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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`VLSI TECHNOLOGY LLC,
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`Plaintiff,
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`V.
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`INTEL CORPORATION,
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`Defendant.
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`Civil Action No. 18-0966-CFC
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`Brian E. Fmnan, Michael J. Fmnan, FARNAN LLP, Wilmington, Delaware;
`Morgan Chu, Benjamin Hattenbach, Amy Proctor, Dominik Slusarczyk, Charlotte
`J. Wen, IRELL & MANELLA LLP, Boston, Massachusetts; Christopher
`Abernethy, Iian Jablon, Adina Stohl, Brian Weissenberg, IRELL & MANELLA
`LLP, Los Angeles, California; Ben Yorks, IRELL & MANELLA LLP, Newport
`Beach, California
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`Counsel for Plaintiff
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`Jack B. Blumenfeld, Jeremy A. Tigan, MORRIS, NICHOLS, ARSHT &
`TUNNELL LLP, Wilmington, Delaware; Robert Kent, TURNER BOYD LLP,
`Redwood City, California
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`Counsel for Defendant
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`MEMORANDUM OPINION
`
`June 26, 2020
`Wilmington, Delaware
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`
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 2 of 12 PageID #: 21025
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`c o~ NNOLL v
`UNITED ST ATES DISTRJCT JUDGE
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`Pending before me is VLSI Technology LLC's motion to amend its
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`Complaint. D.I. 257. By its motion, VLSI seeks to add claims for indirect
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`infringement and for enhanced damages based on willful infringement of U.S.
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`Patent Nos. 6,212,633 (the #633 patent) and 7,523,331 (the #331 patent). 1
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`Defendant Intel Corporation opposes the motion insofar as the claims VLSI seeks
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`to add are for pre-suit infringement. D.I. 275 at 1, 4. 2
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`1 VLSI also seeks in its motion to add claims for indirect infringement and for
`enhanced damages based on willful infringement of U.S. Patent Nos. 7,247,552
`(the #552 patent) and 8,081,026 (the #026 patent). D.I. 257 at 1. The case,
`however, has been stayed with respect to those patents; and the paiiies have agreed
`that "VLSI's requests [in the present motion to amend] to add allegations regarding
`the [#]026 and [#]552 patents need not be decided at this time." D.I. 617 at 3.
`2 Intel also objected to VLSI's motion to the extent VLSI sought to add claims for
`enhanced damages based on post-suit willful infringement of the #633 patent,
`which expired before VLSI filed this suit. D.I. 275 at 18. In its reply brief,
`however, VLSI "clarif[ied] that it is not alleging post-filing willful infringement"
`of that patent. D .I. 286 at 2 n.1. For reasons not clear from the record, Intel has
`not objected to VLSI's remaining claims for post-suit indirect infringement and
`enhanced damages based on post-suit willful infringement. See VLSI Tech. LLC v.
`Intel Corp., 2019 WL 1349468, at *2 (D. Del. Mar. 26, 2019) (holding that "the
`complaint itself cannot serve as the basis for a defendant's actionable knowledge"
`for a willful infringement claim because "[t]he purpose of a complaint is not to
`create a claim but rath~r to obtain relief for an existing claim"); Kaufman v.
`Microsoft Corp., 2020 WL 364136, at *4 (S.D.N.Y. Jan. 22, 2020) (holding that
`"Plaintiffs theory [ of post-suit knowledge of asserted patents] is without merit"
`and "not the law in this district").
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 3 of 12 PageID #: 21026
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`I.
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`BACKGROUND
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`VLSI's Complaint originally included claims for indirect infringement of the
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`#633 and #331 patents and enhanced damages based on willful infringement of
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`those patents. D.I. 1 ,r,r 32-33, 37, 114-15, 119. Intel, however, moved to dismiss
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`those claims, D.I. 17, and I granted Intel's motion because the Complaint failed to
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`state a plausible claim that Intel knew of or was willfully blind to Intel's
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`infringement of the two patents, D.I. 110 at 5.
