The US Court of Appeals for the Federal Circuit reversed an award of enhanced damages even while affirming a jury finding of willfulness (based on substantial evidence), explaining that the award was not adequately explained by the district court. Polara Engineering Inc. v. Campbell Company, Case Nos. 17-11974, -2033 (Fed. Cir. July 10, 2018) (Lourie, J). The Court also found that substantial evidence of experimental use trumped any public use bar.

Polara sued Campbell for infringement of its patent directed to a two-wire, push-button control system for crosswalk stations for pedestrian use at signal-controlled intersections. Polara’s Pedestrian Accessible Signal System (APS) produced visual, audible and tactile signals. Prior to the critical date, and subject to agreements with a municipality that did not include a confidentiality clause, Polara tested two prototypes that satisfied the limitations of the asserted claims. The early installation prototypes failed, and during the testing period, Polara made modifications to its system. A later prototype was installed in a Canadian municipality (subject to harsher weather conditions) pursuant to an agreement that did include confidentiality strictures. However, Polara witnesses testified that they did not tell anyone from the municipalities how the prototype worked, and that a person could not determine how the device worked once it was installed merely by looking at it.

After Campbell developed both a three-wire and two-wire APS, it consulted with patent counsel, who noted that at least one claim of the Polara patent was not limited to a two-wire system and that there were “areas of potential conflict” with the Polara patent.

At the district court, Campbell argued that the patent was invalid because Polara had tested prototypes prior to the critical date at public intersections. The jury found that the asserted claims were not invalid and that Campbell willfully infringed. The district court denied Campbell’s post-trial motion for judgment as a matter of law on validity, concluding that the invention was not subject to the public use bar, and granted Polara’s motion to enhance damages on the basis that five of the nine Read factors favored an award of enhanced damages, two of the factors weighed against enhancement, and two of the factors were neutral. Campbell appealed. 

The Federal Circuit rejected Campbell’s public use argument, noting first that the bar is triggered where, prior to the critical date, the invention is in public use and ready for patenting. However, the bar is not triggered where an inventor tests the claimed features to determine if the invention works for its intended purpose, even if the testing occurs in public. The Court, quoting extensively from the venerable 1877 Supreme Court of the United States decision in City of Elizabeth v. American Nicholson Pavement, found there was substantial evidence to support the jury’s finding of experimental use because Polara needed to test the claimed features of the devices at actual crosswalks of different configurations to ensure they were safe. 

The Federal Circuit also found that substantial evidence supported the jury’s finding of willful infringement. However, citing the 2016 Supreme Court cases Halo (IP Update, Vol. 19, No. 6) and WesternGeco, the Federal Circuit explained that the district court erred by not adequately explaining its decision to enhance damages:

After Halo and under Read, the “closeness of the case” remains a relevant consideration for determining the appropriateness of enhancement. Here, the district court awarded almost the maximum amount of enhanced damages, but did not adequately explain its basis for doing so, and failed to even mention Campbell’s public use defense, which presented a close question in this case.

The Federal Circuit reversed and remanded to the district court with instructions to provide a more complete explanation of its decision on whether to enhance damages, including a discussion of the public use defense.