Halo Electronics, Inc. v. Pulse Electronics, Inc.
118 U.S.P.Q. 2d (BNA) 1761
| SCOTUS | 2016Background
- Section 284 of the Patent Act authorizes district courts to "increase the damages up to three times the amount found or assessed." 35 U.S.C. §284.
- The Federal Circuit in In re Seagate (497 F.3d 1360) adopted a two-part test for willfulness: (1) objective recklessness (shown by clear and convincing evidence), and (2) subjective knowledge (also by clear and convincing evidence); appellate review was tripartite (de novo for step 1, substantial-evidence for step 2, abuse of discretion for the ultimate award).
- Halo v. Pulse and Stryker v. Zimmer presented jury findings of willful infringement but district courts (and the Federal Circuit under Seagate) declined or vacated trebled damages because defendants had arguable defenses at trial.
- The Supreme Court reviewed whether Seagate’s two-part test and its heightened burden of proof and multipart appellate review are consistent with §284.
- The Court traced 180 years of precedent showing enhanced damages traditionally serve as punitive/vindicative relief for egregious, willful, wanton, or malicious infringement—not for ordinary infringement or to compensate litigation costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Seagate’s two-part test (objective recklessness + subjective knowledge, both by clear and convincing evidence) is required by §284 | Seagate properly channels discretion and prevents excessive awards; requires high proof of willfulness | Seagate is unduly rigid, bars district courts from punishing many culpable actors, and imposes an unjustified heightened proof standard | Seagate is inconsistent with §284; district courts have broad, but guided, discretion to award enhanced damages without the Seagate formula |
| Whether enhanced damages require proof by clear and convincing evidence | Seagate (and Federal Circuit) say yes | Plaintiffs (Halo/Stryker) and the Court: §284 contains no heightened evidentiary standard; preponderance historically governs patent litigation | Clear and convincing is not required; preponderance-of-the-evidence governs enhanced-damages determinations under §284 |
| Whether objective recklessness must be shown before any enhancement may be considered | Seagate requires an objective-recklessness threshold | Plaintiffs argue subjective willfulness alone can justify enhancement; objective-step bars punishing intentional infringers | Objective-recklessness is not a prerequisite; subjective willfulness or other egregious conduct can support enhancement |
| Proper standard of appellate review for enhanced-damages awards | Federal Circuit’s tripartite review (de novo, substantial evidence, abuse of discretion) | Plaintiffs argue district-court discretion should be reviewed for abuse of discretion | Appellate review should be for abuse of discretion (consistent with Highmark/Octane) |
Key Cases Cited
- Seymour v. McCormick, 16 How. 480 (describing punitive/vindicative treble damages for "wanton and malicious pirates")
- Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (characterizing §284 awards as punitive or increased damages for willful or bad-faith infringement)
- Martin v. Franklin Capital Corp., 546 U.S. 132 ("may" connotes discretion; discretion is not whim)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (discretionary standards for awards; no precise rule or formula)
- In re Seagate Technology, 497 F.3d 1360 (Fed. Cir.) (adopting two-part clear-and-convincing test for willfulness)
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (defining recklessness and discussing relevance of defendant’s knowledge and reliance on available legal interpretation)
- Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. _ (rejecting rigid two-part test and clear-and-convincing standard for §285 fee awards; instructive analogue)
- Highmark Inc. v. Allcare Health Mgmt. Sys., 572 U.S. _ (holding district court fee decisions reviewed for abuse of discretion; analogous appellate-review principle)