A Wall Street Journal Law Blog article reports that the Supreme Court has agreed to hear two new patent infringement appeals dealing with the issue of willful damages, specifically to determine whether the Federal Circuit has been imposing too strict a standard on patentees seeking enhanced damages for willful infringement.
In these two cases, the Supreme Court agreed to consider whether the Federal Circuit is applying the appropriate standard in determining increased damages for willful infringement. Section 284 of the Patent Act allows for up to triple damages if infringement is found to be willful. But recently the Federal Circuit reduced a district court award of treble damages in the lawsuit brought by Stryker Corp. against Zimmer Biomet Holdings for battery-powered handheld medical devices. Using the same rationale, based on what is known as “the Seagate Test,” the Federal Circuit also upheld a lower court’s decision not to grant enhanced damages in a lawsuit brought by Halo Electronics against Pulse Electronics for infringement of patents involving components used in computers and other devices.
In the Stryker case, the Federal Circuit overturned an award of treble damages because “Zimmer’s defenses to the infringement of each patent claim that Stryker asserted were not objectively unreasonable, and, therefore, it did not act recklessly.” But the standard for imposing willful damages, “the Seagate Test,” doesn’t refer to legal defenses in a lawsuit; rather to whether the patentee can demonstrate “by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.”
Stryker has appealed, arguing that the Federal Circuit approach would immunize infringers who could present a plausible explanation in court for their willful infringement, would give too much discretion to judges, encourage forum shopping, and would cause smaller companies to settle more quickly, in essence encouraging, enabling, and validating willful infringement. LawCash believes that Stryker’s positions have merit and that Stryker succeeding in securing the Court’s revisit or remand of the damages issue, perhaps in light of a willful damages test more similar to a “totality of the circumstances” analysis.
In the Halo case, the lower court judges found Pulse’s infringement not to be worthy of enhanced damages. Halo has appealed, alleging that the Federal Circuit adopted a too-“rigid test,” the Seagate Test again, for when to enhance damages for willful infringement. Halo rests its contentions on the fact that the Supreme Court has already rejected this test in determining whether to award attorneys’ fees to the patentee, an inquiry closely intertwined with that of willful damages, in Section 285 of the Patent Act. Interestingly, in a concurring opinion in the Halo case, two Federal Circuit judges argued that the Supreme Court’s standard for awarding enhanced damages differs from the Seagate Test and suggested that the Federal Circuit should consider “whether those same interpretative errors [in the Supreme Court rejection of the similar attorneys’ fee standard] have led us astray in our application of the authority granted to district courts” in applying enhanced damages for willful infringement.
Halo’s arguments coupled with the concurring opinion, common sense, and the Supreme Court’s agreement to take these two cases, suggest to LawCash that the Supreme Court may indeed reject the Seagate Test and suggest that district courts adopt something more like the “totality of the circumstances” test adopted for awarding attorneys’ fees. It simply doesn’t make sense to determine whether willful infringement occurred based on whether high-priced attorneys can fashion a reasonable challenge, whatever that is and however defined by the trial court, after the fact, within the context of a lawsuit. Meting out damages has long been a thorny issue in patent infringement cases. LawCash suspects this may be a moment where the balance tips back partially in favor of the patentee, at least for now.
