VLSI Technology LLC v. Intel Corporation
Filing
626
MEMORANDUM OPINION. Signed by Judge Colm F. Connolly on 6/26/2020. (fms) (Main Document 626 replaced on 6/26/2020) (fms). (Main Document 626 replaced on 6/29/2020) (nmf, ).
Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 1 of 12 PageID #: 21024
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
VLSI TECHNOLOGY LLC,
Plaintiff,
V.
Civil Action No. 18-0966-CFC
INTEL CORPORATION,
Defendant.
Brian E. Fmnan, Michael J. Fmnan, FARNAN LLP, Wilmington, Delaware;
Morgan Chu, Benjamin Hattenbach, Amy Proctor, Dominik Slusarczyk, Charlotte
J. Wen, IRELL & MANELLA LLP, Boston, Massachusetts; Christopher
Abernethy, Iian Jablon, Adina Stohl, Brian Weissenberg, IRELL & MANELLA
LLP, Los Angeles, California; Ben Yorks, IRELL & MANELLA LLP, Newport
Beach, California
Counsel for Plaintiff
Jack B. Blumenfeld, Jeremy A. Tigan, MORRIS, NICHOLS, ARSHT &
TUNNELL LLP, Wilmington, Delaware; Robert Kent, TURNER BOYD LLP,
Redwood City, California
Counsel for Defendant
MEMORANDUM OPINION
June 26, 2020
Wilmington, Delaware
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c o ~NNOLL v
UNITED STATES DISTRJCT JUDGE
Pending before me is VLSI Technology LLC's motion to amend its
Complaint. D.I. 257. By its motion, VLSI seeks to add claims for indirect
infringement and for enhanced damages based on willful infringement of U.S.
Patent Nos. 6,212,633 (the #633 patent) and 7,523,331 (the #331 patent). 1
Defendant Intel Corporation opposes the motion insofar as the claims VLSI seeks
to add are for pre-suit infringement. D.I. 275 at 1, 4. 2
1
VLSI also seeks in its motion to add claims for indirect infringement and for
enhanced damages based on willful infringement of U.S. Patent Nos. 7,247,552
(the #552 patent) and 8,081,026 (the #026 patent). D.I. 257 at 1. The case,
however, has been stayed with respect to those patents; and the paiiies have agreed
that "VLSI's requests [in the present motion to amend] to add allegations regarding
the [#]026 and [#]552 patents need not be decided at this time." D.I. 617 at 3.
2
Intel also objected to VLSI's motion to the extent VLSI sought to add claims for
enhanced damages based on post-suit willful infringement of the #633 patent,
which expired before VLSI filed this suit. D.I. 275 at 18. In its reply brief,
however, VLSI "clarif[ied] that it is not alleging post-filing willful infringement"
of that patent. D .I. 286 at 2 n.1. For reasons not clear from the record, Intel has
not objected to VLSI's remaining claims for post-suit indirect infringement and
enhanced damages based on post-suit willful infringement. See VLSI Tech. LLC v.
Intel Corp., 2019 WL 1349468, at *2 (D. Del. Mar. 26, 2019) (holding that "the
complaint itself cannot serve as the basis for a defendant's actionable knowledge"
for a willful infringement claim because "[t]he purpose of a complaint is not to
create a claim but rath~r to obtain relief for an existing claim"); Kaufman v.
Microsoft Corp., 2020 WL 364136, at *4 (S.D.N.Y. Jan. 22, 2020) (holding that
"Plaintiffs theory [of post-suit knowledge of asserted patents] is without merit"
and "not the law in this district").
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I.
BACKGROUND
VLSI's Complaint originally included claims for indirect infringement of the
#633 and #331 patents and enhanced damages based on willful infringement of
those patents. D.I. 1 ,r,r 32-33, 37, 114-15, 119. Intel, however, moved to dismiss
those claims, D.I. 17, and I granted Intel's motion because the Complaint failed to
state a plausible claim that Intel knew of or was willfully blind to Intel's
infringement of the two patents, D.I. 110 at 5.
In support of its attempt to reintroduce these claims to the case, VLSI seeks
to add to the Complaint allegations that Intel "regularly monitors its competitors'
activities, which are often in the same field and involve similar products"; that
"Intel has acknowledged that competitors may have patents covering similar
products"; that the prior assignee of the #633 and #331 patents, NXP, is Intel's
competitor and Intel monitors NXP's activities; and that Intel previously engaged
NXP to purchase "other NXP patents." Id., Ex. A ,r,r 32, 123.
