The U.S. Supreme Court held today that the Federal Circuit’s objective/subjective framework for determining whether infringement damages should be enhanced, elucidated in In re Seagate Tech. LLC, 479 F.3d 1360 (Fed. Cir. 2007) (en banc) and Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc., 682 F.3d 1003 (Fed. Cir. 2012), is no longer good law. Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 14-1513, 2016 WL 3221515 (U.S. June 13, 2016).
Under 35 U.S.C. § 284, courts have the discretionary power to increase or enhance the damages in cases of patent infringement up to three times. The statute, however, provides no explicit guidance as to when enhanced damages are appropriate. The Federal Circuit in In re Seagate adopted a two-step test for determining when enhanced damages are appropriate. First, the 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 show 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.”
In 2007, Halo sued Pulse for infringement. The jury found Pulse had infringed Halo’s patent and that there was a high probability that Halo had infringed willfully. The District Court did not grant enhanced damages because Pulse presented a legitimate defense to the infringement at trial. Because of Pulse’s defense, the District Court concluded that Halo had not shown that Pulse was objectively recklessness under the first step of Seagate and thus Pulse was not entitled to enhanced damages. On appeal, the Federal Circuit affirmed the ruling.
The question presented to the Supreme Court was whether the Seagate test provided the correct standard for awarding enhanced damages. The Supreme Court unanimously held that the Federal Circuit had improperly abrogated the meaning of Section 284 by requiring “objective recklessness” for enhanced damages and then remanded the case. The Supreme Court held that the Seagate test unduly restricts the discretion of the courts in granting enhanced damages. The Court held that there was no one formula for determining whether enhanced damages are appropriate and that such damages should be based on a preponderance of the evidence showing culpability or egregiousness of the infringing conduct “[c]onsistent with nearly two centuries of enhanced damages under patent law.” Such a determination would be reviewed for abuse of discretion on appeal.