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Supreme Court Will Review Federal Circuit Enhanced Damages Standard

The Supreme Court agreed to review two cases to decide whether the Federal Circuit standard for enhancing damages for willful infringement must be overturned in light of the Court’s decision to overturn the Federal Circuit standard for awarding attorneys’ fees. Stryker Corp. v. Zimmer, U.S., No. 14-1520, and Halo Electronics, Inc. v. Pulse Electronics, Inc., U.S., No. 14-1513, cert. granted 10/19/2015.

Specifically, the Court granted review of the first question in Halo which states as follows:

1. Whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284, that is the same as the rigid, two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) for imposing attorney fees under the similarly-worded 35 U.S.C. § 285.

The Court also granted review of both questions presented in Stryker, which state as follows:

1. Has the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys’ fee awards in exceptional cases?

2. Does a district court have discretion under 35 U.S.C. § 284 to award enhanced damages where an infringer intentionally copied a direct competitor’s patented invention, knew the invention was covered by multiple patents, and made no attempt to avoid infringing the patents on that invention?

Background

Section 284 of the Patent Act authorizes a court to “increase the damages up to three times the amount found or assessed,” although the statute provides no standards for enhancing damages. Absent a statutory guide, the Federal Circuit has held that an award of enhanced damages requires a showing of willful infringement. Beatrice Foods Co. v. New England Printing & Lithographing Co., 923 F.2d 1576, 1578 (Fed.Cir.1991).

In 2005, the Federal Circuit decided that attorneys’ fees may be awarded under Section 285 if: (1) there was litigation misconduct, or (2) the case brought was objectively baseless and brought in subjective bad faith. Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378 (Fed. Cir. 2005). In 2007, the Federal Circuit held that proof of willful infringement requires clear and convincing evidence that: (1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent, and (2) that this objectively-defined risk 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 (Fed. Cir. 2007).

In 2014, the Supreme Court overturned the Brooks Furniture test for attorneys’ fees with respect to the second consideration in the analysis: was the case both objectively baseless and brought in bad faith. Octane Fitness, LLC v. Icon Health and Fitness, Inc., 134 S.Ct. 1749 (2014). According to the Court, the Brooks Furniture standard was improperly imported from Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993). That case involved a determination of the sham-litigation exception to the Noerr-Pennington doctrine on the right to petition the government. “The threat of antitrust liability * * * far more significantly chills the exercise of the right to petition than does the mere shifting of attorney’s fees,” Justice Sotomayor wrote.

In both the Stryker and Halo cases, it was argued to the Federal Circuit that the Supreme Court’s decision in Octane, overturning the Federal Circuit standard for attorney fee awards, likewise requires overturning the Federal Circuit’s similar analysis for enhancing damages under Section 284 for willful infringement.

To read the Halo petition for certiorari, click here; to read the Stryker petition for certiorari, click here.