“Halo Electronics v. Pulse Electronics” and “Stryker Corporation v. Zimmer”Decision of the Supreme Court of the United States 13 June 2016 – Case No. 14–1513 and Case No. 14–1520

CHIEF JUSTICE ROBERTS delivered the opinion of the Court.Section 284 of the Patent Act provides that, in a case of infringement, courts “may increase the damages up to three times the amount found or assessed.” 35 U.S.C. §284. In In re Seagate Technology, LLC, 497 F.3d 1360 (2007) (en banc), the United States Court of Appeals for the Federal Circuit adopted a two-part test for determining when a district court may increase damages pursuant to §284. Under Seagate, a patent owner must first “show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Id., at 1371. Second, the patentee must demonstrate, 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.” Ibid. The question before us is whether this test is consistent with §284. We hold that it is not.Awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a “punitive” or “vindictive” sanction for egregious infringement behavior. The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or – indeed – characteristic of a pirate.The Seagate test reflects, in many respects, a sound recognition that enhanced damages are generally appropriate under §284 only in egregious cases. That test, however, “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.” … In particular, it can have the effect of insulating some of the worst patent infringers from any liability for enhanced damages. … The principal problem with Seagate’s two-part test is that it requires a finding of objective recklessness in every case before district courts may award enhanced damages. Such a threshold requirement excludes from discretionary punishment many of the most culpable offenders, such as the “wanton and malicious pirate” who intentionally infringes another’s patent – with no doubts about its validity or any notion of a defense – for no purpose other than to steal the patentee’s business. … Under Seagate, a district court may not even consider enhanced damages for such a pirate, unless the court first determines that his infringement was “objectively” reckless. In the context of such deliberate wrongdoing, however, it is not clear why an independent showing of objective recklessness – by clear and convincing evidence, no less – should be a prerequisite to enhanced damages.The Seagate test aggravates the problem by making dispositive the ability of the infringer to muster a reasonable (even though unsuccessful) defense at the infringement trial. The existence of such a defense insulates the infringer from enhanced damages, even if he did not act on the basis of the defense or was even aware of it. Under that standard, someone who plunders a patent – infringing it without any reason to suppose his conduct is arguably defensible – can nevertheless escape any come-uppance under §284 solely on the strength of his attorney’s ingenuity. But culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.Section 284 allows district courts to punish the full range of culpable behavior. Yet none of this is to say that enhanced damages must follow a finding of egregious misconduct. As with any exercise of discretion, courts should continue to take into account the particular circumstances of each case in deciding whether to award damages, and in what amount. Section 284 permits district courts to exercise their discretion in a manner free from the inelastic constraints of the Seagate test. Consistent with nearly two centuries of enhanced damages under patent law, however, such punishment should generally be reserved for egregious cases typified by willful misconduct.The Seagate test is also inconsistent with §284 because it requires clear and convincing evidence to prove recklessness.JUSTICE BREYER, with whom JUSTICE KENNEDY and JUSTICE ALITO join, concurring.I agree with the Court that In re Seagate Technology, LLC, 497 F.3d 1360 (CA Fed. 2007) (en banc), takes too mechanical an approach to the award of enhanced damages. But, as the Court notes, the relevant statutory provision, 35 U.S.C. §284, nonetheless imposes limits that help produce uniformity in its application and maintain its consistency with the basic objectives of patent law. See U. S. Const., Art. I, §8, cl. 8 (“To promote the Progress of Science and useful Arts”). I write separately to express my own understanding of several of those limits.First, the Court’s references to “willful misconduct” do not mean that a court may award enhanced damages simply because the evidence shows that the infringer knew about the patent and nothing more.Second, the Court writes against a statutory background specifying that the “failure of an infringer to obtain the advice of counsel … may not be used to prove that the accused infringer willfully infringed.” §298. The Court does not weaken this rule through its interpretation of §284. Nor should it.Third, as the Court explains, enhanced damages may not “serve to compensate patentees” for infringement-related costs or litigation expenses. That is because §284 provides for the former prior to any enhancement. … And a different statutory provision, §285, provides for the latter.