Although the U.S. Court of Appeals for the Federal Circuit did not take a position on the propriety of bifurcating damages and willfulness, to the extent those issues are separate from infringement, a party will now be able to get appellate review of the infringement issues in advance of devoting the time and resources necessary for a determination of damages.

In Robert Bosch, LLC v. Pylon Manufacturing Corp., the U.S. Court of Appeals for the Federal Circuit sua sponte took the case en banc to answer two questions:

1. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on the Federal Circuit to entertain appeals from infringement determinations when a trial on damages has not yet occurred?

2. Does 28 U.S.C. § 1292(c)(2) confer jurisdiction on the Federal Circuit to entertain appeals from infringement determinations when willfulness issues remain undecided?

Robert Bosch, LLC v. Pylon Manufacturing Corp., Case Nos. 2011-1363, -1364 (Prost, J.) (Moore, J., concurring in part, dissenting in part) (Reyna, J., concurring in part, dissenting in part) (O’Malley, J., dissenting).  The Federal Circuit answered yes to both questions and returned the case to the panel for disposition.

In August 2008, Bosch sued Pylon for patent infringement, and Pylon asserted infringement counterclaims against Bosch.  Pylon filed a motion asking to bifurcate liability from damages.  The district court granted Pylon’s request, noting that “bifurcation is appropriate, if not necessary, in all but exceptional patent cases” and that issues related to a damages trial are “a drain on scarce judicial resources.”  The district court went on to find that “willfulness is a damages issue, not a liability issue” and similarly bifurcated that issue.  The district court stayed all discovery on damages and willfulness.  Following a jury trial and post-trial motions, the district court entered judgment on infringement.  Bosch appealed, and Pylon cross-appealed.  Bosch filed a motion to dismiss both its appeal and Pylon’s cross-appeal arguing that the Federal Circuit lacked jurisdiction.  The Federal Circuit denied Bosch’s motion and its motion for reconsideration.  Following oral argument before a panel of the Federal Circuit, the court sua sponte granted a rehearing en banc to determine the jurisdiction issues.

Generally, the Federal Circuit’s jurisdiction is governed by the final judgment rule granting it jurisdiction over any “appeal from a final decision of a district court of the United States.”  Section 1292(c)(2) is a patent-specific exception to the final judgment rule and allows Federal Circuit jurisdiction in a patent case that is final “except for an accounting.”  This case focused on the meaning of “accounting” and whether a trial on damages and determination of willfulness was an accounting for the purposes of § 1292(c)(2).

The Federal Circuit held that it was “clear from the case law and history of the statute that an accounting includes both the determination of an infringer’s profits as well as a patentee’s damages” and can include a trial on damages.  The court conducted a historical analysis of the term accounting to determine that the statute was intended to encompass in patent cases both the calculation of defendant’s profits and the plaintiff’s damages.  The court continued its historical analysis to reject Bosch’s argument that an accounting was limited to a special master’s determination of damages, finding Bosch’s distinction “manifestly incorrect.”  The court held that while an accounting was historically available in equity, nonetheless a trial on damages was within the scope of § 1292(c)(2).  The court also noted that damages trials are “notoriously complex and expensive” and that “given the substantial reversal rate of liability determinations on appeal, the whole expense of a damages trial is often wasted.”  The court held that these exact policy concerns motivated the U.S. Congress to allow jurisdiction over cases that are final except for an accounting.

The Federal Circuit went on to hold that § 1292(c)(2) confers jurisdiction over appeals when willfulness issues remain outstanding and undecided.  The court again focused on the history of the statute to determine that an “accounting” had long included the determination of willfulness.  The court found it to be “clear” that an accounting included the determination of willfulness.

The court was careful to highlight that the case “does not involve the question of whether the district court has authority to bifurcate the willfulness and infringement issues.  As a general matter it does.”  District courts can decide for reasons of efficiency that bifurcation is, or is not, warranted.  District court judges “are best positioned to make that determination on a case-by-case analysis.”  Similarly, the court “did not take this case en banc to determine whether the issues of infringement and willfulness are so interwoven that trying them separately violates the Seventh Amendment.”  The court found that bifurcation and Seventh Amendment issues were immaterial, because its jurisdiction was set by Congress and included jurisdiction over patent cases that were final save for an accounting.

Judge O’Malley’s dissent disagreed with the broad interpretation of § 1292(c)(2) adopted by the majority.  “As an exception to the final judgment rule, § 1292(c)(2) is to be interpreted narrowly . . . Because I believe the term ‘accounting’ only applies to a limited class of proceedings before special masters or to those instances in which the trier of fact has decided all matters relevant to a damages determination save the application of those decisions to an undisputed set of numbers.”  The dissent disputed the propriety of the majority’s historical analysis, arguing that “[w]hat we should ask is not what questions may be considered during the course of an ‘accounting’ but whether the procedure that was an ‘accounting’ as of 1927 . . . is the same as or encompasses a jury trial on any of those questions.”  The dissent was especially troubled by the majority’s inclusion of willfulness within the “accounting.”  The dissent argued that requiring infringement and willfulness to take place before separate juries may violate the defendant’s Seventh Amendment right to a jury trial.

Practice Note

Although the Federal Circuit did not take a position on the propriety of bifurcating damages and willfulness, to the extent those issues are separate from infringement, a party will now be able to get appellate review of the infringement issues in advance of devoting the time and resources necessary for a determination of damages.