention. But, once upon a time, some clever people figured out that they could export the pieces that make up the patented invention (or a major component thereof) without running afoul of the patent holders exclusion rights (since exporting components was not part of the exclusionary rights granted by the law). They would assemble the patented invention abroad, outside of the jurisdiction of U.S. law, and then sell it abroad.

So, around 1984, Congress put a stop to this kind of thing by allowing patent holders to tag those clever people as infringers. The patent holders could then get damages on both the domestic and foreign sales of the finished product.

There was some doubt as to whether this would apply to software but the Court of Appeals for the Federal Circuit recently held (Eolas Techs. v. Microsoft Corp., 399 F.3d 1325, 1339 (Fed. Cir. 2005)) that these damages are not limited to physical machines. This proposal seeks to overturn that ruling by requiring that 35 U.S.C. 271(f) only apply to tangible items.

This is good for software developers who partially develop in the United States and then sell abroad. If the statute remains unchanged, it creates a potent argument for moving all development of software outside of the United States.

Previous: Part 3. Duty of Candor in Front of the USPTO.
Next Up: Part 5. Apportionment of Damages for Infringement.

Today’s post comes from Guest Barista Ria Schalnat, a registered patent attorney in Frost Brown Todd’s Cincinnati office.

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