In the opening briefs filed last week, Petitioners Halo Electronics Inc. and Striker Corp. plead Supreme Court Justices to authorize District Court judges to have a broader discretion to award enhanced damages in patent cases. The argument behind the pleading is that the Federal Circuit has not interpreted the law accurately, allowing only triple damages in willful infringement cases.
Halo and Stryker brought patent suits against competitors, who were found to infringe, but they were not awarded enhanced damages. A jury found that Pulse Electronics Inc. willfully infringed Halo's transformer patents, but it refused to enhance the $1.5 million verdict, holding that the infringement was not willful. Similarly, in Stryker's case $210 million were awarded in triple damages that the company won against Zimmer Inc. in a case over surgical tools, but again, the Federal Circuit vacated and said Zimmer's infringement was not willful.
A willful infringer is someone who actively knows that they are copying someone else's patent. In cases of willful infringement, attorney's fees can be awarded, under 35 U.S.C. §285. Because the financial stakes are paramount in patent litigation cases, and willfulness is alleged in nearly all patent infringement suits, uniform application of the standard is highly desirable for district courts and its litigants.
Historically, since 2007, when Seagate case was decided, the Federal Circuit has long held that recovery of enhanced damages was only plausible when the willful infringement was proved by patent owners. The requirement of proving willful infringement required the following showing: 1) There was an objectively high likelihood that the infringer’s actions constituted infringement and 2) The likelihood was either known or so obvious that the infringer should have known it. However, proving an infringer should have known of the risk that he would infringe the patent at issue becomes immensely cumbersome, if not impossible, if the defendant had no knowledge of the patent at all.
The briefs provided by the Petitioners argued that the arduous requirements cannot be aligned with the context of the Patent Act. The Act simply states that “the court may increase the damages up to three times the amount found or assessed." Furthermore, the requirements have "created a situation in which patent holders will almost never receive enhanced damages."
While the Federal Circuit has held that enhanced damages can be awarded in willful infringement cases, the Petitioners argued that the statute has nothing that imposes such a restriction, so triple damages should be available in other scenarios at the judge’s discretion. In addition, the companies contended that a judge's decision to award enhanced damages should be given deference on appeal, rather than the current standard of reviewing some aspects of such findings as de novo.
Whether the Supreme Court Justices will be compelled to open the proverbial “Pandora’s box” or stay the course of stringent requirements in willful infringement as decided in Seagate is to be seen.
