Jeffri A. Kaminski, Venable LLP
While various patent reform proposals percolate on Capitol Hill, the courts continue to decide cases that impact the issues. A recent U.S. Court of Appeals for the Federal Circuit decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. maintains the current standard for enhanced damages for willful infringement (a victory for accused infringers), but signals that a change may be coming (a victory for patent owners). Currently, a patent owner must prove that an infringer willfully infringes by clear and convincing evidence in order to recover enhanced damages. Under 35 U.S.C. § 284, enhanced damages may be up to three times the damages found.
In Halo Electronics, the Federal Circuit passed on an opportunity to change, and perhaps lower, the standard required for proving willful infringement, similar to how the Supreme Court lowered the standard for fee-shifting in Octane Fitness (see our previous post on fee-shifting). Although the court passed on the opportunity this time, four of the seven Federal Circuit judges are now on record as favoring reconsideration of the standard for enhanced damages for willful infringement.
Federal Circuit Judges O’Malley and Hughes raised the issue of revisiting the standard in the Halo Electronics panel decision. Judge O’Malley wrote in a concurrence, “I believe it is time for the full court to reevaluate our standard for the imposition of enhanced damages in light of the Supreme Court’s recent decisions” in Highmark and Octane Fitness. In Octane Fitness, the Supreme Court “rejected the requirement that patent litigants establish their entitlement to attorneys’ fees under § 285 by ‘clear and convincing evidence.’” “[T]he ordinary rule in civil cases, and specifically patent infringement cases, is proof by a preponderance of the evidence.” Judges O’Malley and Hughes called on their fellow Federal Circuit judges to take up the issue en banc. Although the court denied en banc review in a March 23, 2015 per curiam opinion, two more judges added their support to reconsider the standard for enhanced damages for willful infringement.
In a concurrence to the denial joined by Judge Reyna, Judge Taranto states that § 284 “continues to lack language prescribing substantive or procedural standards for the enhancement of damages.” The statute only states that “if damages have been found by a jury or assessed by the court, ‘the court may increase the damages’” (emphasis added). Questions are now being raised on many aspects of enhanced damages, raising the specter that the Federal Circuit will need to address the issue in a future case.
Of course, if the court does take up the issue, it is unclear whether the court would change the standard, and if it did, what the new standard would be. Lowering the standard of proof would make it easier for patent owners to prove willful infringement. This would be welcome news to many owners who believe that the continuing tide of patent reform proposals will impinge on their rights. Judge Taranto noted other questions include “whether willfulness should remain a necessary condition for enhancement under [§] 284’s ‘may’ language”; “who makes which decisions and what standards of proof and review should govern those decisions?”; and “what standards govern appellate review?” The debate regarding answers to these questions will continue.