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Power Integrations, Inc. v. Fairchild Semiconductor International, Inc.

United States District Court, D. Delaware

December 8, 2017

POWER INTEGRATIONS, INC., Plaintiff,
v.
FAIRCHILD SEMICONDUCTOR INTERNATIONAL, INC. and FAIRCHILD SEMICONDUCTOR CORPORATION, Defendants.

          Joseph B. Warden, FISH & RICHARDSON P.C., Wilmington, DE., Frank E. Scherkenbach, FISH & RICHARDSON P.C., Boston, MA., Howard G. Pollack and Michael Headley, FISH & RICHARDSON P.C., Redwood City, CA. Attorneys for Plaintiffs.

          John G. Day and Andrew C. Mayo, ASHBY & GEDDES, Wilmington, DE., Blair M. Jacobs, Christina A. Ondrick, and Patrick J. Stafford, PAUL HASTINGS LLP, Washington, DC. Attorneys for Defendants.

          MEMORANDUM OPINION

          STARK U.S. District Judge.

         Pending before the Court are disputes regarding (i) the scheduling of a damages retrial; (ii) whether the Court's finding of willful infringement by Defendants Fairchild Semiconductor International, Inc. and Fairchild Semiconductor Corporation ("Fairchild"), which was vacated on appeal by the Court of Appeals for the Federal Circuit, should be reinstated (see D.I. 751); and (iii) whether the Court should revisit its previous finding that this is not an "exceptional case" (see D.I. 796) and award attorneys' fees to Plaintiff Power Integrations, Inc. ("Power").[1] For the reasons that follow, the Court reinstates its finding of willful infringement, declines to reconsider its denial of attorneys' fees, and requires further input from the parties regarding the scheduling of a damages trial.

         BACKGROUND

         Case History and Changes in Relevant Law

         This case is part of a series of longstanding and contentious patent infringement disputes between the parties.[2] More than a dozen years ago, Power sued Fairchild for infringing U.S. Patent Nos. 6, 249, 876 (the '"876 patent"), 6, 229, 366 (the '"366 patent"), 6, 107, 851 (the "'851 patent"), and 4, 811, 075 (the '"075 patent"). (See D.I. 1) After a five-day trial in October 2006 on the issues of infringement and damages, the jury found that Fairchild willfully infringed all of the asserted claims and awarded Power in excess of $33.9 million, of which almost $15 million was due to lost profits. (See D.I. 415)[3] The parties had stipulated at trial that "$765, 724 worth of accused devices were made or imported into the United States by Fairchild." (D.I. 619 at 2)[4]Separate trials on validity and inequitable conduct were held in September 2007. The jury found Power's asserted patents to be valid (see D.I. 555) and the Court later found that Fairchild had failed to prove its inequitable conduct defense (see D.I. 683, 684).

         Fairchild, seeking a reduction of the jury's damages award, filed a motion for judgment as a matter of law on December 3, 2007. (See D.I. 613) The Court agreed with Fairchild that while there was "testimony... sufficient to establish infringing activity by Fairchild in the United States, " there was no legal basis for the jury's damages award because "the worldwide sales measure of damages ... testified to by [Power's expert] and adopted by the jury" included "Fairchild's activities outside the United States which cannot be considered infringing." (D.I. 694 at 10-11) Still, the Court found that the "jury's verdict, to the extent it was based on inducement of infringement, was supported by the evidence." (Id. at 13)[5] Crediting Power's "argument at trial that 18% of [Fairchild's accused] devices sold outside the United States are later imported in the United States, " the Court reduced the jury's damages award by 82%, to roughly $6.1 million. (Id. at 13-14)

         In the meantime, on August 20, 2007, the Federal Circuit issued its en banc decision in In re Seagate Technologies, LLC, 491 F.3d 1360 (Fed. Cir. 2007), which overruled Underwater Devices Inc. v. Morrison-Knudsen Co., Ill. F.2d 1380 (Fed. Cir. 1983), and established anew standard for willful infringement. In contrast to the negligence-like Underwater Devices standard, on which the Court's instruction to the jury in this case was based (see D.I. 420 at 1668-70), under Seagate patentees were required to "show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent, " and also to "demonstrate that this objectively-defined risk .. . was either known or so obvious that it should have been known to the accused infringer, " Id. at 1371. Fairchild accordingly moved for a new trial (see D.I. 615), which the Court granted to the extent Fairchild sought a new trial on willfulness rather than on all issues (see D.I. 692). The Court adopted the evidentiary record from the jury trial on infringement and damages. (See D.I. 714)

