Halo Electronics, Inc. v. Pulse Electronics, Inc. / Stryker Corporation et al. v. Zimmer, Inc. et al.

SCOTUS Docket Nos. 14-1513, -1520

June 13, 2016

Brief Summary: FC judgments finding neither Halo nor Stryker subject to enhanced damages under § 284 since the Seagate test “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to” DCs and “requires a finding of objective recklessness” by clear and convincing evidence.

Summary: This decision results from petitions by Halo and Stryker regarding enhanced damages portions of the DC decision regarding Pulse’s and Zimmer’s infringements. The jury found a high probability Pulse had infringed willfully, but the DC decline to award enhanced damages under § 284, finding Pulse had “presented a defense that ‘was not objectively baseless, or a ‘sham’’” (affirmed by FC 2014). And the DC concluded “treble damages” against Zimmer “[were] appropriate…[g]iven the one-sidedness of the case and the flagrancy and scope of Zimmer’s infringement” but, after de novo review, the FC vacated the enhanced damages award, finding “Zimmer has asserted ‘reasonable defenses’ at trial” (FC 2015)). The SCOTUS opinion explains that district courts have “enjoy[ed] discretion in deciding whether to award enhanced damages, and in what amount” and that “through nearly two centuries of discretionary awards…‘the channel of discretion ha[s] narrowed’…so that damages are generally reserved for egregious cases of culpable behavior.” It also explains that “[t]he Seagate test reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under § 284 only in egregious cases” but “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to” DCs (Octane Fitness, US 2014 (award of fees under § 285)). SCOTUS wrote that “[t]he principle problem with Seagate’s two-part test is that it requires a finding of objective recklessness [by clear and convincing evidence] in every case before [DCs] may award enhanced damages” (“making dispositive the ability of the infringer to muster a reasonable (even though unsuccessful) defense”). Instead, SCOTUS held, “[t]he subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless”, although enhanced damages “should generally be reserved for egregious cases typified by willful misconduct” (noting that “‘bad-faith infringement’ is an independent basis for enhancing patent damages” (Aro Mfg., US 1964)). The Court also concluded the evidentiary burden for enhanced damages is not “clear and convincing” as in the Seagate test but only “preponderance of the evidence”. And it also rejected “the Federal Circuit’s tripartite framework for appellate review” (Highmark, US 2014) and that DC decisions should be reviewed for abuse of discretion. SCOTUS disagreed with Halo and Stryker that “Congress ratified the Seagate test when it passed” the AIA “and enacted § 284 without pertinent change” or that § 298’s reference to willfulness (“failure…to obtain the advice of counsel…may not be used to prove” willness to a jury (see J. Breyer’s concurring opinion (“technician working there, might, without being ‘wanton’ or ‘reckless,’ reasonably determine that its product does not infringe a particular patent, or that that patent is probably invalid”)) was an endorsement of Seagate. The FC judgments were therefore vacated.

This entry was posted in Attorney's Fees, Damages, Willfullness. Bookmark the permalink.

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