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`In support of its attempt to reintroduce these claims to the case, VLSI seeks
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`to add to the Complaint allegations that Intel "regularly monitors its competitors'
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`activities, which are often in the same field and involve similar products"; that
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`"Intel has acknowledged that competitors may have patents covering similar
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`products"; that the prior assignee of the #633 and #331 patents, NXP, is Intel's
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`competitor and Intel monitors NXP's activities; and that Intel previously engaged
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`NXP to purchase "other NXP patents." Id., Ex. A ,r,r 32, 123.
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`VLSI also seeks to add more detailed allegations regarding Intel's "publicly(cid:173)
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`known corporate policy forbidding its employees from reading patents held by
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`outside companies or individuals." Id., Ex. A ,r,r 33, 124. VLSI's proposed
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`amended complaint states that Intel employees "have admitted that this policy's
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`purpose is to avoid possible triple damages for willful infringement." Id., Ex. A ,r
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`33 (internal quotation marks omitted). And the proposed amended complaint
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`2
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 4 of 12 PageID #: 21027
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`alleges that "[b ]ecause a patentee cannot recover triple damages for an infringer's
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`mere knowledge of a patent, Intel's policy necessarily include[s] avoiding review
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`of known patents to avoid learning of infringement." Id., Ex. A ,r 3 3.
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`VLSI argues that "[w]ith these new allegations, VLSI's proposed complaint
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`states a claim that is more than plausible for enhanced damages based on Intel's
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`willfulness, and for pre-filing indirect infringement." Id. at 2.
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`II.
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`LEGAL STANDARDS
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`A. Motion to Amend
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`"If the complaint, as amended, would not survive a motion to dismiss, leave
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`to amend may be denied as futile." Delaware Display Grp. LLC v. Lenovo Grp.
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`Ltd., Lenovo Holding Co., 2016 WL 720977, at *7 (D. Del. Feb. 23, 2016) (citation
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`omitted). To survive a motion to dismiss, a complaint must set forth enough facts,
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`accepted as true, to "state a claim to relief that is plausible on its face." Bell At!.
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`Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible "when
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`the plaintiff pleads factual content that allows the court to draw the reasonable
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`inference that the defendant is liable for the misconduct alleged." Ashcroft v.
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`Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). Deciding whether a claim is
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`plausible is a "context-specific task that requires the reviewing court to draw on its
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`judicial experience and common sense." Id. at 679 ( citation omitted). Detailed
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`factual allegations are not required, but the complaint must include more than mere
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`3
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 5 of 12 PageID #: 21028
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`"labels and conclusions" or "a formulaic recitation of the elements of a cause of
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`action." Twombly, 550 U.S. at 555 ( citation omitted).
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`B.
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`Indirect Infringement
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`Indirect infringement "requires knowledge of the patent in suit and
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`knowledge of patent infringement." Commil USA, LLC v. Cisco Sys., Inc., 135 S.
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`Ct. 1920, 1926 (2015). A patentee can establish knowledge of patent infringement
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`by showing that the defendant was willfully blind-i.e., by showing that the
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`defendant (1) subjectively believed that there was a high probability that the
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`induced acts constituted infringement and (2) took deliberate actions to avoid
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`learning of that fact. Global-Tech Appliances, Inc. v. SEE SA., 563 U.S. 754, 769
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`(2011).
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`C.
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`Enhanced Damages Based on Willful Infringement
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`Section 284 of the Patent Act "gives district courts the discretion to award
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`enhanced damages against those guilty of patent infringement." Halo Elecs., Inc.
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`v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1935 (2016). The statute provides that "the
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`comi may increase the damages up to three times the amount found or assessed."
