In patent litigation, a judge may enhance damages under 35 U.S.C. § 284 after the defendant is found to have willfully infringed. The question of willfulness was traditionally evaluated with the Seagate test. Halo Electronics, Inc. v. Pulse Electronics, Inc. changed the test for willful infringement, giving new reason to think carefully when confronted with a competitor’s patent.

What This Means to You

  • This case changed the test for willful infringement by eliminating the defense of simply formulating during litigation a reasonable argument that the patent is invalid or not infringed.
  • Under the new test, willfulness is determined based on the infringer’s conduct at the time of infringement, and so care is needed when evaluating a competitor’s patents. An early understanding about why the patents are invalid or not infringed remains an important to defense against a willfulness charge.

Case Background

The Seagate test allowed infringers to avoid enhanced damages by presenting a reasonable—though losing—defense, even when that defense was not formulated until litigation began. The defendant in this case, Pulse Electronics, did just that. Though the jury found that Pulse understood before litigation began that it was infringing, the district court judge found no willful infringement because Pulse reasonably argued that the patent was invalid.

The patent owner, Halo Electronics, asked the Supreme Court to reconsider the Seagate test, and the Supreme Court held that litigation defenses could not alone prevent willful infringement. Instead, the Court held that willfulness should turn on the subjective understanding of the infringer at the time of infringement.

The Federal Circuit held that the jury’s finding was alone sufficient to establish willful infringement, and remanded the case to the district court to determine whether to enhance damages.

Decision Analysis

The Supreme Court’s concern with the Seagate test was that it could let so-called “pirates” off the hook. These “pirates” engage in infringing conduct knowing that they are infringing. Under the Seagate test, however, they could avoid enhanced damages with a reasonable litigation defense.

Making enhanced damages available despite the infringer’s litigation defenses does help capture those “pirates.” However, it also curtails the judge’s check on the jury’s finding of willful infringement. As a consequence, it is possible that more infringers will be found to have infringed willfully.

Even if findings of willful infringement end up being more common, enhanced damages are not necessarily more likely. After a finding of willful infringement, the judge must still decide whether to enhance damages. The Supreme Court emphasized that enhanced damages should typically be reserved for infringement that is “egregious,” “wanton,” or “malicious.” Time will tell whether this guidance impacts district court judges’ analysis.

Takeaways

  • Since willful infringement no longer turns on litigation defenses, a party accused of infringement should put greater emphasis on convincing the jury that any infringement was not willful and convincing the judge that no significant enhancement is appropriate.
  • Avoiding willful infringement requires careful planning from the time that a party learns of a competitor’s patent. In this case, briefing in the district court is ongoing, and the district court judge’s decision on whether to enhance damages may be informative on the level of care needed to avoid enhancement.