Federal Circuit’s Enhanced Damages Standard Discarded by Supreme Court: Companies are Encouraged to Seek an Opinion of Counsel Before Launching Products
Enhanced damages are set out in 35 U.S.C. Section 284, which provides that courts “may increase the damages up to three times the amount found or assessed.” In 2007 in In re Seagate
, 497 F. 3d 1360, the Federal Circuit held that enhanced damages could be awarded only when a court found infringement to be willful, and created a two-part test that patent owners must meet to prove willfulness. The Seagate
test required patent owners to first show that there was an objectively high likelihood that an infringer’s actions constituted infringement and next that the infringer had knowledge of the risk.
On June 13, 2016, the United States Supreme Court unanimously overturned the Federal Circuit’s Seagate
test for enhanced damages. The Court’s decision expands judicial discretion and flexibility for district courts to award enhanced damages, and, in practice, removes a defendant’s ability to avoid enhanced damages by raising a reasonable defense of non-infringement and/or invalidity at the time of trial even if the defendant was unaware of the defense when it acted. Culpability is now measured against the knowledge of the actor at the time of the infringement, which puts the burden on companies to preemptively attempt to determine whether their conduct constitutes patent infringement.
Given the Court’s statement that culpability is measured at the time of infringement, companies developing new products are encouraged to seek an opinion of counsel as to infringement and/or invalidity. There is no requirement under the patent laws that an opinion of counsel be a lengthy written work costing tens of thousands of dollars. In many cases, the opinion may be a preliminary analysis and report back to the company or, in other cases, a simple written document. In summary, early opinions of counsel will likely be important for companies launching products to avoid enhanced damages threats, and such opinions can be drafted to meet companies’ goals and budgets.
The Supreme Court cases are Halo Electronics, Inc. v. Pulse Electronics, Inc.
, U.S., Case No. 14-1513 (Decided June 13, 2016) and Stryker Corp. v. Zimmer
, U.S., Case No. 14-1520 (Decided June 13, 2016).
If you have further questions, please contact Ryan Hiler
, Kevin O'Shea,
or a member of our Intellectual Property
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.