Re Willful Infringement, “Channel” It, Says the Supreme Court

The Seagate two-part test for enhanced patent infringement damages under 35 U.S.C. § 284 — (1) objectively, infringement was not a close call, and (2) subjectively, the defendant knew or obviously should have known that — is gone.  So too is the patentee’s burden to prove entitlement to enhanced damages by clear and convincing evidence.  The Supreme Court has so ruled, in today’s opinion in Halo Electronics v. Pulse Electronics.

What replaces Seagate?  It’s hard to say, but this much we know:

(1) Now, enhanced damages awards are to be decided in the trial court’s discretion, and are to be reviewed for abuse of discretion.

(2) The trial court’s exercise of that discretion is to be “channel[ed]” so as to award enhanced damages only as a “‘punitive’ or ‘vindictive’ sanction for egregious infringement behavior[; t]he sort . . . variously described . . . as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.”

(3) Even if one of these buzzwords captures the defendant’s conduct, the trial court may still decline to award enhanced damages.

(4) An accused infringer’s failure to obtain a lawyer’s advice, or failure to present such advice in defense, may not be used to prove willful infringement. We know this because Congress said so, in adopting 35 U.S.C. § 298.

(5) So, however trial courts decide enhanced infringement damages going forward, they may not do so based on the absence of consultation with counsel.

(6) On the other hand, now, “[t]he subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.” One would, though, expect an objectively close infringement defense to bear upon subjective willfulness, and, in many instances, the closeness of that defense would be something lawyers could help determine.

So in the new Halo world, putative accused infringers probably will have more, and more difficult, privilege waiver issues to deal with than they had in the Seagate world.

Finally, we don’t know whether Halo’s application will yield more or fewer enhanced patent infringement damages awards.  According to the Supreme Court, “district courts are ‘to be guided by [the] sound legal principles’ developed over nearly two centuries of application and interpretation of the Patent Act.  Those principles,” according to the Court, “channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement” — whatever that is — i.e., “egregious cases typified by willful misconduct.”

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