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By Tony Dutra
June 13 — Litigants shouldn't expect a dramatic increase in higher damages awards for “egregious” infringement—up to triple the base amount—under the U.S. Supreme Court's June 13 decision in Halo Elecs. Inc. v. Pulse Elecs. Inc., practitioners told Bloomberg BNA.
“ Halo should not be read as opening up the floodgates to claims for willful infringement,” Michael V. O'Shaughnessy, patent attorney at McDermott Will & Emery LLP, Washington, said.
Still, commenters predicted changes in litigation. In particular, the decision eliminates a way to get rid of an enhanced damages request on an “objective” legal argument, allowing juries to hear more about arguments intended to establish an alleged infringer's bad faith actions.
The now defunct Seagate test of the U.S. Court of Appeals for the Federal Circuit removed the possibility of enhanced damages, allowed under Section 284 of the Patent Act, if the alleged infringer had a reasonable argument for noninfringement or patent invalidity in court. In re Seagate Tech. LLC, 497 F.3d 1360, 2007 BL 83845, 83 U.S.P.Q.2d 1865 (Fed. Cir. 2007) (en banc)(162 PTD, 8/22/07).
“The threat of willfulness had nearly been erased from patent litigation” under that standard and its progeny, Brian H. Pandya patent litigator with Wiley Rein LLP, Washington, said.
Nevertheless, the Halo court only “made clear that it was rejecting Seagate’s specific standard, but not its basic approach,” said Andrew J. Pincus of Mayer Brown. Pincus filed an amicus brief on behalf of BSA | The Software Alliance against changing the standard.
Virtually every commenter agreed that the factor most likely to cause a change, over time at least, was in this line of the opinion by Chief Justice John G. Roberts Jr.: Seagate allows bad actors to “escape any §284 comeuppance solely on the strength of his attorney’s ingenuity.” Halo Elecs., Inc. v. Pulse Elecs., Inc. , No. 14-1513 (U.S. June 13, 2016). Under Halo, the infringer's belief of noninfringement or invalidity has to be established at the time of first infringement and is unaffected by defenses formed after the lawsuit is filed.
“Just because lawyers came up with a plausible validity or non-infringement defense at trial, the infringer may still be subject to enhanced damages if they charged ahead without any of that at the time of their infringement,” Case Collard, partner at Dorsey & Whitney LLP, Denver, said.
“The importance here is that the new framework puts the state of mind of the accused infringers front and center,” according to Michael P. Sandonato, chair of the Electronic and Computer Technologies practice group at Fitzpatrick, Cella, Harper & Scinto, New York.
Michael Hawes, a Houston intellectual property partner at Baker Botts LLP, noted a specific difference: Alleged infringers can't rely on changes in law in their favor. The Supreme Court's recent decisions that certain patents should never have been issued because they are ineligible under Section 101 won't affect the state-of-mind analysis for infringement that began before those decisions, he said.
However, the Halo court's more flexible approach left district courts with a different challenge: Distinguish the egregious cases from the “typical” and “garden-variety” cases.
“The question of whether a case is ‘egregious' or ‘typical' will depend on the facts of each specific case as applied in the discretion of the specific judge assigned to the specific case,” Michael J. Sacksteder, chair of the Patent Litigation Group at Fenwick & West LLP, said. “The outcome of such an analysis is inherently difficult to predict in general terms.”
The only example of “egregious” the court gave was: “the ‘wanton and malicious pirate' who intentionally infringes a patent—with no doubts about its validity or any notion of a defense—for no purpose other than to steal the patentee’s business.”
But the same “ingenious attorneys” will claim their clients' infringement was “typical,” patent litigator Jose L. Patino of Foley & Lardner LLP, San Diego, said. And it will be difficult to show the “no doubts” state-of-mind, in particular, he said.
“We can expect that the same facts that were marshaled to defeat enhanced damages under Seagate will be presented to address the new construct,” he said. “They remain directly pertinent, and now appear to have more force.”
Dan L. Bagatell, an appellate attorney with Perkins Coie LLP, Phoenix, said the biggest change is that juries will now get to see “juicy documents” that were cut off on summary judgment under Seagate.
“As a practical matter, it’s hard, although not impossible, for a defendant to win summary judgment on an issue of subjective intent,” he said, referring to the new state-of-mind requirement. He suspected attorneys would find evidence “suggesting that the defendant—or at least a rogue employee—was a scornful, malicious ‘pirate,' to use the Supreme Court’s terminology, and those documents may affect liability findings as well as willfulness determinations.”
District court judges will not be able to dispose of motions to enhance so quickly, Robert E. Freitas of Freitas Angell & Weinberg LLP, Redwood Shores, Calif., agreed. “But that does not translate directly to more enhancements,” said Freitas, who wrote an amicus brief in the case that tracks the high court's opinion in many respects on behalf of MyKey Technology Inc.
Overall, the appeals court, district court judges and litigators “will have their hands full in the coming years sorting out what are the few situations that amount to willful infringement” under Halo, Pandya said.
Cynthia E. Kernick, intellectual property trial lawyer at Reed Smith LLP, Pittsburgh, noted Roberts's alignment of Section 284 with Section 285 on awarding attorneys' fees for “exceptional” instances of bad litigation behavior by either party.
That was the subject of another high court reversal of a rigid Federal Circuit test in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 2014 BL 118431, 110 U.S.P.Q.2d 1337 (2014)(83 PTD, 4/30/14). In fact, Roberts repeatedly noted that the principles that applied in Octane carried over to Halo.
“It makes the job of the district judge easier because invariably when a party is asking for enhanced damages, they also ask for an award of fees,” Kernick said. “Now the tests are essentially the same, just looked at from opposite ends—one end being the patentee and the other end being the accused infringer.”
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