Timing and Size

Occasionally, the timing of behavior is crucial. (Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. et al.)

Power sued Fairchild, alleging infringement of four of Power’s patents. The case, in a manner evidently designed to provide full employment for attorneys, was tried in FOUR (yes, 4) stages: a jury trial on the issues of infringement and willfulness (Power won); a second jury trial on the issue of patent validity (Power won); a bench trial on the question of Fairchild’s inequitable conduct defense (Power won); and a second bench trial on the issue of willfulness in light of an intervening C.A.F.C. decision (Power won again).

Undaunted, Fairchild moved for judgment as a matter of law or, in the alternative, for a new trial. Fairchild lost. Power, riding a winning wave, then moved for an award of attorneys’ fees and treble damages.

Fairchild, at this point trying desperately to minimize its losses, argued that the Court should exercise its discretion to deny any “enhancement” of the damages. In this, Fairchild faced an uphill battle. “While a finding of willfulness does not automatically entitle a patentee to enhanced damages, where there is such a finding the Court must have a rationale for choosing not to award enhanced damages.”

Among the factors to be considered in reaching a decision as to possible enhancement are: whether the infringer deliberately copied the ideas or design of another; whether the infringer investigated the scope of the patent and had a good-faith belief that it was not infringing or that the patent was invalid; the infringer’s size and financial condition; and the closeness of the case.

There was no real question but that Fairchild had deliberately copied Power’s products. In an effort to reduce the impact of this apparently egregious behavior, Fairchild pointed out that it had procured opinions of counsel that it was not infringing the patents-in-suit. Not good enough. As the Court acidly noted, “all but one of the opinion letters obtained by Fairchild were obtained only after the initiation of litigation; moreover, the opinion letters were contradictory and inconsistent, and Fairchild’s reliance on the lone pre-litigation opinion letter for [one of the patents-in-suit] was ‘lukewarm at best’.”

Undeterred, Fairchild argued that “even when there is deliberate copying, if a willful infringer puts forth a strong, good faith defense at trial, an award of enhanced damages is inappropriate.” No help there. “The closeness of the case … turns on the [objective] degree of willfulness – in other words, whether the accused infringer maintained plausible or credible defenses to infringement. In the Court’s view, however, the evidence of copying is so strong in this case and the evidence related to counsel’s opinion letters and measures taken by Fairchild to avoid infringement so weak, that it is hard to understand how one could objectively believe such actions would not constitute a high likelihood of infringement.”

That brings us to the impact of the defendant’s financial condition and the aspect of the case which some commentators consider to be the most significant. Typically, the defendant’s financial condition is used as a reason not to enhance damages. The courts tend to avoid trebling damages if this would “severely impair the defendant’s ability to function.” Seizing on this, Fairchild argued that its profits from the sale of the accused products were not much more than the approximately $6 million in damages found by the first jury, and that an award of enhanced damages would “severely prejudice” its non-infringing business.

No help here either. “As Fairchild acknowledges … enhanced damages are intended to be punitive. While the $6 million may compensate Power, it does not adequately punish Fairchild. There is no evidence that Fairchild’s operations or business would be severely jeopardized by an award of enhanced damages. At oral argument, Fairchild conceded that even a trebling of the damages award here would ‘not be a death sentence’ for Fairchild.”

In the end, the Court, showing surprising mercy given the tenor of its findings of fact, only doubled the damages. Some commentators found this to be noteworthy, not that the damages were only doubled, but that the damages were enhanced at all in a case where the compensatory damages had effectively eliminated the defendant’s profits. It would seem that the sympathies of such commentators must lie with scum-sucking infringers.

THE LESSON TO BE LEARNED: Timing is important and size does matter.