Federal Circuit Punts, For Now, on Revisiting the Standard for Enhanced Damages

As noted in previous posts (here and  here), in some of its recent decisions the Federal Circuit has continued to apply the framework it announced in In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), and Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., 682 F.3d 1003 (Fed. Cir. 2012), cert. denied, 133 S. Ct. 932 (2013), for determining whether an infringement was "willful" (and thus under the governing interpretation of  35 U.S.C. § 284 potentially subject to an award of "up to three times" actual damages), notwithstanding some doubts expressed by Judges O'Malley and Hughes whether that framework remains good law after the U.S. Supreme Court's decisions on attorneys' fees in Octane Fitness, LLC v. Icon Health & Fitness, Inc., 134 S. Ct. 1749 (2014), and Highmark Inc. v. Allcare Health Mgt. Sys., 134 S. Ct. 1744 (2014).  In brief, the current framework requires, as a predicate to a possible award of enhanced damages, that the prevailing patentee establish, by clear and convincing evidence, that the defendant "willfully" infringed by acting "despite an objectively high likelihood that its actions constituted infringement of a valid patent. . . . If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.”  Seagate, 497 F.3d at 1371.  In addition, despite the court's one time characterization of willfulness generally as a question of fact, under Bard willfulness is a question of law (that is, for the judge to decide), subject to de novo review on appeal.  A potential difficulty arises because, until recently, the court applied a similar framework for evaluating whether a case was "exceptional" under § 285 and therefore potentially meriting an award of attorneys' fees; but in 2014 in Octane Fitness and Highmark the Supreme Court held instead that "[d]istrict courts may determine whether a case is 'exceptional' in the case-by-case exercise of their discretion, considering the totality of the circumstances"; that the normal evidentiary burden of preponderance of the evidence, not the higher clear and convincing evidence standard, applies to this determination; and that the standard of review on appeal is abuse of discretion, not de novo review.  

Given the Federal Circuit’s policy over the last decades to construe the “exceptional case” and willfulness standards in a similar fashion, the question therefore arises whether the current standards for determining willful infringement remain valid.  Nevertheless, on Monday of this week the court denied a petition for rehearing en banc in Halo Electronics, Inc. v. Pulse Electronics, Inc. in which Halo presented for en banc review the question (as phrased by Judge Taranto) "whether the objective reasonableness of Pulse’s invalidity position must be judged only on the basis of Pulse’s beliefs before the infringement took place."  Aside from the brief per curiam order denying review, there are two separate opinions. The first (authored by Judge Taranto and joined by Judge Reyna), recognizes the multiple questions that now surround the court's willfulness jurisprudence, but concludes that Halo's petition does not raise a question meriting en banc review:

. . . Halo has not demonstrated the general importance of [the question quoted above] or that the panel’s assessment of objective reasonableness is inconsistent with any applicable precedents or produces confusion calling for en banc review. . . . Indeed, the panel’s approach to objective reasonableness—as negating the objectively high risk of harm (here, infringement) needed for willfulness—is strongly supported by Seagate and by the Supreme Court’s authoritative Safeco decision addressing the meaning of “willfulness” in non-criminal contexts. And that conclusion is not affected by Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), which does not address the term “willful” at all.

Those are sufficient reasons to deny further review here. Doubtless we will receive various requests for en banc review of some or all of the many possible § 284 questions in other cases. The standard for granting en banc review is necessarily a demanding one. We must apply the standard to particular issues in particular cases. Unlike Congress, we may not convene to clean the slate and write a set of rules that answer the host of questions about which § 284 is, at present, silent.

Dissenting, Judge O'Malley, joined by Judge Hughes, writes that

For the reasons detailed in my concurrence at the panel stage—Halo Electronics, Inc. v. Pulse Electronics, Inc., 769 F.3d 1371, 1383–86 (Fed. Cir. 2014) (O’Malley, J., concurring)—and reiterated here, I believe the full court should hear this case en banc to reevaluate our jurisprudence governing an award of enhanced damages under 35 U.S.C. § 284.

Also on Monday, the court released a revised version of its opinion (authored by Judge Prost and joined by Judges Newman and Hughes) in Stryker v. Zimmer (see my previous blog post here).  Unless I'm missing something, the only revision is the addition of the following footnote to page 18:

This court has not yet addressed whether Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014), or Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1746 (2014), altered the standard of review under which this court analyzes the objective prong of willfulness. However, as the district court failed to undertake any objective assessment of Zimmer’s specific defenses, the district court erred under any standard of review and thus this court need not now address what standard of review is proper regarding the objective prong of willfulness. 

I think it's fair to say that the law of willful infringement will be "in play" over the coming months.  For other discussion of these cases, see Jason Rantanen's excellent post on Patently-O.