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Willfulness and Liability, Separate But Equal?
By Angie M. Hankins and Vivian Luo
The Court of Appeals for the Federal Circuit, sitting
en banc, recently held in Robert Bosch, LLC v. Pylon
Mfg. Corp., __ F.3d __ , Case Nos. 2011-1363, 20111364, 2013 WL 2664281, at *13 (Fed. Cir. June 14,
2013) that the court has jurisdiction under 28 U.S.C.
§1292(c)(2) to hear appeals from patent infringement
liability determinations prior to a trial on damages and
while willfulness issues remain outstanding. This
article summarizes Bosch and highlights the practical
implications of the Federal Circuit’s decision.
In Bosch, the parties brought claims and counterclaims
for patent infringement. Id. at *1. Prior to trial, the
defendant moved to bifurcate the issues of liability
and damages. The District Court for the District of
Delaware granted the motion and stayed discovery on
damages and willfulness, which it deemed a damages
issue. Id. After a jury trial and entry of judgment on
liability, the parties appealed. Id. The plaintiff filed a
motion to dismiss the appeals, which was denied, and
sought reconsideration of its motion, which was also
denied. Id. The Federal Circuit sua sponte granted a
rehearing en banc to consider whether the court has
jurisdiction under Section 1292(c)(2) over appeals
from liability determinations prior to a trial on
damages and willfulness determinations. Id.
At oral argument, Bosch argued that an “accounting”
under Section 1292(c)(2) “is limited to an accounting
of an infringer’s profits and cannot include a
determination of damages” because “historically an
accounting included only the ascertainment of an
infringer’s profits.” Id. at *2. Bosch also argued that
“whatever an accounting is, it cannot be a trial on
damages” because “an accounting was a proceeding
before a special master - available only in courts of
equity,” which excludes modern jury trials because
“juries do not sit in equity.” Id. at *6. Thus, “an
accounting must be limited to a special master’s
determination of damages.” Id. In contrast, Pylon
argued that “an accounting included a trial on
damages, including the determination of willfulness.”
Id. at *2.
Damages Determination and Jury
Trial
The Federal Circuit began its analysis with the final
judgment rule, which dictates that appeals can be
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taken only from a final decision of a district court meaning litigation on the merits has ended and all
that remains for the district court is to execute the
judgment. Id. However, Section 1292(c)(2) provides
an exception for patent cases whereby appeals may be
made “from a judgment in a civil action for patent
infringement which would otherwise be appealable
to [the Federal Circuit] and is final except for an
accounting.” Id. (emphasis in original). The issues, thus,
turned on the meaning of “accounting.”
no distinction between a jury trial and
other means of determining damages. Id.
2. The issues decided in historical
accountings are the same as those decided
today by a jury - lost profits or a reasonable
royalty. Id. at *6, 8.
3. Judicial economy supports granting
interlocutory appeals from liability
determinations prior to an accounting
because “the whole expense of the
accounting is wasted when an appellate
court reverses on liability after an
accounting.” Id. at *9.
Specifically, the Federal Circuit was faced with
whether an accounting includes both a determination
of damages and a trial on damages. Based on statutory
interpretation of the patent laws and historical case
law, the Federal Circuit concluded that an
“accounting” for the purposes of Section 1292(c)(2)
encompasses the determination of an infringer’s
profits and a patentee’s damages, including lost profits
and a reasonable royalty. Id. at *2-6.
4. The Federal Circuit found that stare
decisis favors its holding because the
Federal Circuit has “long recognized that
an accounting’ within the context of
§1292(c)(2) includes a trial on damages.”
Id.
The Federal Circuit also found that an accounting
can be a trial on damages, and is not limited to a
special master’s determination of damages. Id. at *6.
The majority based its finding on four points:
Willfulness Issues
The Federal Circuit also held that it has jurisdiction
to hear appeals from liability determinations while
willfulness issues remain outstanding. Id. at *10. In
support, the Federal Circuit cited to pre-1927 cases
where accountings included determinations of
willfulness by the special master. Id. at *11. The
Federal Circuit further found that the practice of a
number of federal courts determining willfulness as
part of an accounting, both prior to and after 1927,
confirm its holding and noted that Bosch was unable
to point to anything in Section 1292(c)(2) or its
legislative history that would indicate that Congress
“intended to disturb the practice of determining
willfulness as part of an accounting.” Id. at *11-12.
1. In 1948, Congress amended the
interlocutory appeal statute by substituting
the phrase “civil actions” for “suit[s] in
equity,” which expanded jurisdiction over
interlocutory appeals from cases in equity
to “civil actions for patent infringement
which are final except for accounting,”
and brought the statute into essentially its
current form. Id. at *7 (quoting H.R.
