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Supreme Court Loosens Standard for Willful Infringement/Enhanced Damages

In a relatively rare “pro-patent” decision, the U.S. Supreme Court earlier this week unanimously overruled the Federal Circuit’s so-called Seagate standard for finding willful patent infringement and awarding enhanced damages. In Halo Electronics, Inc. v. Pulse Electronics 14-1513, (together with Stryker Corp. v. Zimmer, Inc. 14-1520), the Court vacated and remanded the Federal Circuit’s decision denying Halo enhanced damages under §284 of the Patent Act. The Court’s decision appears to have lowered the bar for finding willful infringement and awarding enhanced damages.

The key takeaways from this decision are:

  • The Seagate test is overruled, and District Courts now have greater discretion in awarding enhanced damages in patent litigation, similar to their discretion in awarding attorneys’ fees under Octane Fitness.
  • Enhanced damages may be awarded to punish “egregious behavior,” measured at the time of the infringement, and reviewed under a preponderance of the evidence standard.
  • Halo may potentially result in an increased awarding of enhanced damages, thereby strengthening the position of patent holders in litigation, and, by extension, the value of their patent portfolios.

Under §284, if the District Court awards damages for patent infringement, it “may increase the damages up to three times the amount found or assessed.” In the Seagate case the Federal Circuit established a two-part test for determining when to enhance damages, ruling that the patentee must prove (1) that there was an “objectively high likelihood” of infringement, and (2) that this likelihood was known or should have been known to the infringer. Additionally, the patentee had to prove this by clear and convincing evidence.

In a parallel analysis to last term’s Octane Fitness decision interpreting §285, (giving District Court judges greater discretion in awarding attorneys’ fees for exceptional cases), the Court rejected the Seagate standard as too rigid, and ruled that the District Courts have discretion to award enhanced damages for “egregious cases of misconduct beyond typical infringement,” without regard to “objective recklessness.” The Court also rejected the Federal Circuit’s clear and convincing evidence standard, finding no statutory basis for that requirement.

Acknowledging concerns about increasing the leverage of so-called “patent trolls,” the Court stated that in awarding enhanced damages, the District Court has discretion “to punish the full range of culpable behavior”, but must “be guided by sound legal principles” developed over two centuries and not awarded in “garden-variety cases.”

In a separate concurrence joined by two other justices, Justice Breyer suggested applying a somewhat more rigorous reading of “egregious behavior,” also citing the “troll” assertion problem.

© Polsinelli PC, Polsinelli LLP in California

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About this Author

Keith J. Grady, Polsinelli, Trade Secret Technology Protections, Lawyer, Copyright Infringement Attorney
Practice Chair

Specializing in disputes relating to all forms of intellectual property, Keith Grady's 25 years of experience in courtrooms across the nation provides him with the knowledge and insight necessary to advise his clients on the full range of options available. Whether in the courtroom, boardroom or around a mediation table, Keith uses his advocacy skills to further the goals of his clients and avoid unnecessary disruptions to their business.

Keith’s areas of focus include:

  • Patent 

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Practice Chair

As practice group chair, Patrick C. Woolley has helped to grow the firm's Science and Technology practice from its inception to over 35 lawyers and scientists.  In his practice, Mr. Woolley has worked in a variety of areas including patents, trademarks, copyright, licensing, litigation, trade secret litigation and business advice and guidance.  His practice has included both domestic and foreign issues, with Mr. Woolley having done significant work in Australia, Canada, Europe and Japan.  Mr. Woolley has worked with startup companies, federal agencies, individual inventors and university/research institutions.  In particular, Mr. Woolley has managed the entire intellectual property portfolio for a Fortune 500 company, as well as for a major research institution.  His duties have included patent and trademark preparation and prosecution, patentability secrets, freedom to operate opinions, licensing and asset management, product design around and development, business guidance for new products, and development of a portfolio to promote VC investment or sale of assets.

 

Mr. Woolley has issued numerous opinions on patentability, non-infringement, and validity related to food products and processes, insecticides, Aids drugs, opiates, stem cells, carrier drugs, asthma compositions and a range of chemical, biotech, and mechanical inventions. Mr. Woolley spends significant time on opinion work and counseling executives and boards.

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As the former Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office, Todd Dickinson possesses an in-depth knowledge of the USPTO and its practices, as well as an uncommon perspective on all facets of U.S. and international IP practice and policy.

During his 35-year career, Todd has also been Chief IP Counsel for two Fortune 50 companies, with overall corporate responsibility for all IP, including the management of extensive patent and trademark portfolios. This senior-level in-house experience gives him an intimate understanding...

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