VLSI also seeks to add more detailed allegations regarding Intel's "publiclyknown corporate policy forbidding its employees from reading patents held by
outside companies or individuals." Id., Ex. A ,r,r 33, 124. VLSI's proposed
amended complaint states that Intel employees "have admitted that this policy's
purpose is to avoid possible triple damages for willful infringement." Id., Ex. A ,r
33 (internal quotation marks omitted). And the proposed amended complaint
2
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alleges that "[b]ecause a patentee cannot recover triple damages for an infringer's
mere knowledge of a patent, Intel's policy necessarily include[s] avoiding review
of known patents to avoid learning of infringement." Id., Ex. A
,r 3 3.
VLSI argues that "[w]ith these new allegations, VLSI's proposed complaint
states a claim that is more than plausible for enhanced damages based on Intel's
willfulness, and for pre-filing indirect infringement." Id. at 2.
II.
LEGAL STANDARDS
A.
Motion to Amend
"If the complaint, as amended, would not survive a motion to dismiss, leave
to amend may be denied as futile." Delaware Display Grp. LLC v. Lenovo Grp.
Ltd., Lenovo Holding Co., 2016 WL 720977, at *7 (D. Del. Feb. 23, 2016) (citation
omitted). To survive a motion to dismiss, a complaint must set forth enough facts,
accepted as true, to "state a claim to relief that is plausible on its face." Bell At!.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible "when
the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged." Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Deciding whether a claim is
plausible is a "context-specific task that requires the reviewing court to draw on its
judicial experience and common sense." Id. at 679 ( citation omitted). Detailed
factual allegations are not required, but the complaint must include more than mere
3
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"labels and conclusions" or "a formulaic recitation of the elements of a cause of
action." Twombly, 550 U.S. at 555 (citation omitted).
B.
Indirect Infringement
Indirect infringement "requires knowledge of the patent in suit and
knowledge of patent infringement." Commil USA, LLC v. Cisco Sys., Inc., 135 S.
Ct. 1920, 1926 (2015). A patentee can establish knowledge of patent infringement
by showing that the defendant was willfully blind-i.e., by showing that the
defendant (1) subjectively believed that there was a high probability that the
induced acts constituted infringement and (2) took deliberate actions to avoid
learning of that fact. Global-Tech Appliances, Inc. v. SEE SA., 563 U.S. 754, 769
(2011).
C.
Enhanced Damages Based on Willful Infringement
Section 284 of the Patent Act "gives district courts the discretion to award
enhanced damages against those guilty of patent infringement." Halo Elecs., Inc.
v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1935 (2016). The statute provides that "the
comi may increase the damages up to three times the amount found or assessed."
35 U.S.C. § 284. Although the Cami in Halo intentionally "eschew[ed] any rigid
formula for awarding enhanced damages under§ 284," 136 S. Ct. at 1934, the
Court held that the legal principles "developed over nearly two centuries of
application and interpretation of the Patent Act ... channel the exercise of [the
4
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district court's] discretion" and "limit[ ] the award of enhanced damages to
egregious cases of misconduct beyond typical infringement," id. at 193 5. Thus,
enhanced damages awards under § 284 are available only in "egregious cases" of
misconduct that involve more than "typical" infringement. Id. As the Court
explained, the enhanced damages award provided by§ 284 was "designed as a
'punitive' or 'vindictive' sanction for egregious infringement behavior ... [that]
has been variously described in [the Court's] cases as willful, wanton, malicious,
bad-faith, deliberate, consciously wrongful, flagrant, or-indeed-characteristic of
a pirate." Id. at 1932.
Although"§ 284 allows district courts to punish th[is] full range of culpable
behavior," id. at 193 3, in the vast majority of patent cases filed today, claims for
enhanced damages are sought based on allegations of willful misconduct-so
much so that, even though the words "willful" and "willfulness" do not appear in
§ 284, plaintiffs and courts more often than not describe claims for enhanced
damages brought under§ 284 as "willful infringement claims." Indeed, some
parties and courts refer to such claims as willful infringement "causes of action"
even though§ 271 of the Patent Act, which creates causes of action for direct,
induced, and contributory infringement, does not mention or suggest such a thing
5
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as "willful infringement." 3
The fact that willfulness is the most common type of misconduct alleged by
plaintiffs who invoke § 284 makes sense, as willful conduct "serve[ s] as [the] floor
for culpable behavior that may incur enhanced damages." ROBERT L. HARMON,
CYNTI-IlA A. HOMAN & LAURA A. LYDIGSEN, PATENTS AND THE FEDERAL CIRCUIT,
§ 17.3(a), at 1378 (13th ed. 2017). It also explains the Court's statement in Halo
that enhanced damages under § 284 "should generally be reserved for egregious
cases typified by willful misconduct." 136 S. Ct. at 1934 (emphasis added).
