by Dennis Crouch
The Supreme Court today issued an important unanimous decision in Halo v. Pulse – vacating the Federal Circuit’s rigid limits to enhanced damages in patent cases. The decision rejects the dual objective/subjective test of Seagate as “inconsistent” with the statutory language of 35 U.S.C. §284. Rather, the court indicated that district courts have discretion to award enhanced damages where appropriate “as a sanction for egregious infringement behavior” and that those awards will be reviewed with deference on appeal. Although the district courts are given discretion, the opinion here makes clear that enhanced damages should not be awarded in “garden-variety cases.”
Section 284 gives district courts the discretion to award enhanced damages against those guilty of patent infringement. In applying this discretion, district courts are “to be guided by [the] sound legal principles” developed over nearly two centuries of application and interpretation of the Patent Act. Those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement.
The Roberts opinion linked this case to that of Octane Fitness in which the court had earlier rejected a rigid Federal Circuit test for attorney-fee awards in favor of flexible discretion at the district court level. In its decision, the Supreme Court also repeatedly cited its 19th century decisions as guidance. However, rather than wholehearted acceptance of those old cases, the nuanced opinion walks through their reasoning and explains which continue to hold force today.
In thinking about enhanced damages, I find it useful to keep in mind that this issue only arises after a patent has been found enforceable and the accused found liable for infringement. Thus, any ‘excuse’ offered for the infringement at that point is insufficient to avoid liability but may still be sufficient to avoid an enhanced damage award. An important element of the decision is that of timing for the excuse. The opinion notes that an ex post defense generated for litigation is does not remove culpability. Rather, culpability will be measured according to the infringer’s knowledge at the time of the accused unlawful conduct.
Although the burden for proving egregious infringement behavior rests entirely upon the patentee, the court here held that clear-and-convincing evidence is not required to support an enhanced damages award. Rather, a preponderance of the evidence (more likely than not) is sufficient to support that award.
Missing from the opinion is an express holding as to whether willful infringement is a prerequisite to an enhanced damages award. The statute, of course, is silent on this point – indicating only that “the court may increase the damages up to three times the amount found or assessed.” Going forward, it may make sense to refer to the topic as ‘egregious’ infringement rather than ‘willful’ infringement.
The opinion vacates the decisions in both Halo and Stryker. Read the Decision: HaloPulseStrykerZimmerDecision
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Although the court’s opinion was unanimous, Justice Breyer also provided a concurring opinion joined by Justices Alito and Kennedy. The concurrence suggests a more limited discretion for the district court – namely: (1) that mere knowledge of the patent is insufficient to prove willfulness; (2) failure to obtain advice of counsel cannot be used to prove recklessness (see Section 298); and (3) enhanced damages are not to be used to compensate the patentee for either the infringement or the hassle/cost of litigation.
Regarding the standard for review, Justice Breyer also offers an interesting statement supporting the Federal Circuit’s role as an ‘expert court’:
[I]n applying that standard [of deference], the Federal Circuit may take advantage of its own experience and expertise in patent law. Whether, for example, an infringer truly had ‘no doubts about [the] validity’ of a patent may require an assessment of the reasonableness of a defense that may be apparent from the face of that patent. And any error on such a question would be an abuse of discretion.
Despite this ‘experience and expertise’, I won’t look for the Supreme Court to begin giving deference to the Federal Circuit anytime soon.
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 Martin v. Franklin Capital Corp., 546 U. S. 132, 136 (2005) (quoting Fogerty v. Fantasy, Inc., 510 U. S. 517, 533 (1994)).
 Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___ (2014).
 See, for example, Seymour v. McCormick, 16 How. 480, 488 (1854); Dean v. Mason, 20 How. 198, 203 (1858); Hogg v. Emerson, 11 How. 587, 607 (1850); Livingston v. Woodworth, 15 How. 546, 560 (1854); Tilghman v. Proctor, 125 U. S. 136, 143–144 (1888); Topliff v. Topliff, 145 U. S. 156, 174 (1892); Cincinnati SiemensLungren Gas Illuminating Co. v. Western SiemensLungren Co., 152 U. S. 200, 204 (1894); Clark v. Wooster, 119 U. S. 322, 326 (1886); Day v. Woodworth, 13 How. 363, 372 (1852); and Teese v. Huntingdon, 23 How. 2, 8–9 (1860).