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`35 U.S.C. § 284. Although the Cami in Halo intentionally "eschew[ed] any rigid
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`formula for awarding enhanced damages under§ 284," 136 S. Ct. at 1934, the
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`Court held that the legal principles "developed over nearly two centuries of
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`application and interpretation of the Patent Act ... channel the exercise of [the
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`4
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 6 of 12 PageID #: 21029
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`district court's] discretion" and "limit[ ] the award of enhanced damages to
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`egregious cases of misconduct beyond typical infringement," id. at 193 5. Thus,
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`enhanced damages awards under § 284 are available only in "egregious cases" of
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`misconduct that involve more than "typical" infringement. Id. As the Court
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`explained, the enhanced damages award provided by§ 284 was "designed as a
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`'punitive' or 'vindictive' sanction for egregious infringement behavior ... [that]
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`has been variously described in [the Court's] cases as willful, wanton, malicious,
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`bad-faith, deliberate, consciously wrongful, flagrant, or-indeed-characteristic of
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`a pirate." Id. at 1932.
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`Although"§ 284 allows district courts to punish th[is] full range of culpable
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`behavior," id. at 193 3, in the vast majority of patent cases filed today, claims for
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`enhanced damages are sought based on allegations of willful misconduct-so
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`much so that, even though the words "willful" and "willfulness" do not appear in
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`§ 284, plaintiffs and courts more often than not describe claims for enhanced
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`damages brought under§ 284 as "willful infringement claims." Indeed, some
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`parties and courts refer to such claims as willful infringement "causes of action"
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`even though§ 271 of the Patent Act, which creates causes of action for direct,
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`induced, and contributory infringement, does not mention or suggest such a thing
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`5
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 7 of 12 PageID #: 21030
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`as "willful infringement."3
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`The fact that willfulness is the most common type of misconduct alleged by
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`plaintiffs who invoke § 284 makes sense, as willful conduct "serve[ s] as [the] floor
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`for culpable behavior that may incur enhanced damages." ROBERT L. HARMON,
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`CYNTI-IlA A. HOMAN & LAURA A. LYDIGSEN, PATENTS AND THE FEDERAL CIRCUIT,
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`§ 17.3(a), at 1378 (13th ed. 2017). It also explains the Court's statement in Halo
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`that enhanced damages under § 284 "should generally be reserved for egregious
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`cases typified by willful misconduct." 136 S. Ct. at 1934 (emphasis added).
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`In assessing the egregiousness of a defendant's conduct for§ 284 purposes,
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`"culpability is generally measured against the knowledge of the [defendant] at the
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`time of the challenged conduct." Id. at 1933. The Court in Halo rejected the
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`Federal Circuit's requirement announced in In re Seagate Technology, LLC, 497
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`3 See, e.g., Valinge Innovation AB v. Halstead New Eng. Corp., 2018 WL 2411218,
`at *5 (D. Del. May 29, 2018); Milo & Gabby, LLC v. Amazon.com, Inc., 12 F.
`Supp. 3d 1341, 1353 (W.D. Wash. 2014); Trs. of Univ. of Pa. v. St. Jude
`Children's Research Hosp., 982 F. Supp. 2d 518, 529-30 (E.D. Pa. 2013);
`MONEC Holding AG v. Motorola Mobility, Inc., 897 F. Supp. 2d 225,236 (D. Del.
`2012); Inv. Tech. Grp., Inc. v. Liquidnet Holdings, Inc., 759 F. Supp. 2d 387,409
`(S.D.N.Y. 2010); Powell v. Home Depot U.S.A., Inc., 715 F. Supp. 2d 1285, 1290
`(S.D. Fla. 2010); Dura Glob. Tech., Inc. v. Magna Donnelly Corp., 665 F. Supp.
`2d 787, 789 (E.D. Mich. 2009); Cognitronics Imaging Sys., Inc. v. Recognition
`Research Inc., 83 F. Supp. 2d 689, 691 (E.D. Va. 2000); Heil Co. v. Hartford
`Accident and Indem. Co., 937 F. Supp. 1355, 1361 (E.D. Wis. 1996); In re
`Recombinant DNA Tech. Pat. and Contract Litig., 850 F. Supp. 769, 771 (S.D. Ind.
`1994).