         The parties waived their jury rights[6] and the Court held a short bench trial on June 22, 2009. (See D.I. 714, D.I. 740) On July 23, 2010, the Court issued an opinion and order applying the Seagate standard and concluding that Power had proven, by clear and convincing evidence, willful infringement of the asserted claims. (See D.L 750, D.I. 751) Later, the Court reaffirmed this finding (see D.I. 795 at 6-10) and, applying the factors set out in Read v. Portec, 970 F.2d 816, 827 (Fed. Cir. 1992), granted Power's motion for enhanced damages pursuant to 35 U.S.C. § 284 (see Id. at 10-22; see also D.I. 796).[7] The Court doubled the reduced damages award (see D.I. 795 at 10-22) and entered judgment in Power's favor in the amount of $12, 866, 647, including interest (D.I. 800).

         On appeal, the Federal Circuit agreed with the Court's conclusion that the jury's original damages award was contrary to law and rejected what it called Power's "'foreseeability' theory of worldwide damages." Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., 711. F.3d 1348, 1371 (Fed. Cir. 2013) ("Remand Opinion"). But the Federal Circuit also held that the Court "erred in relying on [Power's expert's] inherently speculative 18% figure" and, therefore, "the amount of [the Court's] remittitur [was] not supported by substantial evidence." Id. at 1376. Instead, "there was no basis upon which a reasonable jury could find Fairchild liable for induced infringement." Id. The Federal Circuit vacated the damages award and also vacated the Court's finding of willfulness. Id. at 1381. Additionally, the Federal Circuit reversed this Court's construction of certain claim terms in the '851 and '366 patents, but affirmed the Court's denial of Fairchild's motion for judgment as a matter of law seeking to invalidate the '876 patent as obvious. See id.[8] The case was remanded with instructions to "reassess willfulness in view of [the Federal Circuit's] other holdings, " Id. at 1381, and for a new damages trial "to determine the proper amount of damages for Fairchild's direct infringement that is supported by substantial evidence in the existing record, " which the Federal Circuit "anticipate[d] ... will be commensurate in scope with the accused domestic activity to which Fairchild stipulated, " Id. at 1377.

         In 2014, the Supreme Court issued its decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014). Before Octane Fitness, in order for a case to be deemed exceptional under § 285, the Federal Circuit required a showing by clear and convincing evidence that the litigation was brought in subjective bad faith and further that it was objectively baseless. See, e.g., Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F.3d 1378 (2005). The Supreme Court found this standard to be "overly rigid" and rejected it as "superimpos[ing] an inflexible framework onto statutory text that is inherently flexible." Octane Fitness, 134 S.Ct. at 1756. A case is now "exceptional" when it "stands out from others, " either with regard to the "substantive strength of a party's litigating position" or the "unreasonable manner in which the case was litigated." Id. Hence, § 285 allows district courts to exercise their discretion in determining, on a case-by-case basis and "considering the totality of the circumstances, " whether a case qualifies as "exceptional." Id. The Supreme Court also rejected application of the clear and convincing standard, requiring a patentee to make its showing only by a preponderance of the evidence. See Id. at 1758.

