The Supreme Court has cleared the way for larger enhanced damages awards in patent infringement cases. In a unanimous decision released today, the Court found that the Federal Circuit’s test for determining whether to award enhanced damages is inconsistent with § 284 of the Patent Act. The decision was announced in the consolidated cases of Stryker Corp. v. Zimmer Inc. 14-1520 and Halo Electronics Inc. v. Pulse Electronics Inc., 14-1513.
§ 284 of the Patent Act provides that courts “may increase the damages up to three times the amount found or assessed” in patent infringement matters. In 2007, the Federal Circuit created a two part test to determine whether damages might be increased under § 284 for willful infringement. The patent owner must show by clear and convincing evidence (1) that the infringer acted despite an objectively high likelihood that its actions constitute infringement of a valid patent; and (2) that the risk of infringement was either known or so obvious that it should have been known to the accused infringer. In re Seagate Technology, LLC, 497 F. 3d 1360, 1371 (Fed. Cir. 2007).
The Supreme Court found the Seagate test to be unduly rigid and noted that it imposed a higher burden of proof than the Patent Act itself. Writing for the majority, Chief Justice John Roberts found that the Seagate test “can have the effect of insulating some of the worst patent infringers from any liability for enhanced damages” and that it “excludes from discretionary punishment many of the most culpable offenders.”
The Court has set the evidentiary bar back to a preponderance of the evidence standard, thus easing the path for plaintiffs to receive enhanced damages against willful infringers. The Court restored discretion to district courts deciding whether to award enhanced damages. The decision urges district courts to use the principles outlined in nearly two centuries of developed legal principles which “channel the exercise of discretion, limiting the awards of enhanced damages to egregious cases of misconduct beyond typical infringement.”
Because the Court vacated the Seagate test, both Halo and Stryker are headed back to the Federal Circuit. In Stryker, the district court awarded enhanced damages to Stryker, finding that the jury heard testimony that the infringer had “all-but instructed its design team to copy Stryker’s products.” The Federal Circuit later overturned the enhanced damages award. In Halo, the jury found willful infringement, but the district court declined to award enhanced damages under the Seagate test. Both cases now have a second chance for enhanced damages awards on remand.
Chelsie Spencer is a Senior Associate with the Dallas office of Kennedy Law, PC. She may be reached at 214-716-4345.