35 U.S.C. § 284 provides that upon a finding of willful infringement, courts "may increase the damages up to three times the amount found or assessed." To determine willful infringement, courts had long applied the Federal Circuit's two-prong Seagate test, which required a finding of objective recklessness, as well as a subjective finding of willfulness. In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). But, the Supreme Court recently rejected this test in Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 14–1513, slip op. at 2 (2016), finding the first prong of objective recklessness is "unduly rigid" and that it "impermissibly encumbers" a district court's discretion, because it "excludes from discretionary punishment many of the most culpable offenders." Id. at 9. Thus, a showing of objective recklessness is no longer required for a willfulness determination. Id.
Leaving the second prong intact, the Court held that the "subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages." Id. at 10. Additionally, the Court lowered the burden of proof from a clear and convincing standard to a preponderance of the evidence standard, because § 284 "imposes no specific evidentiary burden, much less such a high one." Id. at 13. The Supreme Court therefore left it to a court's discretion, "guided by the sound level principles developed over nearly two centuries" of patent law, to determine whether a case is one of the "egregious cases" that merit a finding of willful infringement. Id. at 15.
In the aftermath of Halo, several courts have considered its effect on willful infringement determinations. While district courts still maintain discretion as to the ultimate damages award, juries are now more likely to hear evidence of willful infringement at trial.
Emphasis on the Factual Determinations Made by a Jury
Several district courts have found it impermissible to vacate a jury verdict of willful infringement, because a finding of subjective willfulness is a question of fact. In particular, since in these cases the jury verdicts were reached under the higher clear and convincing standard, the courts have found that a jury verdict of willful infringement must stand.
- A Western District of North Carolina court recently upheld a jury's verdict, finding the defendants willfully infringed the patent, in Sociedad Espanola de Electromedicina y Calidad, S.A. v. Blue Ridge X-Ray Co., Inc., No. 1:10-cv-00159-MR, 2016 WL 3661784, at *2 (W.D.N.C. July 8, 2016). Because the jury had already made the "factual determination" of subjective willfulness, the court held the jury's finding was "sufficient to support a finding of willfulness." Id.
- A Southern District of California court also upheld a jury's verdict of willfulness in Presidio Components, Inc. v. American Tech. Ceramics Corp., No. 3-14-cv-02061, 2016 U.S. Dist. LEXIS 82532, at *44–46 (S.D. Cal. June 17, 2016), noting "a finding of willfulness is a question of fact" that a jury may properly resolve. Id. at *45. There, because the defendant "failed to provide the [c]ourt with a valid basis for disregarding the jury's finding," the court declined to issue a finding of no willful infringement. Id. The court further noted that "the jury found willful infringement by clear and convincing evidence – a higher burden of proof than is required," and thus found no reason to vacate the jury's verdict. Id.
- A Northern District of New York court also recently upheld a jury verdict of willfulness in PPC Broadband, Inc. v. Corning Optical Commc'ns RF, LLC, No. 5:11-cv-761, 2016 WL 3365437, at *10 (N.D.N.Y. June 16, 2016), finding that sufficient evidence supported the jury's verdict of willful infringement. The court also remarked that a JMOL finding of no willful infringement would "impermissibly substitute [the court's] judgment for that of the jury." Id.
Fewer Summary Judgment Decisions of No Willful Infringement
Courts will likely be reluctant to grant a motion for summary judgment on willful infringement, now that Halo no longer requires a plaintiff to show objective recklessness.
For example, the Eastern District of Texas vacated a summary judgment decision of no willfulness in TransData, Inc. v. Centerpoint Energy Houston Elec., LLC, No. 6-10-cv-00557, slip op. at 3 (E.D. Tex. June 29, 2016). There, summary judgment had been granted based on the plaintiff's inability to satisfy the higher burden of clear and convincing evidence. Id. Under the lower preponderance of the evidence standard, the Court found that factual disputes remained. Id. at 4. Importantly, since "the question of subjective willfulness . . . is typically a determination reserved for the jury," and Halo removed the objective prong, the court emphasized that the issue must be decided after it is tried to a jury. Id. at 3.
Thus, it is now more likely that a jury will hear evidence of willful infringement, which will force potential infringers to react immediately upon learning of such a threat. Otherwise, a defendant faces the possibility of a jury learning of conduct that may have been previously excluded under the Seagate test.
District Courts Maintain Discretion over the Ultimate Award
Halo emphasizes that district courts will retain discretion over any award of enhanced damages due to willful infringement, as there is "no precise rule or formula" for the ultimate analysis. Halo, at 8. The district courts considering the issue after Halo have noted that it will be up to the court to determine whether the willfulness qualifies as "egregious" such that an award is appropriate, and what that award might be. Id.
For example, the Presidio court emphasized that despite refusing to vacate the jury's finding as to subjective willfulness, "the ultimate determination of whether to award enhanced damages is committed to the discretion of the district court," taking into account the "particular circumstances of the case." Presidio, at *45–46. Similarly, in TransData, the court stated "[u]ltimately, this [c]ourt will decide whether it is appropriate to award enhanced damages in this case, and, if so, in what amount." TransData, at 4.
Thus, while district courts ultimately decide whether the willful infringement is "egregious" enough to warrant an award of enhanced damages, this will more often be made after trial, rather than at summary judgment. Patent owners will therefore get a chance to put forward evidence of bad-faith conduct to the jury, and juries will be called on more frequently to determine factual findings of subjective willfulness. Looking forward, it appears that it will become increasingly important to obtain well-reasoned advice on potential claims early, so as to prevent allegations of willful infringement from reaching the jury.