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`6
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 8 of 12 PageID #: 21031
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`F.3d 1360 (Fed. Cir. 2007) (en bane) that a patentee show "objective recklessness"
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`in order to prove willful misconduct for § 284 purposes. The Court reasoned that
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`the "objective recklessness" test insulated many of the most culpable infringers
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`from§ 284's punitive sanctions because it made dispositive invalidity and non(cid:173)
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`infringement defenses asserted at trial even if the infringer had not acted on the
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`basis of those defenses or was even aware of them. In the Court's words: "Under
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`that standard, someone who plunders a patent-infringing it without any reason to
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`suppose his conduct is arguably defensible-can nevertheless escape any
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`comeuppance under§ 284 solely on the strength of his attorney's ingenuity."
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`Halo, 136 S. Ct. at 1933. Thus, the Court held that, in cases where the asserted
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`basis for enhanced damages is willful misconduct, it is "[t]he subjective willfulness
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`of [the] patent infringer, intentional or knowing, [that] may warrant enhanced
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`damages, without regard to whether his infringement was objectively reckless."
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`Id.
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`The Court's "intentional or knowing" clause makes clear that willful
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`infringement is-at a minimum-knowing infringement. This standard is
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`consistent with the Supreme Court's holding in Global-Tech, that "induced
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`infringement under§ 271(b) requires knowledge that the induced acts constitute
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`patent infringement." 563 U.S. at 766. Since§ 284 enhanced damages are
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`available in cases of induced infringement, see, e.g., Barry v. Medtronic, Inc., 2019
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`7
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 9 of 12 PageID #: 21032
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`WL 302886, at *17 (Fed. Cir. Jan. 24, 2019); SynQor, Inc. v. Artesyn Techs., Inc.,
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`709 F.3d 1365, 1385 (Fed. Cir. 2013); ACCO Brand, Inc. v. ABA Locks Mfrs. Co.,
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`501 F.3d 1307, 1314 (Fed. Cir. 2007); Metabolite Labs., Inc. v. Lab. Corp. of Am.
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`Holdings, 370 F.3d 1354, 1371 (Fed. Cir. 2004), and since, under Halo,§ 284's
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`enhanced damages award is reserved only for egregious cases, it would seem
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`incongruous if not illogical to require a lesser showing of culpability for enhanced
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`damages under § 284 than for induced infringement under § 271 (b ).
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`The Federal Circuit emphasized in SRI International, Inc. v. Cisco Systems,
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`Inc., 930 F.3d 1295 (Fed. Cir. 2019) that under Halo enhanced damages are
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`available only if a showing of something more than intentional or knowing
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`infringement is made:
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`As the Supreme Court stated in Halo, "[t]he sort of
`conduct warranting enhanced damages has been
`variously described in our cases as willful, wanton,
`malicious, bad-faith, deliberate, consciously wrongful,
`flagrant, or-indeed-characteristic of a pirate." While
`district courts have discretion in deciding whether or not
`behavior rises to that standard, such findings "are
`generally reserved for egregious cases of culpable
`behavior." Indeed, as Justice Breyer emphasized in his
`concurrence, it is the circumstances that transform simple
`"intentional or knowing" infringement into egregious,
`sanctionable behavior, and that makes all the difference.
