“Willful Infringement: What Does It Mean?” with Tom McNulty of Lando & Anastasi

Nathan (0s):
Welcome back Radio Entrepreneurs listeners and fans, I’m producer Nathan Gobes excited to be back with you again and back with Tom McNulty of Lando and Anastasi, one of our regular reporters here to talk to us about a new subject related to intellectual property.

Tom (19s):
Hey, it’s always, always good to be here.

Nathan (22s):
Thanks. Why don’t you dive right into our topic? Most of our listeners should be knowledgeable of who you are, and we’re excited to hear what you have to say today.

Tom (31s):
Okay. So today I thought I’d talk about the concept of Willful Infringement of the, of the various types of intellectual property. You know, the sort of three main pillars of, of IP are patent trademark and copyright. And for the first two of those patents and trademarks, you can infringe without having any knowledge of the patent without having any knowledge of the trademark. And certainly without having any intent, copyright infringement, you have to, you have to have had access to the material that was copied. So there’s sort of is some knowledge and intent kind of baked in, but in all of these, all of these forms of protection, if a court finds that your infringement was willful, you deliberately took action, knowing that there was a likelihood of infringement, they can do some things like enhancing damages, award attorney’s fees, things like that, that I thought, you know, it might be good to have kind of a general discussion on those lines.

Nathan (1m 25s):
Okay. Sure. But that makes sense to me, I’m interested to hear more.

Tom (1m 29s):
Okay. So I guess the first I would want to tackle is in patent law patents, the pen statutes have a section that deals with exceptional cases. They don’t specifically reference Willful Infringement in the statute, just they allow a court to increase damages by up to a factor of three for exceptional cases. And there are some other things that can come into play in whether a case is exceptional litigation misconduct being probably the main one other than willfulness, but by and large courts have treated this as a requirement I’ve treated. The statute is though a finding of Willful Infringement is required, excuse me.

Tom (2m 11s):
And under the patent statute patent fees, excuse me, attorney’s fees are not typically awarded, but if, if, if it falls within this exceptional case category, the courts can also in lieu of, or in addition to trebling damages can award attorney’s fees on the trademark side of things, the typical ma measures of damages and trademark law. It can be your actual damages as the trademark holder. It can be a disgorgement of the infringer’s profits, and it can sometimes include awards of attorney’s fees up until 2020 courts treated the disgorgement of the infringer’s profits is something that could only occur if they found Willful Infringement, a Supreme court decision removed the willful finding as a, as sort of an absolute requirement, but they strongly suggested that in most cases, that’s what you’re going to need so effectively for, for a disgorgement of the infringer’s profits, which is often the, the highest measure of damages you’re you’ll really need to, to, to prove willfulness and the same thing on the attorney’s fees side.

Tom (3m 18s):
In that case, the trademark statutes provide that attorney’s fees can be awarded to the prevailing party only in exceptional cases. And, and historically, other than litigation misconduct, again, infringements that are Willful that are deliberate are, are somewhat of a prerequisite for that. And then I don’t know if you’re familiar with the, the concept of trademark dilution,

Nathan (3m 42s):
I am not

Tom (3m 44s):
The real quick basics of that, because I’m not really looking to do a trace on that today. If you have a famous mark, usually trademarks are protected within the field of goods and services that you offer. So somebody can use apple. For example, you know, it was the Beatles record label and apple computers started. And at the time, anyways, those were separate and distinct enough that they were allowed to coexist. I think that would probably be the case these days, but if mark has become famous, you can prevent people from using that mark, even if the goods and services are wildly different and you can collect damages if they do so. And, and in terms of dilution, it’s actually a statutory requirement that willfulness be found.

Tom (4m 26s):
So there it’s an absolute bar on, on word of profits.

Nathan (4m 30s):
Okay. Yeah. That does make sense. I can’t use the, the Nike logo on, I dunno, my, my new widget.

Tom (4m 38s):
Exactly. You can’t sell Coca-Cola running shoes.

Nathan (4m 42s):
Yeah. I’m sure they do. Okay. That’s interesting.

Tom (4m 47s):
Yeah. And actually one of the other kind of weird quirks of trademark law as it exists at the federal level, but it also exists at the state level. You can have a state registration and under Massachusetts law, if you have a state registration, if there’s a willfulness finding under, under the state law, the court can enhance the damages by a factor of up to three and award attorney’s fees. Excuse me. So, so there’s sort of a trademark law has many different sort of layers and levels.

