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Halo Elecs., Inc. v. Pulse Elecs., Inc. - 136 S. Ct. 1923 (2016)

Rule:

Awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a “punitive” or “vindictive” sanction for egregious infringement behavior. The sort of conduct warranting enhanced damages has been variously described in cases decided by the United States Supreme Court as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate. District courts enjoy discretion in deciding whether to award enhanced damages, and in what amount. But through nearly two centuries of discretionary awards and review by appellate tribunals, the channel of discretion has narrowed, so that such damages are generally reserved for egregious cases of culpable behavior.

Facts:

Section 284 of the Patent Act provides that, in a case of infringement, courts “may increase the damages up to three times the amount found or assessed.” The Federal Circuit adopted a two-part test for determining whether damages may be increased pursuant to §284. First, a patent owner must “show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Second, the patentee must demonstrate, also by clear and convincing evidence, that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.”  Under Federal Circuit precedent, an award of enhanced damages was subject to trifurcated appellate review. The first step of Seagate--objective recklessness--is reviewed de novo; the second--subjective knowledge--for substantial evidence; and the ultimate decision--whether to award enhanced damages--for abuse of discretion.

In each of these cases, petitioners were denied enhanced damages under the Seagate framework.

Issue:

Was the use of Seagate framework in determining whether damages may be increased §284 proper?

Answer:

No

Conclusion:

The U.S. Court of Appeals for the Federal Circuit's decision affirming the district court's judgment awarding compensatory damages in a patent infringement action to a company that sold electronic components, but denying enhanced damages under 35 U.S.C.S. § 284, and the Federal Circuit's decision affirming a district court's judgment in favor of a company that sold surgical devices which awarded enhanced damages under § 284, had to be vacated because the Federal Circuit used the test it adopted in In re Seagate Technology, LLC, 497 F.3d 1360, 2007 U.S. App. LEXIS 19768, to review both cases. The Seagate test was not consistent with § 284 because it required a finding of objective recklessness and required that recklessness be proved by clear and convincing evidence when patent infringement litigation had always been governed by a preponderance of the evidence standard. The Supreme Court vacated the Federal Circuit's decision in both cases and remanded both cases for further proceedings.

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