Innovention Toys, LLC v. MGA Entertainment, Inc.

NOTE: This disposition is nonprecedential.

United States Court of Appeals
for the Federal Circuit
______________________

INNOVENTION TOYS, LLC,
Plaintiff-Appellee

v.

MGA ENTERTAINMENT, INC., WAL-MART
STORES, INC., TOYS “R” US, INC.,
Defendants-Appellants
______________________

2014-1731
______________________

Appeal from the United States District Court for the
Eastern District of Louisiana in No. 2:07-cv-06510-SM-
MBN, Judge Susie Morgan.
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Decided: August 5, 2016
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JAMES C. OTTESON, Arnold & Porter, LLP, Palo Alto,
CA, for plaintiff-appellee. Also represented by DAVID A.
CAINE, THOMAS T. CARMACK; BRANDON D. BAUM, Agility IP
Law, LLP, Menlo Park, CA.

DONALD ROBERT DUNNER, Finnegan, Henderson,
Farabow, Garrett & Dunner, LLP, Washington, DC, for
defendants-appellants. Also represented by ALLEN
MARCEL SOKAL.
2 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.

______________________

Before LOURIE, PLAGER, and TARANTO, Circuit Judges.
TARANTO, Circuit Judge.
In Innovention Toys, LLC v. MGA Entertainment, Inc.,
611 F. App’x 693 (Fed. Cir. 2015), we decided the appeal
brought by defendants-appellants (MGA) from a judg-
ment, entered after a jury trial, that awarded enhanced
damages and attorney’s fees for MGA’s infringement of
certain claims of Innovention’s U.S. Patent No. 7,264,242.
We affirmed the rejection of MGA’s obviousness challenge
and the ruling that pre-issuance damages under 35 U.S.C.
§ 154(d) are proper in this case. Innovention, 611 F. App’x
at 697–700. But we reversed the willfulness finding made
by the jury, J.A. 118, and by the district court, e.g., J.A.
57–58, 65, 69 & n.141. And because we found no willful-
ness as a matter of law, we reversed the enhancement of
damages under 35 U.S.C. § 284—an enhancement the
district court had found to be warranted after analyzing,
J.A. 70–78, the factors enumerated in Read Corp. v.
Portec, Inc., 970 F.2d 816 (Fed. Cir. 1992), to guide an
enhancement determination once willfulness is found.
Innovention, 611 F. App’x at 700–01. We also vacated the
award of attorney’s fees under 35 U.S.C. § 285, which
rested partly on the willfulness finding, J.A. 78–81.
Innovention, 611 F. App’x at 701. We remanded for entry
of a judgment awarding unenhanced damages and for
reconsideration of the fee award. Id.
The Supreme Court has now vacated our decision and
remanded the case to us for reconsideration in light of
Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct.
1923 (2016) (hereinafter “Halo”). See Innovention Toys,
LLC v. MGA Entm’t, Inc., No. 15-635, 2016 WL 3369417,
at *1 (U.S. June 20, 2016). Because Halo has no effect on
our rulings as to obviousness and pre-issuance damages,
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 3

we reinstate our 2015 opinion as to those issues. But
Halo does undermine the basis of our reversal of the
willfulness finding and, hence, of our damages-
enhancement reversal and fee-award vacatur.
In our 2015 decision, we reversed the willfulness find-
ing based solely on our conclusion, reached under a de
novo standard of review, that the obviousness challenge
presented by MGA in the litigation was not objectively
unreasonable. On appeal, MGA did not dispute that,
given the jury instructions, the jury, in finding willful-
ness, necessarily found subjective willfulness, and MGA
presented no persuasive argument that the evidence was
insufficient to support the finding of subjective willful-
ness. But our conclusion of no objective unreasonableness
of MGA’s litigation defense by itself precluded a finding of
willfulness, a precondition for enhancement, under In re
Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir.
2007) (en banc), and Bard Peripheral Vascular, Inc. v.
W.L. Gore & Associates, Inc., 776 F.3d 837, 844 (Fed. Cir.
2015), as reflected in this court’s decision in Halo Elec-
tronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371,
1382–83 (Fed. Cir. 2014), vacated, 136 S. Ct. 1923 (2016).
In Halo, the Supreme Court rejected the Seagate-
Bard approach in respects relevant to our 2015 decision in
this case. The Court held that objective reasonableness of
the infringer’s litigation defense does not preclude a
finding of “willful misconduct,” which is a permissible
basis for enhancement and which may be found based on
the infringer’s subjective willfulness at the time of its
conduct, and that a district court’s enhancement determi-
nation is to be reviewed for abuse of discretion. 136 S. Ct.
at 1932–34. In light of those Supreme Court rulings, our
2015 decision as to willfulness in this case cannot stand.
Halo does not require that we now affirm the district
court’s award of enhanced damages and fees. Instead, we
conclude, Halo warrants a vacatur of those rulings and a
4 INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC.

remand for reconsideration. Through its emphasis on
egregiousness and otherwise, Halo clarifies the policies
affecting whether to enhance damages. The district court
should revisit its exercise of discretion to enhance the
damages in this case in light of that clarification. The
district court should also reconsider its fee award, which
it viewed as related to its enhancement determination.
J.A. 79–80. In so concluding, we do not suggest that the
district court should reach results different from its pre-
appeal rulings on enhancement and fees.
The task on remand is limited in an important re-
spect. There is no basis for a new trial on “willful miscon-
duct,” which is a sufficient predicate, under Halo, to allow
the district court to exercise its discretion to decide
whether punishment is warranted in the form of en-
hanced damages. Halo, 136 S. Ct. at 1934 (“such pun-
ishment should generally be reserved for egregious cases
typified by willful misconduct”). On the record in this
case, including the jury instructions, J.A. 5534, the predi-
cate of willful misconduct is established by the jury’s
finding that MGA was subjectively willful under the
second part of the Seagate standard. The jury made that
finding under the clear-and-convincing-evidence standard,
which is more demanding than needed. See Halo, 136 S.
Ct. at 1934. The Supreme Court in Halo did not question
our precedents on jury determination of that issue. See
WBIP, LLC v. Kohler Co., Nos. 2015-1038, -1044, 2016
WL 3902668, at *15 (Fed. Cir. July 19, 2016). Nor did it
doubt that a finding favorable to the patentee on the
second part of the Seagate standard suffices to establish
the subjectively willful misconduct that, when present,
moves the enhancement inquiry to the stage at which the
district court exercises its discretion. The remand in this
case, therefore, is for the district court to exercise its
discretion in accordance with Halo, including the empha-
sis on egregiousness; willful misconduct has already been
INNOVENTION TOYS, LLC v. MGA ENTERTAINMENT, INC. 5

established by a verdict that Halo does not warrant
disturbing. See Halo Elecs., Inc. v. Pulse Elecs., Inc., Nos.
2013-1472, -1656, slip op. at 20–21 (Fed. Cir. Aug. 5,
2016).
CONCLUSION
For the foregoing reasons, the judgment of the district
court is affirmed in part and vacated in part, and the case
is remanded for proceedings consistent with this opinion.
No costs.
AFFIRMED IN PART AND VACATED AND
REMANDED IN PART