United States: Enhanced Damages And Willful Infringement Depend On What The Infringer Knew At Time Of Infringement

Abstract

In June, the Supreme Court in Halo Electronics, Inc. v. Pulse Electronics, Inc. rejected the "Seagate" test for enhancing patenting infringement damages as unduly rigid. On remand from the Supreme Court, the Federal Circuit vacated the district court's finding of no willful infringement made under the Seagate framework and directed the district court to reconsider whether enhanced damages were appropriate under the circumstances. The Federal Circuit directed the district court to focus on whether the patent infringer intentionally or knowingly infringed the patent considering what the infringer knew or had reason to know at the time of infringement.

In 2007, the Federal Circuit established the "Seagate" test for proving willful infringement to support an award of enhanced damages for infringement under the Patent Act.  Under Seagate, establishing willful infringement required a two-prong analysis comprised of an objective and subjective component.  First, the patentee was required to "show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent."  This "objective recklessness" prong was determined without regard to the infringer's state of mind and could be defeated if the infringer raised a "substantial question" about whether the patent was valid or infringed.  Second, if the objective threshold was met, the patentee was required to show that the objectively-defined risk "was either known or so obvious that it should have been known to the accused infringer."  In Halo Electronics, Inc. v. Pule Electronics, Inc., the Supreme Court rejected the Seagate "objective recklessness" requirement as "unduly rigid" and inconsistent with the district court's discretion to enhance damages under the Patent Act.  On remand, the Federal Circuit considered the impact of the Supreme Court's rejection of the Seagate test on the district court's finding of no willful infringement. 

Background

In 2007, Halo Electronics, Inc. ("Halo") sued Pulse Electronics, Inc. ("Pulse") in federal district court for patent infringement of three patents directed to surface mount electronic packages containing transformers for mounting on a printed circuit board.  Pulse allegedly knew of Halo's patents as early as 1998.  In 2002, Halo offered Pulse licenses to its patents, but did not accuse Pulse of infringement.  Upon receiving the license offer from Halo, a Pulse engineer reviewed the Halo patents and concluded that they were invalid in view of Pulse products.  Pulse did not seek the advice of counsel on the validity of the patents and continued to sell its products.

Following a trial on Halo's claims of infringement, a jury found that Pulse infringed Halo's patents and that it was highly probable that Pulse's infringement was willful. On a post-trial motion for enhanced damages, the district court applied the Seagate test for willfulness and concluded that the objective prong of the two-part test was not met because Pulse reasonably relied on its internal review and determination that the patents were obvious in light of prior Pulse products. The district court determined that this obviousness defense was not baseless and thus concluded that Pulse's infringement was not willful based on the threshold, objective prong of Seagate.  On appeal, the Federal Circuit affirmed the judgment of no willful infringement. On appeal from the Federal Circuit, the Supreme Court rejected the rigid, two-part Seagate test for enhanced patent infringement damages, vacated the Federal Circuit's affirmance of no willful infringement, and remanded to the Federal Circuit.

The Federal Circuit's Halo Decision

On remand, the Federal Circuit considered the impact of the Supreme Court's Halo opinion on the district court's finding of no willful infringement. In particular, the Federal Circuit discussed the rejection of Seagate's requirement of "a finding of objective recklessness in every case before district courts may award enhanced damages." According to the Supreme Court, this requirement excluded a finding of willful infringement against "many of the most culpable offenders, such as the 'wanton and malicious pirate' who intentionally infringes another's patent—with no doubts about its validity or any notion of a defense—for no purpose other than to steal the patentee's business." Rather, "the subjective willfulness of the patent infringer, intentional or knowing, may warrant the award of enhanced damages." 

In view of the Supreme Court's Halo opinion, the Federal Circuit vacated the district court's determination of no willful infringement, which was based on the objective prong of Seagate—that is, the determination that Pulse's obviousness defense was not objectively baseless. The Federal Circuit remanded for the district court to exercise its discretion in determining whether enhancement of damages is warranted. The Federal Circuit specifically directed the district court to consider the jury's finding of subjective willfulness and what Pulse knew or had reason to know at the time of the infringement of Halo's patents, citing the Supreme Court's guidance that "culpability is generally measured against the knowledge of the actor at the time of the challenged conduct." This direction to the district court was given in view of Halo's argument that Pulse's invalidity defense was developed after the lawsuit was filed and that Pulse did not actually rely on any invalidity defense when selling the accused products.  

Strategy and Conclusion

The rejection of Seagate's objective recklessness requirement has likely removed a common obstacle to proving willful infringement. As demonstrated in Halo, avoiding liability for willful infringement may require more than simply showing, post-hoc, the existence of a substantial question about whether the patent was valid or infringed. Instead, more focus will likely be put on what the infringer knew or had reason to know at the time of infringement, including the infringer's knowledge of any defenses at the time of infringement.

 Footnotes

1. The Federal Circuit Halo opinion may be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2016/HaloElectronicsInc_v_Pulse%20ElectronicsInc.13-1472_2016-08-05.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
15 Nov 2017, Conference, California, United States

Finnegan is a Gold sponsor of the second annual Digital Media & IP Forum, hosted by World Congress.

15 Nov 2017, Conference, London, UK

Finnegan partner Leythem Wall will consider European claim drafting strategy and will lead the Chemical Workshop during a two-day course, hosted by Management Forum.

15 Nov 2017, Seminar, Amsterdam, Netherlands

Finnegan partner Anthony Tridico will lead Forum Institute for Management’s course comparing patent law in the United States and Europe.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.