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.”
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.”