In assessing the egregiousness of a defendant's conduct for§ 284 purposes,
"culpability is generally measured against the knowledge of the [defendant] at the
time of the challenged conduct." Id. at 1933. The Court in Halo rejected the
Federal Circuit's requirement announced in In re Seagate Technology, LLC, 497
3
See, e.g., Valinge Innovation AB v. Halstead New Eng. Corp., 2018 WL 2411218,
at *5 (D. Del. May 29, 2018); Milo & Gabby, LLC v. Amazon.com, Inc., 12 F.
Supp. 3d 1341, 1353 (W.D. Wash. 2014); Trs. of Univ. ofPa. v. St. Jude
Children's Research Hosp., 982 F. Supp. 2d 518, 529-30 (E.D. Pa. 2013);
MONEC Holding AG v. Motorola Mobility, Inc., 897 F. Supp. 2d 225,236 (D. Del.
2012); Inv. Tech. Grp., Inc. v. Liquidnet Holdings, Inc., 759 F. Supp. 2d 387,409
(S.D.N.Y. 2010); Powell v. Home Depot U.S.A., Inc., 715 F. Supp. 2d 1285, 1290
(S.D. Fla. 2010); Dura Glob. Tech., Inc. v. Magna Donnelly Corp., 665 F. Supp.
2d 787, 789 (E.D. Mich. 2009); Cognitronics Imaging Sys., Inc. v. Recognition
Research Inc., 83 F. Supp. 2d 689, 691 (E.D. Va. 2000); Heil Co. v. Hartford
Accident and Indem. Co., 937 F. Supp. 1355, 1361 (E.D. Wis. 1996); In re
Recombinant DNA Tech. Pat. and Contract Litig., 850 F. Supp. 769, 771 (S.D. Ind.
1994).
6
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F.3d 1360 (Fed. Cir. 2007) (en bane) that a patentee show "objective recklessness"
in order to prove willful misconduct for § 284 purposes. The Court reasoned that
the "objective recklessness" test insulated many of the most culpable infringers
from§ 284's punitive sanctions because it made dispositive invalidity and noninfringement defenses asserted at trial even if the infringer had not acted on the
basis of those defenses or was even aware of them. In the Court's words: "Under
that standard, someone who plunders a patent-infringing it without any reason to
suppose his conduct is arguably defensible-can nevertheless escape any
comeuppance under§ 284 solely on the strength of his attorney's ingenuity."
Halo, 136 S. Ct. at 1933. Thus, the Court held that, in cases where the asserted
basis for enhanced damages is willful misconduct, it is "[t]he subjective willfulness
of [the] patent infringer, intentional or knowing, [that] may warrant enhanced
damages, without regard to whether his infringement was objectively reckless."
Id.
The Court's "intentional or knowing" clause makes clear that willful
infringement is-at a minimum-knowing infringement. This standard is
consistent with the Supreme Court's holding in Global-Tech, that "induced
infringement under§ 271(b) requires knowledge that the induced acts constitute
patent infringement." 563 U.S. at 766. Since§ 284 enhanced damages are
available in cases of induced infringement, see, e.g., Barry v. Medtronic, Inc., 2019
7
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WL 302886, at *17 (Fed. Cir. Jan. 24, 2019); SynQor, Inc. v. Artesyn Techs., Inc.,
709 F.3d 1365, 1385 (Fed. Cir. 2013); ACCO Brand, Inc. v. ABA Locks Mfrs. Co.,
501 F.3d 1307, 1314 (Fed. Cir. 2007); Metabolite Labs., Inc. v. Lab. Corp. ofAm.
Holdings, 370 F.3d 1354, 1371 (Fed. Cir. 2004), and since, under Halo,§ 284's
enhanced damages award is reserved only for egregious cases, it would seem
incongruous if not illogical to require a lesser showing of culpability for enhanced
damages under § 284 than for induced infringement under § 271 (b ).
The Federal Circuit emphasized in SRI International, Inc. v. Cisco Systems,
Inc., 930 F.3d 1295 (Fed. Cir. 2019) that under Halo enhanced damages are
available only if a showing of something more than intentional or knowing
infringement is made:
As the Supreme Court stated in Halo, "[t]he sort of
conduct warranting enhanced damages has been
variously described in our cases as willful, wanton,
malicious, bad-faith, deliberate, consciously wrongful,
flagrant, or-indeed-characteristic of a pirate." While
district courts have discretion in deciding whether or not
behavior rises to that standard, such findings "are
generally reserved for egregious cases of culpable
behavior." Indeed, as Justice Breyer emphasized in his
concurrence, it is the circumstances that transform simple
"intentional or knowing" infringement into egregious,
sanctionable behavior, and that makes all the difference.