         In 2016, the Supreme Court turned to the law on willful infringement, and ruled that the Seagate test (including the Federal Circuit's "tripartite framework for appellate review") was also "unduly rigid" and, therefore, inconsistent with § 284's grant of discretion to district courts to enhance damages. Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923, 1932-34 (2016) (internal quotation marks omitted). The Supreme Court took issue with Seagate's objective prong, under which "someone who plunders a patent. .. can nevertheless escape any comeuppance under § 284 solely on the strength of his attorney's ingenuity." Id. at 1933. Post-Halo, willfulness may be found when a party shows, by a preponderance of the evidence, that an infringer has engaged in conduct that is "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or ... characteristic of a pirate." Id. at 1932. "[S]ubjective willfulness alone - i.e., proof that the defendant acted despite a risk of infringement that was 'either known or so obvious that it should have been known to the accused infringer' - can support an award of enhanced damages." WesternGeco L.L.C. v. ION Geophysical Corp., 837 F.3d 1358, 1362 (Fed. Cir. 2016) (quoting Halo, 136 S.Ct. at 1930; internal citation omitted). After the factfinder determines that an infringer has engaged in willful or egregious conduct, district courts are tasked with making a discretionary call as to whether to award enhanced damages and, if so, in what amount. See Halo, 136 S.Ct. at 1933 ("[N]one of this is to say that enhanced damages must follow a finding of egregious misconduct. As with any exercise of discretion, courts should continue to take into account the particular circumstances of each case.").[9]

         As a result of Halo and Octane Fitness; the issues of willfulness and exceptional case in the instant lawsuit have not been considered under current law. Accordingly, the parties filed briefs and presented arguments addressing how these changes impact this case in connection with the Federal Circuit's remand. Power asks the Court to reinstate its prior willfulness finding, enhance damages, reconsider its finding that the case is not exceptional, and award attorney fees. Fairchild opposes.

         Power's Asserted Patents

         As noted above, in this lawsuit Power has asserted claims of four patents against Fairchild products. The Court briefly summarizes some aspects of the status of each of these patents-in-suit.

         '876 Patent

         Power's '876 patent is entitled, "Frequency Jittering Control for Varying the Switching Frequency of a Power Supply." (D.I. 1 at 28 of 67) After reexamination, the Patent Trial and Appeal Board (PTAB) upheld the examiner's rejection of asserted claim 1 of the '876 patent. (See D.I. 950-1) Because the PTAB's decision is currently on appeal at the Federal Circuit (see Fed. Cir. Docket No. 17-1304), the rejection is not final and does not impact the patent's status here. Hence, the Court will assess willfulness as to claim 1 of the '876 patent. See generally 35 U.S.C. § 307 (providing that reexamination certificate issues "when the time for appeal has expired or any appeal proceeding has terminated").

         '366 Patent

         The '366 patent is entitled, "Off-line Converter with Integrated Softstart and Frequency Jitter." (D.I. 1 at 43 of 67) Fairchild pursued ex parte reexamination of the '366 patent, and during that process Power amended the asserted claims. (See, e.g., 'D.1. 857-3, 857-4) By separate order entered today, the Court has dismissed the '366 patent from this case, and it has no continued relevance to the issues the Court confronts in this Opinion. (See also Tr. at 27) (Power explaining it is not seeking reinstatement of willfulness finding on '366 patent)

         '851 Patent

         The '851 patent is entitled, "Offline Converter with Integrated Softstart and Frequency Jitter." (D.I. 1 at 9 of 67) Power asserted claims 1 and 4 of the '851 patent. (See D.I. 376 at 2) Claim 1 was cancelled after reexamination. (See D.I. 870-1 at 68 of 82) The Federal Circuit reversed this Court's means-plus-function construction of claim 4's "soft start circuit" term and remanded with instructions to "assess what effects, if any, the new constructions have" on the claim's validity. Power Integrations, 711 F.3d at 1366. To this point, neither party has requested that the Court evaluate the validity of the '851 patent; Fairchild has not even sought to remove the '851 patent from the Court's permanent injunction against it. (See generally D.L 851)[10] Given that the Federal Circuit's reversal requires a broader construction of claim 4's scope, the previous finding of infringement of this claim still stands. Thus, the Court will assess willfulness as to Fairchild's infringement of claim 4.

         '075 Patent

         The '075 patent, which is entitled "High Voltage MOS Transistors, " expired on April 24, 2007. (See D.I. 1 at 62 of 67 ('075 patent (filed April 24, 1987)); see also 35 U.S.C. § 154(c)(1)) It nonetheless remains relevant to the issues to be decided here, as much of the relevant conduct (including at least the stipulated direct infringement) occurred prior to expiration of the '075 patent.

         DISCUSSION

         Damages Retrial ...


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