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`Id. ( emphasis in original) ( citations omitted).4
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`4 I am aware that in Arctic Cat Inc. v. Bombardier Recreational Products Inc., 876
`F.3d 1350, 1371 (Fed. Cir. 2017), the Federal Circuit held that proof that a
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`8
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 10 of 12 PageID #: 21033
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`Neither the Supreme Court in Halo nor the Federal Circuit in SRI directly
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`addressed the pleading requirements for an enhanced damages claim. Because of
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`the difficulty in articulating precisely the range or type of circumstances that would
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`transform a "simple 'intentional or knowing'" infringement claim into an enhanced
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`damages claim, the safest course is to allow an enhanced damages claim to proceed
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`beyond the pleadings stage if the operative pleading alleges facts from which it can
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`be plausibly inferred that the party accused of infringement had knowledge of the
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`asserted patent and lmowledge that the party's alleged conduct constituted,
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`I
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`induced, or contributed to infringement of the asse1ted patent. And since the
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`doctrine of willful blindness applies in patent cases, see Global-Tech, 563 U.S. at
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`defendant "should have lmown that its actions constituted an unjustifiably high risk
`of infringement" was enough to establish willfulness under Halo. In so holding,
`the Comt expressly rejected the defendant's argument that this "'should have
`lmown' standard contradicts Halo." Id. Two other Federal Circuit decisions
`issued after Halo held that a plaintiff can establish willfulness for § 284 purposes
`with proof that "the defendant acted despite a risk of infringement that was either
`lmown or so obvious that it should have been lmown." WesternGeco L.L. C. v. Ion
`Geophysical Corp., 837 F.3d 1358, 1362 (Fed. Cir. 2016) (internal quotation marks
`and citations omitted), rev'd on other grounds, 138 S. Ct. 2129 (2018); see also
`WCM Indus., Inc. v. JPS Corp., 721 F. App'x 959, 970 (Fed. Cir. 2018) (citing
`Arctic Cat, 876 F.3d at 1371) (holding that in reviewing "under the new Halo
`standard" a district court's award of enhanced damages, "we must determine
`whether the evidence, when viewed in the light most favorable to [the plaintiff],
`was sufficient to prove by a preponderance of the evidence that [the defendant]
`acted despite a risk of infringement that was either lmown or so obvious that it
`should have been lmown to [the defendant]"). All three of these cases were
`decided before SRI, and, in my view, cannot be reconciled with Halo. I will
`therefore follow SRI.
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`9
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 11 of 12 PageID #: 21034
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`766, a willful infringement-based claim for enhanced damages survives a motion
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`to dismiss if it alleges facts from which it can be plausibly inferred that the pmiy
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`accused of infringement ( 1) had knowledge of or was willfully blind to the
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`existence of the asserted patent and (2) had knowledge of or was willfully blind to
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`the fact that the pmiy's alleged conduct constituted, induced, or contributed to
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`infringement of the asserted patent.
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`III. DISCUSSION
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`I will deny VLSI's motion to amend because VLSI's attempt to reallege its
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`claims for pre-suit indirect infringement of the #633 and #331 patents and
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`willfulness-based enhanced damages would be futile. Although, as I previously
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`held, VLSI "plausibly alleges that Intel knew of the existence of the #633 [and]
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`#3 31 patents," D .I. 110 at 3, VLSI' s proposed amended complaint does not
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`plausibly allege that Intel knew of or was willfully blind to Intel's infringement of
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`the #633 and #331 patents.
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`First, the new proposed allegations that VLSI seeks to add to its Complaint
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`do not support a plausible inference that Intel knew it infringed the #633 and #331
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`patents. The allegations state that Intel monitored its competitors' activities
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`generally (including the prior assignee of the asserted patents, NXP), that Intel
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`knew its competitors "may have" patents covering Intel's similar products, and that
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`Intel engaged NXP to acquire "other" NXP patents. D.I. 257, Ex. A ,r,r 32, 123.
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`10
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`Case 1:18-cv-00966-CFC-CJB Document 626 Filed 06/26/20 Page 12 of 12 PageID #: 21035
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`None of those allegations, however, specifically concern the #633 or #331 patents.
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`Allegations about monitoring competition generally and about patents not asserted
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`here do not plausibly establish that Intel had knowledge of infringement of the
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`#633 and #331 patents.
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`The proposed new allegations also fail to allege plausibly that Intel was
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`willfully blind to its infringement of the #633 and #331 patents. VSLI argues that
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`willful blindness can be plausibly infened from its new allegations regarding
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`Intel's "publicly-known corporate policy forbidding its employees from reading
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`patents held by outside companies or individuals." D.I. 257 at 7. But having a
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`general policy with respect to thousands of patents in a field of technology does
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`not plausibly establish or imply that Intel subjectively believed there was a high
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`probability that its acts constituted infringement of two specific patents.
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`IV. CONCLUSION
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`For the foregoing reasons, I will grant in part and deny in pait VLSI's
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`motion to amend the Complaint. I will grant the motion insofar as VLSI seeks to
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`add claims based on post-suit infringement. I will deny the motion in all other
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`respects.
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`The Comt will enter an order consistent with this Memorandum Opinion.
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`1 1
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