By Jason Rantanen
Halo Electronics, Inc. v. Pulse Electronics, Inc. (Fed. Cir. 2015) (denial of rehearing en banc) Halo Order
The Federal Circuit denied Halo’s petition for rehearing en banc today over the dissent of Judges O’Malley and Hughes. (For background, Dennis and I previously wrote about the opinion and the petition for rehearing). The concurrence and dissent focused solely on the issue of willfulness, which Halo had framed as:
Willfulness: Whether an infringer who subjectively knew pre-suit that it was infringing a valid patent (after being given notice of the patent, and failing to design around, seek a license, or stop infringing) can use an unsuccessful defense developed post-suit as a per se bar to liability for pre-suit willful infringement, despite the flexible text of 35 U.S.C. § 284.
This is not the right case: Concurring in the denial of the rehearing en banc, Judge Taranto, joined by Judge Reyna, wrote separately to explain that the denial was appropriate because “Halo raises only one question about the enhanced-damages provision of the Patent Act, 35 U.S.C. § 274, and I do not think that further review of that question is warranted.” Concurrence at 4. In the concurrence’s view, “[t]he only enhancement-related question that Halo presents for en banc review is whether the objective reasonableness of Pulse’s invalidity position must be judged only on the basis of Pulse’s beliefs before the infringement took place.” Id. at 5. In Judge Taranto’s view, “Halo has not demonstrated the general importance of that question or that the panel’s assessment of objective reasonableness is inconsistent with any applicable precedents or produces confusion calling for en banc review.” Id. Nor is the requirement of objective recklessness affected by Octane Fitness.
Nevertheless, the concurrence observed, there are many aspects of the court’s § 284 jurisprudence that could bear revisiting en banc, including “whether willfulness should remain a necessary condition for enhancement under § 284’s “may” language,”” the proper standards for finding willfulness,” “who makes which decisions and what standards of proof and review should govern those decisions,” whether “a judge or jury decide willfulness, in full or in part,” whether “willfulness (or, rather, its factual predicates) have to be proved by clear and convincing evidence,” and “what standards govern appellate review”? In Judge Taranto’s words, “Whether such questions warrant en banc review will have to be determined in other cases.” Id. at 1.
The Willfulness Jurisprudence Should be Reevaluated: Judge O’Malley, joined by Judge Hughes, disagreed for the same reasons provided in her dissent to the original opinion (discussed here). The court’s “jurisprudence governing the award of enhanced damages under § 284 has closely mirrored our jurisprudence governing the award of attorneys’ fees under § 285.” Dissent at 2. But “[w]e now know that the artificial and awkward construct we had established for § 285 claims is not appropriate. We should assess whether the same is true with respect to the structure we continue to employ under § 284.” Id. at 4. Both the court’s framework for assessing willfulness and the framework for attorneys’ fees were predicted on its interpretation of Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993). But in Octane Fitness, the Supreme Court held that the Federal Circuit had misunderstood PRE for its attorneys’ fees inquiry. Consequently “[w]e should now assess whether a flexible test similar to what we have been told to apply in the § 285 context is also appropriate for an award of enhanced damages.” Id. at 5.
Beyond the effect of Octane Fitness, Judge O’Malley identifies additional issues with the current willfulness framework: its requirement of clear and convincing evidence, the court’s imposition of de novo review, which was rejected for fee awards by the Court in Highmark, and who should be making the decision to enhance damages: the judge or the jury?
The Unsettled Standard of Review: Shortly after releasing its denial of rehearing en banc in Halo, the court issued a revised opinion in Stryker v. Zimmer, in which it added a new footnote:
6 This court has not yet addressed whether Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), or Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1746 (2014), altered the standard of review under which this court analyzes the objective prong of willfulness. However, as the district court failed to undertake any objective assessment of Zimmer’s specific defenses, the district court erred under any standard of review and thus this court need not now address what standard of review is proper regarding the objective prong of willfulness.
Combined with the additional language in Stryker v. Zimmer, the court may be gearing up to take on a compromise issue in willfulness: namely, whether a modified standard of review is appropriate. That said, it is entirely possible that the Supreme Court will take on the bigger question that Judge O’Malley raises in dissent. Halo remains an appeal to watch.