Federal Circuit Revisits Willfulness Post Halo

On remand from the Supreme Court’s decision in Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016), the Federal Circuit recently issued a revised decision in Stryker Corp. v. Zimmer, Inc., No. 2013-1668 (Fed. Cir. 2016).  The decision provides insight into the court’s interpretation of the Halo standard and enhanced damages.

In its en banc decision in In re Seagate Technology, 497 F.3d 1360 (Fed. Cir. 2007), the Federal Circuit held that a district court may increase damages under 35 U.S.C. § 284 only if a patent owner shows by clear and convincing evidence that the infringer acted “despite an objectively high likelihood that its actions constituted infringement,” and then also showed, again by clear and convincing evidence, that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.”

In Halo, the Supreme Court rejected that “unduly rigid” test as having the effect of “insulating some of the worst patent infringers from any liability for enhanced damages.” Instead, the Supreme Court articulated a new willfulness standard, in which “[t]he subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.”  Halo Elecs., Inc., 136 S. Ct. at 1932.  The Supreme Court also rejected the Federal Circuit’s use of a clear and convincing standard in favor of a preponderance of the evidence standard.

Writing for the Federal Circuit and applying the new Halo standard, Chief Judge Prost first notes that, on appeal, Zimmer did not dispute the jury’s finding of subjective willfulness.  Further recognizing that the jury’s determination was made under the higher clear and convincing standard, the Federal Circuit affirmed the jury’s finding of willful infringement.  However, in doing so, the Federal Circuit also vacated the award of enhanced damages and remanded to the district court, so that it may exercise its discretion as to whether enhanced damages is appropriate and to what extent.  While it is clear that under the Halo standard, the decision to enhance damages is a discretionary one that the district court should make based on the circumstances of the case, it is unclear why remand was necessary given that the district court has already exercised its discretion to treble damages.

As to attorney’s fees, because the standard for finding an exceptional case changed since the district court issued its ruling, the Federal Circuit remanded the issue for further consideration by the district court.  On remand, the district court may determine whether the case is exceptional in its discretion considering the totality of the circumstances.

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