Supreme Court Issues Decision on Treble Damages

June 13, 2016
Post by Blog Staff

On the subject of willful infringement, 35 U.S.C. § 284 provides that, "[T]he court may increase the damages up to three times the amount found or assessed.‚¬ On its face, the statute allows for broad discretion by the district courts, but the Federal Circuit set out a stricter standard for awarding of enhanced damages, as In re Seagate Technology LLC. This test required clear and convincing evidence that: (1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent, and (2) that this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer. The Supreme Court, however, has now rejected this test in Stryker Corp. v. Zimmer and Halo Electronics, Inc. v. Pulse Electronics, Inc.

In both cases, the petitioners were denied treble damages under the Seagate test. The Supreme Court held that the test was ineffective because the requirement of objective recklessness allowed for the most willful infringers to avoid enhanced damages, which was inconsistent with the purpose of § 284. The Court further relied on their holding in Octane Fitness v. ICON Health & Fitness, a 2009 case in which they determined that attorney's fees may be awarded in cases of bad faith. Under the newly-established standard, with regard to both attorney's fees and treble damages, the court must "take into account the particular circumstances of each case and reserve punishment for egregious cases typified by willful misconduct.‚¬

The Court also invalidated the "clear and convincing"standard imposed by the Seagate test. Because § 284 has no language of imposing a heightened burden of evidence, the test was inconsistent with the purpose of the statute. The court held that patent litigation always uses a preponderance of the evidence standard, and that treble damages were no exception. This decision harmonizes the analysis of both attorney's fees and treble damages, allowing the district courts broad discretion in determining when to award enhanced damages for willful infringement.

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