By Jason Rantanen
Halo Electronics, Inc. v. Pulse Electronics, Inc. (Fed. Cir. 2014) Halo v Pulse
Panel: Lourie (author), O’Malley (concurring opinion), Hughes (joining concurrence)
This opinions contains two important parts: a discussion of 271(a) in the context of multi-national transactions and Judge O’Malley’s concurrence on the issue of willful infringement. I’ll write more about the 271(a) issue in a separate post, but for now I wanted to focus on the points Judge O’Malley raises.
In this case, Halo accused Pulse of willfully infringing its patent, thus paving the way for enhanced damages under 35 U.S.C. § 284. That statute reads in relevant part:
When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. Increased damages under this paragraph shall not apply to provisional rights under section 154 (d).
The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.
Under longstanding Supreme Court precedent, enhancement of damages under this provision requires either willful or bad-faith infringement.
In countering the infringement claim, Pulse argued that the asserted patent was obvious. Ultimately, the jury rejected Pulse’s argument and found that the “it was highly probably that Pulse’s infringement was willful.” Slip Op. at 7. However, both the district judge and the Federal Circuit panel concluded that Pulse’s obviousness defense was not objectively unreasonable, thus precluding a finding of willfulness under In re Seagate‘s two-prong approach (which contains both objective and subjective components).
While concurring as to the panel outcome, Judge O’Malley (joined by Judge Hughes) wrote separately to issue a public call to “the full court to reevaluate our willfuness jurisprudence in light of the Supreme Court’s decisions in Highmark and Octane Fitness.
Judge O’Malley’s concurrence first notes the linking of the standards for exceptional case and willful infringement. Under Federal Circuit precedent, the test for willful infringement under § 284 parallels that for exceptional case determinations under § 285. The court has stated this explicitly: “The objective baselessness standard for enhanced damages and attorney’s fees against a non-prevailing plaintiff under Brooks Furniture is identical to the objective recklessness standard for enhanced damages and attorneys’ fees against an accused infringer for § 284 willful infringement actions under [Seagate].” iLOR, LLC v. Google, Inc., 631 F.3d 1372, 1377 (Fed. Cir. 2011).
This linkage leads Judge O’Malley to three observations:
1) Both the test for willful infringement and the test for exceptional case determinations were based on the Federal Circuit’s interpretation of Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993). But, in Octane Fitness, the Supreme Court rejected the Federal Circuit’s interpretation of PRE in the exceptional case determination context. If the two tests are truly in parallel, then the Federal Circuit should revisit the test for willful infringement.
2) The evidentiary standard for willful infringement should also be revisited. “In Octane Fitness, the Supreme Court also rejected the requirement that patent litigants establish their entitlement to attorneys’ fees under § 285 by ‘clear and convincing evidence’. Id. at 1758. As we used to do for attorneys’ fees, we currently require patentees to prove willfulness by clear and convincing evidence. See Seagate, 497 F.3d at 1371. As the Supreme Court explained in Octane Fitness, however, the ordinary rule in civil cases, and specifically patent infringement cases, is proof by a preponderance of the evidence.” Concurrence at 4.
3) The Supreme Court also rejected a de novo standard of review for exceptional case determinations in Highmark. This is important because, although Judge O’Malley doesn’t directly state it, the “objective” prong of willful infringement is currently treated as a question of law, meaning that it is reviewed under a de novo standard. If the two standards are truly parallel, this is inconsistent with Highmark.
Finally, under both §§ 284 and 285, “the court” is the entity that makes the determination. However, the Federal Circuit’s caselaw currently sends some issues of willful infringement to a jury. In Judge O’Malley’s view, whether this is actually correct as a statutory matter should also be addressed by the court en banc.
I’m largely in agreement with Judge O’Malley. Like the judge, I see a tremendous tension between the existing willful infringement caselaw and Octane Fitness/Highmark that flows from the treatment of §§ 284 and 285 as being in parallel.
I also think the history here is important – and my sense is that much of the mucky precedent in this area actually comes from the just the last decade. One important piece of context to keep in mind is the totality of the circumstances analysis that comes after the threshold determination. Attorney’s fees and enhanced damages are not a binary question, but rather a multi-step inquiry where the initial determination is just the first part.