Nathan (5m 16s):
It makes sense for a business owner to pursue a federal versus state one over the other, or would you preserve potentially pursue both if your trademark was infringed

Tom (5m 28s):
Well to, to pursue both well, to pursue it at the state level, you have to have registered within the state. It’s inexpensive. It involves usually nothing more than a single filing. So it’s never a bad idea to do so, you know, a state registration protects you, you know, within the state of Massachusetts, if you’re registered in Massachusetts, you wouldn’t be able to use it outside of the state. Whereas federal gives you a nationwide coverage. So obviously there’s advantages to faculty, but the federal process of getting a trademark registered is, is a bit more complex and time consuming. And,

Nathan (6m 2s):
And both, both would cover out for any perpetrators based outside of the area that you’re registering. And of course, right. So if there, you know, you registered in Massachusetts and somebody in California, you know, does something, then you still can utilize that trade at that state right

Tom (6m 20s):
There. It sort of depends. If somebody from California is selling into Massachusetts, you could go after them for selling it to Massachusetts. But if they’re existing and doing their business solely in California, you would effectively not have any rights against them. And you’d sort of have to coexist, okay. If you just had the state registration you

Nathan (6m 37s):
Just had state, right?

Tom (6m 41s):
So then there’s the copyright side of things. And like I say, to infringe a copyright, it’s not enough that you just sort of stumbled across the same thing that somebody else had previously done. You have to have had access and there has to have been some actual copying. So there’s sort of as an inherent, I don’t want to say willfulness to it, but it slides a lot closer to willfulness when you simply have a copyright infringement. If Willful Infringement in copyright context is found, it really applies primarily to statutory damages. So under copyright law, you can collect your actual damages or in the alternative, you can collect statutory damages, which would be a statutorily set amount per infringement in, in federal court, you know, in, in sort of run of the mill infringement, the amount can be anywhere from 750 to $30,000 per infringing act with the finding of willfulness.

Tom (7m 35s):
That amount goes up to as high as $150,000 per infringement. And also attorney’s fees can be awarded and statutory. I’m sorry. I’m willfulness can be kind of a factor in that as well. It’s not a prerequisite to attorney’s fees, but, but it’s one of the factors that would be considered. So that’s kind of why willfulness is important, but I guess one of the things I sort of really wanted to highlight there is sort of willfulness in the sense of I went out and I deliberately wrote, you know, I deliberately copied this. I deliberately did something mentioned a patent that I knew about by God, I do it at French. And I did it anyways. You’re clear cut, you know, smack yourself in the head kind of cases of obviousness.

Tom (8m 19s):
And, you know, if you’ve got an email and discovery from the opposing side that says, damn it, I don’t care copy it. That’s pretty unusual. So usually it’s, it, it involves some sort of inferences based on the evidence of record. And one of the concepts I wanted to touch on is in, in all three of these categories, there’s the concept of willful blindness that can rise to the level of Willful Infringement. And this is something I think, you know, companies sort of need to be aware about, excuse me, in the pad world, for example, 22,000 decision made an award of enhanced damages kind of easier to get and more likely by removing pen in patent law.

Tom (9m 6s):
It used to be that if you came up with an objectively reasonable defense to infringement, whether it be non-infringement or that you think the patents invalid or something, it didn’t matter when you came up with it. So if you started infringing, you knew about the opposing patent and you did it for five or six years and then got sued. And in litigation, your, your counsel dug up a prior art reference that looked like maybe it would bring into question the validity of the patent. That would be enough to absolve you on the Willful side of things for the past six years of activity, when you had no knowledge of that reference and the Supreme court did away with that. So now it’s, it’s your subjective belief at the time you commit the infringing acts. So a lot of company’s response to that was to Institute policies that prohibited employees from reviewing patents.

Tom (9m 53s):
Interesting, you know, sort of, sort of, you know, if, if, if we don’t know, cause part of, part of an Willful Infringement finding in patent laws, you have to know about the opposing patent. You have to know that your, your product or service is likely to infringe. So this was sort of a way to make sure you didn’t know that has been treated in at least some cases as sufficient to rise to reckless disregard of whether you’re infringing, that that’s sufficient to have a finding of willfulness. So the concept of willful blindness is the defendant must subjectively believe there’s a high probability that a fact exists, that there’s a patent out there covering this, that, you know, my, my actions may or may not infringe that.

