Supreme Court Review Sought on Federal Circuit’s Standard for Appellate Review of Damages Awards

Recently, the Commonwealth Scientific and Industrial Research Organization (CSIRO) filed a petition requesting the Supreme Court to review a Federal Circuit decision that vacated a $16 million award against Cisco Systems Inc. Supreme Court Docket No. 15-1440 CSIRO states that the case really revolves around a set of “rigid rules about damages awards in patent infringement cases.” The consequences of these rigid rules, according to CSIRO, is that trial judges in effect are stripped of their ability to determine damages.

The patent infringement action surrounding this appeal to the Supreme Court dates back to July 2011, when CSIRO filed suit against Cisco for infringement of its patent related to wireless local area networks. In the action, Cisco did not dispute infringement, and the only issue in the case rested on the damages amount. In February 2014, a bench trial with US District Judge Leonard Davis presiding, resulted in a damages award of $16 million, plus interest. This was subsequently appealed to the Federal Circuit.

The Federal Circuit held in December 2015 that the trial judge failed to “account for extra value the patent accrued after the technology was used to develop a wireless technology standard. The Federal Circuit then surmised that this extra value consideration may have impacted the District Court Judge’s assessment of royalty rates, that was the starting point for the damages award calculation.

The CSIRO petition to the Supreme Court addressed this issue with several arguments. First of all, CSIRO indicated that the Federal Circuit is usurping the trier of fact in determining compensatory damages. This results in the Federal Circuit not giving the proper deference to the factual findings of the district courts. The standard of appellate review is whether a clear error was made and to ensure that the result is based by the substantial evidence.

Additionally, CSIRO indicates in its appeal that this result goes counter to defendants having an incentive to settle. The argument is that if the Federal Circuit can review any patent damage award and is likely to reverse such awards, the losing defendants would be less likely to settle, but instead go through the entire patent trial.

Finally, CSIRO states that the rules relating to damages should be consistent with appellate review rules in which the trier of fact determines the question.

Gibbons will be following the petition to the Supreme Court on the issue of damages and updating this blog.

Estelle J. Tsevdos, Ph.D is a Director in the Gibbons Intellectual Property Department.
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