Earlier in 2016, the Supreme Court of the United States issued its landmark decision in Halo Electronics v. Pulse Electronics and Stryker v. Zimmer, modifying the US Court of Appeals for the Federal Circuit's previous standard for enhanced damages due to willful infringement (IP Update, Vol. 19, No. 6). Although the Federal Circuit has already applied this new willfulness standard in other cases (see, e.g., IP Update, Vol. 19, No. 8), in August 2016 the Federal Circuit finally issued its modified decision in Halo. On remand from the Supreme Court, the Federal Circuit vacated the district court's willfulness determination under the previous Seagate standard and remanded that portion of the case in order to allow the district court to apply the Supreme Court's new paradigm. Halo Electronics v. Pulse Electronics, Case Nos. 13-1472; -1656 (Fed. Cir., Aug. 5, 2016) (Lourie, J).
In the original trial, the jury found that Pulse directly infringed Halo's patent and found it highly probably that Pulse's infringement was subjectively willful. Applying the two-part Seagate test of assessing (1) subjective willfulness and (2) objective willfulness, the district court determined that the objective prong was lacking because Pulse's obviousness defense at trial had been reasonable. Although the defense was ultimately unsuccessful, the district court found that the defense was not "objectively baseless." Because the district court found that the objective component of the Seagate willfulness test was not satisfied, it declined to award enhanced damages.
In its modified decision on remand, the Federal Circuit instructed the district court to exercise its discretion in determining whether to award enhanced damages. As part of that discretion, the Federal Circuit reminded the district court to consider at least two factors in its analysis: the jury's subjective willfulness finding, and (instead of the accused infringer's state of mind at the time of trial) what the accused infringer knew or had reason to know at the time of infringement.
Practice Note: The Federal Circuit reached the same result in a non-precedential companion case that issued the same day as its modified decision in Halo. Innovention Toys, LLC v. MGA Entm't, Inc., Case No. 14-1731 (Fed. Cir., Aug. 5, 2016) (Taranto, J). In that case, the Federal Circuit also instructed the district court to use its discretion, along with the jury's finding establishing subjective willfulness, to determine if enhanced damages are warranted.
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