In a decision with significant impact for engineers, the Supreme Court issued a ruling that will make it easier to seek enhanced damages in cases of patent infringement.
In October 2015, the Supreme Court granted certiorari in a pair of consolidated cases, Halo Electronics v. Pulse Electronics and Stryker Corp. v. Zimmer, Inc. to consider the question of the proper standard for awarding enhanced damages in patent cases.
Patent infringement occurs where a defendant has made, used, sold, offered to sell, or imported an infringing invention. A patent owner is entitled to receive damages from the infringer to compensate for the infringement. In addition, a district court may award enhanced damages for willful infringement, up to three times the assessed amount.
In a unanimous decision that issued last week, the Supreme Court rejected as “unduly rigid” the two-part test for determining whether to award enhanced damages that had governed since 2007. The old test required evidence that the infringer was both objectively reckless and subjectively reckless. The Halo decision removed the objective prong of the analysis, making enhanced damages easier to obtain in cases where the patentee can show culpable conduct by the infringer.
For example, under the old two-part test, a defendant found to intentionally infringe a patent might still have avoided enhanced damages if its attorneys came up with an objectively reasonable defense during litigation. This was true even if the infringer did not act on the basis of the defense when it initially began infringing, or was not even aware of the defense until litigation began. This is no longer the case after the Halo decision. The focus of the inquiry will be on the subjective intent of the accused infringer at the time of the initial infringement.
The decision means that potential infringers must tread more carefully when their competitors have patents. Companies that are aware of relevant patents should give careful consideration to those patents before they make or sell a product that may infringe, particularly if they are aware of specific allegations that the product does in fact infringe. If the company decides to proceed with making and selling the product, it should ensure that it documents its good-faith basis to do so.
A good faith basis could include performing a noninfringement analysis to confirm that the product does not infringe any known patents, or redesigning the product to ensure it does not infringe. Companies can also analyze the validity of the patent. Evidence that the company reasonably believes the patent in not infringed and/or is invalid will help with a defense against any later attempts by the patent owner to seek enhanced damages.
Although the Supreme Court’s recent decision emphasized that formal opinions of counsel are not required to avoid willful infringement, it noted that such advice could be helpful. Therefore, seeking the advice of an attorney early in the process is advisable.
Conversely, patent owners intending to seek enhanced damages should notify infringers of the patent and of the acts of infringement. This will prevent alleged infringers from claiming ignorance of the patent, and require them to develop a good-faith basis to make and sell the accused product.
--Cheryl Burgess, an electric engineer and registered patent attorney, is a litigator and appellate specialist at intellectual property law firm Knobbe Martens and can be reached at firstname.lastname@example.org.