Supreme Court Will Review Federal Circuit Willfulness Standard

On October 19, 2015, the Supreme Court granted petitions for writs of certiorari in two cases: Stryker Corp. v. Zimmer, U.S., No. 14-1520, and Halo Electronics, Inc. v. Pulse Electronics, Inc., U.S., No. 14-1513. The Court has agreed to decide whether the Federal Circuit standard for enhancing damages for willful infringement must be overturned in light of the Court’s decision to overturn the Federal Circuit standard for awarding attorneys’ fees.

In Octane Fitness, LLC v. Icon Health Fitness, Inc., 134 S. Ct. 1749, 1758 (2014), the Supreme Court lowered the evidentiary standard applicable to proving an “exceptional” case under 35 U.S.C. § 285 to a preponderance of the evidence, instead of the clear and convincing standard that the Federal Circuit previously required.  Also, the Supreme Court rejected the Federal Circuit’s test for when a case was “exceptional” and required that there is a totality of the circumstances analysis rather than a two. Id. at 1756-58.  Lastly, in Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1749 (2014), the Supreme Court held that awards of attorney fees should be reviewed on appeal for an abuse of discretion, overturning the Federal Circuit’s previous application of de novo review.

In light of the aforementioned three issues, the Court granted review of the first question in Halo, which states as follows: 1. Whether the Federal Circuit erred by applying a rigid two-part test for enhancing patent infringement damages under 35 U.S.C. § 284 that is the same as the rigid two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) for imposing attorney fees under the similarly-worded 35 U.S.C. § 285.

The Court also granted review of both questions presented in Stryker, which state as follows:

1. Has the Federal Circuit improperly abrogated the plain meaning of 35 U.S.C. § 284 by forbidding any award of enhanced damages unless there is a finding of willfulness under a rigid, two-part test, when this Court recently rejected an analogous framework imposed on 35 U.S.C. § 285, the statute providing for attorneys’ fee awards in exceptional cases?

2. Does a district court have discretion under 35 U.S.C. § 284 to award enhanced damages where an infringer intentionally copied a direct competitor’s patented invention, knew the invention was covered by multiple patents, and made no attempt to avoid infringing the patents on that invention?

In the concurrence opinion for Halo, Judge O’Malley joined by Judge Hughes wrote separately to note that “it is time for the full court to reevaluate our standard for the imposition of enhanced damages in light of” OctaneHighmark, and “the terms of the governing statutory provision 35 U.S.C. § 284 (2012).”  The concurrence also noted that the Seagate test is analogous to the test the court prescribed for awards of attorney fees under § 285 that was overruled by Octane.

The Supreme Court’s grant of certiorari in the Stryker and Halo case suggests that in light of Octane and Highmark, enhancement of patent infringement damages may experience a shift in its standards—to what degree remains to be seen.