Tom (10m 38s):
And then the defendant must take a deliberate action to avoid learning about that fact sort of the classic patent case. In, in that area. It was a company that was knocking off. I want to say it was a deep fryer, deep prior machine. So they bought, they bought a competitive product, took it apart, figured out how to, how to copy it, you know, how to make it and make copies of it while they were in the process of doing this, the product itself was marked with a patent. Number 10, you know, this is covered by us patent number, lovey blah. They deliberately withheld that information from their attorneys when their attorneys were conducting a search patent search to see if this was something that they could do.

Tom (11m 19s):
And that’s one of the ways to defeat infringement, as you get, you know, a competent opinion of counsel that you’re free to operate in the area. So in this case, they didn’t get a freedom to operate opinion, but they deliberately withheld from the guys doing the opinion, what was going to clearly be the most relevant patent. So in that case, you know, they knew the existence of the patent. They didn’t necessarily know that they infringed because they never read it, but they were found to be a willful infringer by deliberately going out of their way to avoid finding that out. Sounds like one of the best takeaways

Nathan (11m 53s):
Here is for business owners that are creating their own, you know, to make sure they get those, those trademarks filed and placed on, on their products for, you know, the fact that they had it on. There really means that it couldn’t be hidden. You know, they couldn’t avoid it. They could, they could try, they could pretend, but in the end, it’s going to show that, you know, they were willfully, you know, being ignorant to it.

Tom (12m 20s):
Yeah, exactly. And I think at least in the terms of Willful Infringement, I think one of the biggest takeaways is if something happens where you’re a little bit suspicious, you’re getting too good of a deal. Something’s a little bit too easy, you know, don’t deliberately, you know, hide your eyes and not REL. So this, this will happen a lot in the context, for example, software. If, if somebody says, Hey, I’m, you know, I’m a software salesman and I can get you copies of, you know, Microsoft office suite for, you know, 10 bucks, a pop that’s. So suspiciously low enough that you may end up being kind of deemed willfully blind. If you don’t try to figure it out, Jesus is a legitimate copy.

Tom (12m 60s):
You know, that’s, that’s one of the contexts you see it arise in a lot is, is

Nathan (13m 4s):
It makes sense much easier to, you know, when, when you’ve got like a deep fryer, for example, there’s, there’s like you said, there’s probably a plate on there that says cover by patent, whatever, whatever, but it’s not always quite the same with software. So that makes sense that that often is it?

Tom (13m 19s):
Yeah. And on the patent side of things, I think one of the things that’s important to note putting the, the patent number on the product is called patent marking. And it’s a requirement in, in collecting damages to provide notice of the patent. And that’s one of the ways that it’s done within the last, I don’t know, six years or so the courts and the patent laws allow for you to do virtual patent marketing. So you can, instead of having the patent number of the product, you can have a website, you know, a webpage listed for, for patent information, see www dot, whatever. And, and, you know, again, if you see something like that, and then you don’t go to the site and look at the patents here again, potentially, you know, sticking your neck out for, for a willfulness, finding an enhanced damages award,

Nathan (14m 6s):
Sticking your neck out, but what your head in the sand? Yeah. Well, this is all really interesting and definitely something that business owners need to be aware of, regardless of which side they find themselves on, whether they’re the original creator there’s takeaways here of what they should be considering. And then also, you know, if there’s somebody, like you said, if they’re getting too good of a deal, or if they’re trying to, you know, take advantage of another competitors, you know, product that they, you know, have serious issues that could arise from doing so. So it’s all, it’s all very interesting. And we really appreciate you joining us here, Tom, if people want to find out more, reach out to you and get some advice at Lando and Anna Staci, what’s the best way to do so

Tom (14m 52s):
They can always reach me at my email address. It’s T McNulty, M C N U L T y@lalaw.com or they can get me by phone (617) 395-7040.

Nathan (15m 4s):
Great. Tom joins us monthly here at Radio Entrepreneurs. And we’re looking forward to having you back. We’ll be back with more Radio Entrepreneurs after this break.