In a consolidated decision involving two new cases, the U.S. Supreme Court continued its trend of shunning bright-line rules in patent infringement cases. The cases overturned the “objective recklessness” test that the Federal Circuit established in 2007 as a threshold criterion for finding that an accused infringer willfully infringed a patent.
In Halo Electronics, Inc. v. Pulse Electronics Inc. (consolidated with Stryker Corp. v. Zimmer Corp.) the Court held that Section 284 of the Patent Act gives district courts the discretion to determine whether to award enhanced damages against those guilty of patent infringement, and if so how much. The Court expressed concern that the “objective recklessness” test made it too easy for bad-faith infringers to avoid enhanced damages by simply presenting a reasonable defense to infringement at trial — even if the defense was unsuccessful and the infringer did not act on the basis of that defense. Instead, the Court said that in the context of willfulness, the proper rule is that “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.”
However, the Court cautioned that district court discretion is not without limits: “Awards of enhanced damages under the Patent Act … are not to be meted out in a typical infringement case, but instead are designed as a ‘punitive’ or ‘vindictive’ sanction for egregious infringement behavior” and “are generally reserved for egregious cases of culpable behavior.”
Because of this, the Court’s decision may not significantly alter the situations when damages are actually awarded for patent infringement, nor is the decision likely to have much effect on the amounts awarded. However, the decision will likely to make it easier for patent holders to bring patent infringement claims and avoid having those claims cut off in a summary judgment ruling. In addition, the decisions will ensure that truly bad-faith infringers don’t use a bright-line rule such as objective recklessness as a shield to avoid enhanced damages.