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Supreme Court Makes Recovery of Treble Damages Easier in Patent Cases: Halo Electronics, Inc. v. Pulse Electronics, Inc.



In what is becoming a trend, the United States Supreme Court on Monday overturned longstanding Federal Circuit precedent, with the result that it should now be easier for a successful litigant to recover treble damages for pursuing patent infringement. When combined with the Court’s relaxation of the standards for awarding attorneys fees, the Supreme Court’s decision strengthens the hand of patent holders who have a good infringement case.

In the companion cases of Halo Electronics, Inc. v. Pulse Electronics and Stryker Corp. et al. v. Zimmer, Inc. et al, the Supreme Court overruled the Federal Circuit’s decade-old rule (the so-called Seagate test) for judging when a patent holder could recover enhanced damages, as it found that test was too rigid. Under 35 U.S.C. §284, courts “may increase the damages up to three times the amount found or assessed.” In the Seagate case, the Federal Circuit (which hears all patent law appeals) had come up with a complicated test for recovering such enhanced damages that essentially required the patent owner to prove by clear and convincing evidence an objectively high likelihood that the defendant knew should have known it was infringing a valid patent.

Finding no such limitation on a trial court’s discretion in the Patent Act itself, the Supreme Court swept away that test. Instead, it replaced that test with...? The Court did not announce any new or replacement test. Instead, it emphasized that a trial court’s discretion is still cabined by the nearly two centuries of case law that have narrowed the circumstances in which enhanced damages are available to “egregious infringement behavior” that may be described as “willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant or—indeed—characteristic of a pirate.” Further, such “egregious infringement behavior” only needs to be proven by a preponderance of the evidence.

As pointed out by the three-justice concurrence, there are over 2.5 million patents currently in force in the United States. Having thrown out a complicated but at least well-defined test for “willful” infringement, and replaced it with nothing more than a “we know it when we see it” discretionary standard, it is now a more difficult task to determine whether a business’ activity that may read on one of those patents will expose the business to enhanced damages. While the Supreme Court’s recent decisions have narrowed the scope of what can be patented, this week’s decision strengthens the hand of those who possess a valid patent and a solvent potentially infringing defendant. How the district courts will exercise their newly unleased discretion to award enhanced damages remains to be seen.

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