Supreme Court Addresses Enhanced Damages for Patent Infringement

June 13, 2016. The Supreme Court released its unanimous opinion in Halo Electronics v. Pulse Electronics and Stryker v. Zimmer regarding the award of enhanced damages for patent infringement under 35 U.S.C. § 284.

The Supreme Court rejected the approach announced by the Federal Circuit in In Re Seagate, but provided little guidance to the lower courts in its place. However, it wrote this much. First, the District Courts possess discretion. Second, there is no "rigid formula". Third, treble damages are only to be awarded for "egregious cases of misconduct beyond typical infringement".

The Supreme Court vacated the judgments of the U.S. Court of Appeals (FedCir), and remanded. See, October 22, 2014 opinion of the Court of Appeals in Halo v. Pulse, and December 19, 2014 opinion of the Court of Appeal in Stryker v. Zimmer.

35 U.S.C. § 284 provides in part that "Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." Also, "When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed."

The issue in these cases is how treble damages are awarded. The statute provides no guidance. In both cases the Court of Appeals followed its 2007 opinion in In Re Seagate Technology, 497 F. 3d 1360.

The Supreme Court wrote that "we eschew any rigid formula for awarding enhanced damages under §284".

It also wrote that "Section 284 gives district courts the discretion to award enhanced damages against those guilty of patent infringement". And hence, the Court of Appeals should only review awards for abuse of discretion.

It reviewed prior cases, and then concluded that "those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement."

Chief Justice Roberts wrote the opinion of the Court. Justice Stephen Breyer wrote a concurring opinion, in which Justices Alito and Kennedy joined.

Justice Breyer (at left) wrote that "the Court’s references to ``willful misconduct´´ do not mean that a court may award enhanced damages simply because the evidence shows that the infringer knew about the patent and nothing more."

Second, he wrote that "Second, the Court writes against a statutory background specifying that the ``failure of an infringer to obtain the advice of counsel ... may not be used to prove that the accused infringer wilfully infringed.´´ §298. The Court does not weaken this rule through its interpretation of §284. Nor should it. It may well be expensive to obtain an opinion of counsel. ... Such costs can prevent an innovator from getting a small business up and running. At the same time, an owner of a small firm, or a scientist, engineer, or 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."

Finally, he wrote that "The Court holds that awards of enhanced damages should be reviewed for an abuse of discretion. ... I agree. But I also believe that, in applying that standard, the Federal Circuit may take advantage of its own experience and expertise in patent law."

The first of these two cases is Halo Electronics, Inc. v. Pulse Electronics, Inc. et al., Sup. Ct. No. 14–1513, on petition for write of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. Nos. 2013-1472 and 2013-1656. The Court of Appeals heard an appeal from the U.S. District Court for the District of Nevada, D.C. No. 07-CV-0331, Judge Philip Pro presiding.

The second of these two cases is Stryker Corporation, et al. v. Zimmer, Inc., et al., Sup. Ct. No. 14–1520, on petition for write of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. No. 2013-1668. The Court of Appeals heard an appeal from the U.S. District Court for the Western District of Michigan, D.C. No. No. 10-CV-1223, Judge Robert Jonker presiding.

(Published in TLJ Daily E-Mail Alert No. 2,823, June 15, 2016.)