United States: En Banc Court Concludes It Has Jurisdiction over Patent Infringement Determinations When Damages and Willfulness Remain Undecided

In Robert Bosch, LLC v. Pylon Manufacturing Corp., Nos. 11-1363, -1364 (Fed. Cir. June 14, 2013), (en banc), the Federal Circuit held that 28 U.S.C. § 1292(c)(2) confers jurisdiction on the Court to hear appeals from patent infringement liability determinations (1) when a trial on damages has not occurred, and (2) when willfulness issues are outstanding and remain undecided.

Robert Bosch, LLC ("Bosch") sued Pylon Manufacturing Corp. ("Pylon") for patent infringement, and Pylon later asserted patent infringement claims against Bosch.  On a motion by Pylon, the district court bifurcated the issues of liability and damages.  The district court also stayed discovery on damages and willfulness issues.  After a jury trial on liability and JMOL motions, the district court entered judgment on the liability issues.  Bosch appealed and Pylon cross-appealed.  Bosch filed a motion to dismiss its appeal and Pylon's cross-appeal on the ground that the Federal Circuit lacked jurisdiction.  The Court denied Bosch's motion and the parties presented both the substantive and jurisdictional issues before a panel of the Court.  After oral argument, the Court sua sponte granted a rehearing en banc to determine if the Court had jurisdiction over the appeal.

Under § 1292(c)(2), an appeal can be taken to the Federal Circuit from a judgment in a patent infringement action that is otherwise appealable except for an accounting.  The question before the en banc Court was whether a trial on damages and willfulness is an accounting for purposes of § 1292(c)(2).

The Court first concluded that "an accounting" includes the determination of damages, reasoning that it was clear from the case law and the history of the statute that an accounting includes both the determination of an infringer's profits as well as a patentee's damages.  The Court noted that in enacting 28 U.S.C. § 227a, the predecessor to § 1292(c)(2), Congress gave the term "accounting" its judicially settled meaning of proceedings before a special master to determine the infringer's profits and the plaintiff's damages.  The Court stated that "[t]he statute's interpretation through history is clear."  Slip op. at 13.  "An 'accounting' in the context of § 1292(c)(2) includes the determination of damages and cannot be limited to a traditional equitable accounting of an infringer's profits."  Id.

"It is clear from the case law and the history of the statute that an accounting includes both the determination of an infringer's profits as well as a patentee's damages."  Slip op. at 5.

"We also took this case en banc to determine whether § 1292(c)(2) confers jurisdiction on this court to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided.  We hold now that it does."   Id. at 22.

The Court next concluded that an accounting may include a trial on damages, finding that neither the text nor the history of the statute supported Bosch's narrower interpretation to the contrary.  The Court based its conclusion on four points.  First, Congress expanded jurisdiction over interlocutory appeals from cases in equity to "civil actions for patent infringement which are final except for accounting."  Id.  Second, the issues historically decided in accounting proceedings are the same that are decided in modern damages trials.  Third, Congress's reasons for allowing interlocutory appellate jurisdiction over patent cases except for an accounting apply with equal force to a modern damages trial.  Fourth, stare decisis weighs in favor of allowing interlocutory appeals where liability has been established and a damages trial remains.

The Court further held that § 1292(c)(2) confers jurisdiction to entertain appeals from patent infringement liability determinations when willfulness issues are outstanding and remain undecided.  The Court noted that the authority of the district court to bifurcate willfulness and infringement issues and the related Seventh Amendment issues were immaterial to its inquiry.  Instead, the Court explained that the disposition of the issue turned on whether an "accounting" includes the determination of willfulness.  The Court held that it does, basing its decision on the statute itself and cases decided since the enactment of the statute's predecessor.  The Court stated that "it is clear that an accounting . . . included the determination of willfulness" and that it was "in no position to change that well settled meaning now."  Id.  at 26.

Judge Moore agreed with the majority's holding that the Court has interlocutory jurisdiction over judgments that are final except for determining damages, but disagreed that this includes jurisdiction over judgments when willful infringement remains outstanding.  According to Judge Moore, "[n]o reasonable construction of an 'accounting' can encompass the subjective state-of-mind and objective recklessness inquiries that underpin a willful infringement analysis."  Moore Concurrence-in-Part and Dissent-in-Part at 1-2.  Judge Moore opined that Congress made clear that an appeal can be had when all that is left is to ascertain the plaintiff's damages and determine the defendant's profits, and that this construction is consistent with the general understanding of the term "accounting."  Judge Moore disagreed with the majority's reliance on past cases, stating that none of the cases established that Congress understood an accounting to include the substantive determinations of knowledge, intent, and reasonableness, and further, that none of the cases held that a determination of willfulness is part of an accounting.  Judge Moore noted that many cases during the relevant time period gave the term "accounting" its plain and ordinary meaning—the determination of damages.  Judge Moore dissented-in-part as there was "no sound basis upon which to twist the statute and introduce such inefficiency into the judicial system."  Id.  at 6-7.

Judge Reyna also agreed with the majority that the Court has interlocutory jurisdiction over judgments that are final except for determining damages, but dissented from the majority's holding that an accounting includes determining willfulness for three reasons.  First, according to Judge Reyna, the plain language of § 1292(c)(2) makes no mention of willfulness and does not unambiguously express Congress's intent to exclude willfulness from the finality rule.  Second, Judge Reyna reasoned that an accounting bears no relation to the willfulness inquiry, which has little to do with damages and everything to do with liability for infringement.  Third, Judge Reyna opined that if § 1292(c)(2) is interpreted to allow an appeal before a determination of willfulness is made, Congress's purpose of avoiding needless expense wrought by piecemeal appeals in patent litigation will be frustrated.

Judge O'Malley dissented, joined by Judge Wallach, disagreeing with both of the majority's conclusions.  Judge O'Malley stated that she did not agree that the scope of the § 1292(c)(2) exception to the final judgment rule "has the astounding breadth the majority affords it today."  O'Malley Dissent at 1.  According to Judge O'Malley, the majority stretched the statutory provision beyond reasonable bounds, and well beyond anything Congress intended.  Judge O'Malley expressed that the appeal should be dismissed because it is a nonfinal judgment over which the Court has no jurisdiction.

According to the dissent, rather than interpreting § 1292(c)(2) narrowly to find limited exceptions to the final judgment rule applicable to all Article III courts, the majority grossly expanded the Court's jurisdictional reach by adopting a broad definition of "an accounting."  The dissent stated that the majority asked and answered the wrong question—whether an accounting in 1927, when § 227a was enacted, only permitted consideration of an infringer's profits or also allowed calculation of a patentee's damages.

The dissent opined that the Court instead should have asked whether the 1927 "accounting" proceeding as contemplated in § 1292(c)(2) was the same as or encompassed a jury trial on profits and damages.  Judge O'Malley did not find persuasive any of the majority's four reasons for concluding that an "accounting" includes a damages trial.

According to the dissent, the majority's conclusion that an accounting can include a willfulness determination "is even less defensible" than its conclusion that an accounting can include a damages trial.  Id. at 28.  The dissent disagreed with the majority's asking only whether the fact of willfulness was ever considered by special masters when assessing the appropriate measure of an award to a patent holder in a suit in equity, stating that it "is simply not the relevant inquiry."  Id.

Judges: Rader, Newman, Lourie, Dyk, Prost (author), Moore (concurring-in-part and dissenting-in-part), O'Malley (dissenting), Reyna (concurring-in-part and dissenting-in-part), Wallach (dissenting)

[Appealed from D. Del., Judge Robinson]

This article previously appeared in Last Month at the Federal Circuit, July, 2013

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