Id. (emphasis in original) (citations omitted). 4
4
I am aware that in Arctic Cat Inc. v. Bombardier Recreational Products Inc., 876
F.3d 1350, 1371 (Fed. Cir. 2017), the Federal Circuit held that proof that a
8
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Neither the Supreme Court in Halo nor the Federal Circuit in SRI directly
addressed the pleading requirements for an enhanced damages claim. Because of
the difficulty in articulating precisely the range or type of circumstances that would
transform a "simple 'intentional or knowing'" infringement claim into an enhanced
damages claim, the safest course is to allow an enhanced damages claim to proceed
beyond the pleadings stage if the operative pleading alleges facts from which it can
be plausibly inferred that the party accused of infringement had knowledge of the
asserted patent and lmowledge that the party's alleged conduct constituted,
induced, or contributed to infringement of the asse1ted patent. And since the
doctrine of willful blindness applies in patent cases, see Global-Tech, 563 U.S. at
defendant "should have lmown that its actions constituted an unjustifiably high risk
of infringement" was enough to establish willfulness under Halo. In so holding,
the Comt expressly rejected the defendant's argument that this "'should have
lmown' standard contradicts Halo." Id. Two other Federal Circuit decisions
issued after Halo held that a plaintiff can establish willfulness for § 284 purposes
with proof that "the defendant acted despite a risk of infringement that was either
lmown or so obvious that it should have been lmown." WesternGeco L.L. C. v. Ion
Geophysical Corp., 837 F.3d 1358, 1362 (Fed. Cir. 2016) (internal quotation marks
and citations omitted), rev'd on other grounds, 138 S. Ct. 2129 (2018); see also
WCM Indus., Inc. v. JPS Corp., 721 F. App'x 959, 970 (Fed. Cir. 2018) (citing
Arctic Cat, 876 F.3d at 1371) (holding that in reviewing "under the new Halo
standard" a district court's award of enhanced damages, "we must determine
whether the evidence, when viewed in the light most favorable to [the plaintiff],
was sufficient to prove by a preponderance of the evidence that [the defendant]
acted despite a risk of infringement that was either lmown or so obvious that it
should have been lmown to [the defendant]"). All three of these cases were
decided before SRI, and, in my view, cannot be reconciled with Halo. I will
therefore follow SRI.
9
I
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766, a willful infringement-based claim for enhanced damages survives a motion
to dismiss if it alleges facts from which it can be plausibly inferred that the pmiy
accused of infringement ( 1) had knowledge of or was willfully blind to the
existence of the asserted patent and (2) had knowledge of or was willfully blind to
the fact that the pmiy's alleged conduct constituted, induced, or contributed to
infringement of the asserted patent.
III.
DISCUSSION
I will deny VLSI's motion to amend because VLSI's attempt to reallege its
claims for pre-suit indirect infringement of the #633 and #331 patents and
willfulness-based enhanced damages would be futile. Although, as I previously
held, VLSI "plausibly alleges that Intel knew of the existence of the #633 [and]
#3 31 patents," D .I. 110 at 3, VLSI' s proposed amended complaint does not
plausibly allege that Intel knew of or was willfully blind to Intel's infringement of
the #633 and #331 patents.
First, the new proposed allegations that VLSI seeks to add to its Complaint
do not support a plausible inference that Intel knew it infringed the #633 and #331
patents. The allegations state that Intel monitored its competitors' activities
generally (including the prior assignee of the asserted patents, NXP), that Intel
knew its competitors "may have" patents covering Intel's similar products, and that
Intel engaged NXP to acquire "other" NXP patents. D.I. 257, Ex. A
10
,r,r 32,
123.
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None of those allegations, however, specifically concern the #633 or #331 patents.
Allegations about monitoring competition generally and about patents not asserted
here do not plausibly establish that Intel had knowledge of infringement of the
#633 and #331 patents.
The proposed new allegations also fail to allege plausibly that Intel was
willfully blind to its infringement of the #633 and #331 patents. VSLI argues that
willful blindness can be plausibly infened from its new allegations regarding
Intel's "publicly-known corporate policy forbidding its employees from reading
patents held by outside companies or individuals." D.I. 257 at 7. But having a
general policy with respect to thousands of patents in a field of technology does
not plausibly establish or imply that Intel subjectively believed there was a high
probability that its acts constituted infringement of two specific patents.
IV.
CONCLUSION
For the foregoing reasons, I will grant in part and deny in pait VLSI's
motion to amend the Complaint. I will grant the motion insofar as VLSI seeks to
add claims based on post-suit infringement. I will deny the motion in all other
respects.
The Comt will enter an order consistent with this Memorandum Opinion.
11
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