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By Tony Dutra
Aug. 5 — Halo Electronics Inc., which convinced the U.S. Supreme Court to make it easier for patent owners to get punitive damages against willful infringers, will get its chance for an enhanced award after the Federal Circuit reversed itself Aug. 5 ( Halo Elecs., Inc. v. Pulse Elecs., Inc. , 2016 BL 253622, Fed. Cir., No. 2013-1656, 8/5/16 ).
The appeals court sent infringer Pulse Electronics Inc. back to district court with a harder task for avoiding up to triple damages. Pulse no longer can argue that it had “objectively reasonable” arguments of patent invalidity after it was sued. It now has to argue that it wasn't “egregious” behavior to rely on a two-hour analysis by an engineer at the time it learned about Halo's patent.
The Federal Circuit similarly remanded Innovention Toys LLC's case against MGA Entertainment Inc., where the district court had not only trebled damages but also awarded attorneys' fees ( Innovention Toys, LLC v. MGA Entm't, Inc. , 2016 BL 253627, Fed. Cir., No. 2014-1731, 8/5/16 ).
Both Pulse and MGA face jury findings of subjective willful infringement, but the appeals court indicated that was not sufficient for enhancing damages.
The court has yet to rule on the companion case the Supreme Court considered along with Halo's— Stryker Corp. v. Zimmer, Inc., No. 13-01668. Like Innovention, the Federal Circuit reversed an enhanced damages award won by Stryker Corp. (57 PTD, 3/25/15) under the test that is no longer valid.Source Material:
Innovention v. MGA
Original panel opinion: 611 Fed. Appx. 693 (April 29, 2015)
U.S. Patent:No. 7,264,242
The court's Aug. 5 Halo opinion repeated the original opinion's rulings on the merits of the case (205 PTD, 10/23/14).
The court affirmed that Pulse infringed U.S. Patent Nos. 5,656,985 , 6,297,720 , and 6,344,785 on electronic packages containing transformers for mounting on a printed circuit board. However, much of Pulse's sales activities were overseas. The infringement award was only $1.5 million.
The Supreme Court's decision in this case was confined to the enhanced damages issue. Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 118 U.S.P.Q.2d 1761, 2016 BL 187307 (U.S. 2016) (114 PTD, 6/14/16). The district court had found—and the Federal Circuit agreed on appeal—that Pulse presented in court objectively reasonable arguments that the patents were obvious.
Under the Federal Circuit's prior “ Seagate” standard, that was enough to avoid enhancement. But Pulse can't rely on that finding any more as the case is sent back to the U.S. District Court for the District of Nevada.
The court told Judge Philip M. Pro that enhancing the compensatory damages was still at his discretion. But it emphasized the Supreme Court's comment that such awards “are generally reserved for egregious cases of culpable behavior” beyond “typical infringement.” The jury's willful infringement finding is just “one factor in the analysis,” it said.
Judge Alan D. Lourie wrote the court's opinion in the Halo case, which was joined by Judges Kathleen M. O'Malley and Todd M. Hughes.
Craig Earl Countryman of Fish & Richardson P.C., San Diego, represented Halo. Mark L. Hogge of Dentons US LLP, Washington, represented Pulse.
The Federal Circuit panel handling the Innovention case did not repeat its 2015 merits decisions (84 PTD, 5/1/15).
The court had affirmed infringement by MGA's Laser Battle game of Innovention's U.S. Patent No. 7,264,242 on a chess-like, light-reflecting board game and methods of playing it. Distributors Wal-Mart Stores Inc. and Toys “R” Us Inc. are co-defendants.
A jury of the Eastern District of Louisiana awarded $1.4 million in lost-profit damages and $167,000 in reasonable-royalty damages. But in this case, the Federal Circuit overturned Judge Susie Morgan's decision to treble the damages, under 35 U.S.C. § 284 , at least in part based on a finding of MGA's willfulness.
In the Aug. 5 decision, the court remanded for Morgan's reconsideration of the enhancement decision. As it did in Halo, the appeals court referenced “the emphasis on egregiousness” in the Supreme Court standard.
Judge Richard G. Taranto wrote the court's opinion, which was joined by Lourie and Judge S. Jay Plager.
James C. Otteson of Arnold & Porter LLP, Palo Alto, Calif., represented Innovention. MGA was represented by Donald R. Dunner of Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Washington.
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