Rep. 308, 80th Cong., 1st Sess. (1948)).
The court determined that the term
“accounting” in Section 1292 identifies
the nature of the issue being adjudicated,
rather than the adjudicator (as is the
dissent’s view), and that the statute makes
Additionally, while the Federal Circuit confirmed
that district courts have the authority to bifurcate
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willfulness and damages issues from liability issues, it
noted that neither the issue of bifurcation nor any
Seventh Amendment concern (as raised by the
dissent) was before it. Id. at *10.
Judge O’Malley, joined by Judge Wallach, dissented,
focusing on the scope of the exception to the rule of
finality and taking issue with the majority’s broad
definition of “accounting” under Section 1292(c)(2).
In the dissent’s view, the proper issue is not whether
an “accounting” as of 1927 permits consideration of
an infringers profits or allows calculations of a
patentee’s damages, but rather, whether the
accounting procedure contemplated by §1292(c)(2)
encompasses a jury trial on such questions. Id. at *26.
Disagreeing with the majority’s four points, Judge
O’Malley concluded that it does not encompass a
jury trial, because an accounting before a special
master is not a substitute for a jury trial on damages,
which is a right preserved by the Seventh
Amendment. Id. at *29-30.
Judges Moore and Reyna, writing separately,
concurred with the majority’s holding that the
Federal Circuit has jurisdiction over appeals from
determinations of liability where a determination of
damages remains outstanding. However, they
dissented with respect to the determination that the
Federal Circuit has jurisdiction where willfulness
issues remain undecided. Id. at *13, 16. Judge Moore
opined that willfulness determinations, which require
consideration of the state of mind of the accused
infringer and the reasonableness of the defenses the
accused infringer presents, are not within the
meaning of “accounting.” Id. at *14-15. Rather, an
“accounting” should be limited to numerical
calculations. Id.
On the issue of willfulness, the dissent raised similar
concerns. The dissent framed the question not as
whether willfulness was ever considered by special
masters in an accounting, but rather “whether a
finding of willfulness is an ‘accounting’ under §
1292(c)(2).” Id. at *35. Concluding it is not, the
dissent pointed out that willfulness findings were
made by a court, not the special master, and such
findings were not numbers-related. Id. at *36-37.
The dissent also noted that the majority’s holding as
to willfulness leads to inefficiencies and calls Seventh
Amendment concerns into question. Id. at *37-38.
Judge Reyna articulated similar reasoning and set
forth three reasons why a willfulness determination
should not be brought under the definition of an
“accounting”:
1. The plain language of Section
1292(c)(2) should be construed narrowly
and it does not unambiguously express
Congress’ intent to exclude willfulness
from the rule of finality. Id. at *16-17.
Practice Implications
Although the Federal Circuit’s decision as to damages
is unsurprising, its decision as to willfulness is
unexpected. Bosch will, no doubt, bolster the filing of
motions to bifurcate trials on damages and willfulness
from liability. The bifurcation of liability and damages
trials may result in some significant front-end cost
savings for litigants, particularly if a court stays
discovery on damages. Moreover, bifurcation will
likely impact the frequency and expediency of
2. The plain meaning of “accounting”
bears no nexus to willfulness. Willfulness is
related to liability, not damages. Id. at *16,
17-21.
3. Congress’s purpose in avoiding
piecemeal litigation will be frustrated by
forcing litigants to appeal “virtually
identical sets of facts and issues twice.” Id.
at *16, 21.
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settlements, as the losing party in the liability phase
may choose to settle rather than invest in an
interlocutory appeal. However, as separate juries will
be tasked with making decisions in the same case,
litigants may wind up duplicating the presentation of
evidence and recalling witnesses for a subsequent
damages trial. As the dissent observed, litigants will be
forced “to try and appeal virtually identical sets of
facts and issues twice.” Id. at *21, *37. Such repeat
proceedings will likely increase the ultimate cost of
the litigation.
________________________________
Angie M. Hankins is a partner and Vivian Luo is an
associate in the Intellectual Property Practice Group
of Stroock & Stroock & Lavan LLP’s New York
Office. The opinions expressed herein are their own
and not necessarily those of the firm or any of its
clients.
For More Information
Angie M. Hankins
212.806.5580
[email protected]
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Vivian Luo
212.806.6197
[email protected]
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Reprinted with permission from the August 1, 2013 issue of
Intellectual Property Strategist. Further duplication without
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