Federal Circuit: District Courts Must Exercise their Discretion and in Deciding Whether to Enhance Infringement Damages

by Dennis Crouch

Halo Electronics v. Pulse Electronics (Fed. Cir. 2016)

On remand from the Supreme Court, the Federal Circuit has shifted its holding on enhanced damages (as required by the Supreme Court) and remanded for reconsideration:

Because the district court applied the Seagate test in declining to enhance damages . . . we vacate its unenhanced damages award with respect to products that were delivered in the United States, and remand for further proceedings consistent with the Supreme Court’s opinion on enhanced damages.

The only remaining in the case is that of enhanced damages under 35 U.S.C. § 284.  In its Halo decision, the Supreme Court held that the provision “gives district courts the discretion to award enhanced damages . . . in egregious cases of misconduct beyond typical infringement.”  The court rejected the Federal Circuit’s prior test under Seagate, noting that it was both “unduly rigid” and “impermissibly encumbers the statutory grant of discretion to district courts.” (quoting Octane Fitness).

According to the evidence previously presented,

“Pulse allegedly knew of the Halo patents as early as 1998. In 2002, Halo sent Pulse two letters offering licenses to its patents, but did not accuse Pulse of infringement in those letters. The president of Pulse contacted a Pulse engineer, who spent about two hours reviewing the Halo patents and concluded that they were invalid in view of prior Pulse products. Pulse did not seek an opinion of counsel on the validity of the Halo patents at that time and continued to sell its surface mount electronic package products. A Pulse witness later testified that she was “not aware of anyone in the company . . . that made a conscious decision” that “it was permissible to continue selling” those products.”

Hearing this evidence, the jury found that “it [was] highly probable that Pulse’s infringement was willful.”  However, the district court held that it could not find willfulness under Seagate because the obviousness defense was not objectively baseless.

On remand, the district court must now “exercise its discretion and to decide whether, taking into consideration the jury’s unchallenged subjective willfulness finding as one factor in its analysis, an enhancement of the damages award is warranted.”  The statement from the Federal Circuit here is interesting and important in its focus on the question of enhancement rather than willfulness. Notably, the court does not suggest that the district court first determine whether Pulse was a willful infringer and then determine whether to enhance damages.  Rather, the Federal Circuit indicates that the discretion for enhanced damages is a full bundle of discretion and willfulness only “one factor in [the] analysis.”  This approach matches with the statutory language of Section 284 that does not mention willfulness but rather simply indicates that “the court may increase the damages up to three times the amount found or assessed.”

florence-nightingale-1[1]At the Time of the Infringement: Of course, as the Supreme Court wrote, the discretion is not limited. In considering Pulse’s culpability, the Federal Circuit also noted the Supreme Court’s statement that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.”   Thus, an important question on will be the level of culpability at the time of infringement. There will also be a question of who-knew-what and the extent that the court will follow Florence Nightengale’s opinion that the person ‘in charge’ must “not only to carry out the proper measures yourself but to see that every one else does so too; to see that no one either willfully or ignorantly thwarts or prevents such measures.”

17 thoughts on “Federal Circuit: District Courts Must Exercise their Discretion and in Deciding Whether to Enhance Infringement Damages

  1. 1

    Yeah, I really like it when engineering management tells patent counsel that the company does need a license because the patent is invalid or not infringed.

    1. 1.1

      We really need, in my view, the courts to come down hard on Pulse to restore some balance to the force. Else, every Tom, Dick and Harry will have his opinion and it will count.

    2. 1.2

      Technical opinion is one thing / legal opinion is quite another.

      Management better know the difference.

      1. 1.2.1

        anon, they Should. But, you do know that engineer management usually is a lot more powerful than patent counsel in any corporation.

        In one of my first jobs, management ordered patent counsel to file suit simply to harass an upstart competitor without regard to whether there was infringement. We did. The competitor settled right away. So, we came out ahead. But, in todays environment of actually having to have a case before one files suit, it probably would have turned our very bad.


          …you don’t see any ethical issues with knowingly filing a suit solely to harass…?

          (just because one may be in the position of inside counsel does not mean that the ethical rules of our profession do not apply)



              Does your attorney ethics provide some sort of “but management told me to do it” excuse?


                anon, who said I did anything?

                I had a boss who said he defied a top exec on some IP issue. He said is career was wrecked because of it.

                Think of it this way, with ruthless people, one has no choice. The world is full of ruthless people, not so?


          in todays environment of actually having to have a case before one files suit

          You speak as if this is a new thing.


              Lol – so how do you feel about notice pleading for any and all other instances where such remains the norm?


                Since you ask, my “feelings” are that notice pleading generally makes courts more accessible to potential plaintiffs, which can be a “good thing”. However, in areas where there is a great deal of inequity in the burden placed on defendants in the early stages of trial (as in the patent arena), it is inarguably abused by filers for whom ethics or justice are not paramount concerns.

                IMHO, not-a-lawyer, other disclaimers may apply.

                1. Thanks Dobu – I respect that you recognized the difference between an opinion and the existing rationale for notice pleading.

                  There are also additional rationale for specially selected types of cases that demand more than simple notice pleading, and those whose job it is to determine that do not have the same opinion as you (notwithstanding all of the “Tr011” propaganda afoot).

                  As it is then, since items concerning patents have not been separated from other notice pleading situations, let me ask you a further question: taking that patents are not separate from other notice pleading types; what should be done with notice pleading?

                2. Uhh . . . if it weighs more than a duck . . . burn it?

                  Again, IMHO, you can’t just throw out notice pleading altogether. It was brought forth to address the oft-unnavigable waters of the civil procedure that came before, and at some level, serves its purpose. In some ways, it has turned out to be an over-correction, allowing too much leeway and room for abuse, so a “fix” would have to allow courts to reign-in the most egregious abuses. The USSC provided some tools to do just that, in Twombly and Iqbal. Of course, nobody wants the Circuit splits that would result from giving the courts too much discretion, so it’s all a balancing act, at best.

                  “. . . what should be done with notice pleading?” — just keep tweaking and hope for some balance. This old computer systems engineer ain’t got a better solution to offer.

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