Monday, October 19, 2015

Halo and Stryker

At this point, I have no clear idea what to expect from the U.S .Supreme Court when it takes up the issue of enhanced patent damages in Halo and Stryker (see post below).  One possibility is that the Court will interpret section 284, which in relevant part states only that “the court may increase the damages up to three times the amount found or assessed," to involve some sort of totality-of-the-circumstances standard akin to what it did in Octane Fitness, the attorneys' fee case, last year.  As I noted in my blog post on Stryker late last year:
. . . a question that Stryker does not address is whether the Federal Circuit’s willfulness framework still makes sense in the wake of 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), the Supreme Court’s opinions earlier this year on awards of attorneys’ fees in “exceptional cases” (see my post, here).  As Jason Rantanen has noted (see here) in his post on Judge O'Malley's recent concurring opinion in Halo Electronics, over the years the Federal Circuit has come to link the standards for willfulness and for “exceptional case.”  However, now that the “exceptional case” standard has changed, does it still make sense to premise a finding of willful infringement on proof, by clear and convincing evidence and subject to de novo review on appeal, of objective baselessness?
See also this post on Halo from this past May.  Another possibility is that the Court will try to reconstruct what standard or historical practices the drafters of the 1952 Patent Act may have had in mind when they enacted section 284.  Or maybe they will do something else.

As I wrote this past July, in my view it would be very bad policy to return to the pre-Seagate, pre-Knorr Bremse state of the law under which willfulness was frequently pleaded and enhanced damages were more often awarded than they are today (for discussion of the relevant empirical studies conducted by then-Professor Kimberly Moore and by Professor Christopher Seaman, see my paper with John Golden here).  On the other hand, and looking at the matter more optimistically, if it is the case that deliberate copying is rarely pleaded or proven, as Cotropia and Lemley argue here, maybe we won't see much of an upswing in cases awarding enhanced damages.  Moreover, some of the mischief under the Federal Circuit's pre-Seagate, pre-Knorr Bremse case law was the rule stated in Underwater Devices Inc. v. Morrison-Knudson, Inc., 717 F.2d 1380 (Fed. Cir. 1984), that "[w]here . . . a potential infringer has actual notice of another’s patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing,” which “affirmative duty includes, inter alia, the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity.”  Section 298 of the U.S. Patent Act ("The failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of the patent"), which was passed as part of the AIA, won't allow the Supreme Court won't revive that rule, at least.  Even so, in my opinion enhanced or punitive damages should be granted only in cases in which infringement is difficult to detect or there is otherwise some concern that infringers will not be adequately deterred.  (I would be willing to award attorneys' fees more often than is common in the U.S., however.)  I would be concerned that once again allowing enhanced damages greater play would result in overdeterrence, overcompensation, and greater uncertainty regarding potential damages liability.  Indeed, from a policy perspective, more awards of enhanced damages would seem to contravene much of the Supreme Court's recent curtailing of expansive interpretations of patent law in other areas including nonobviousness, injunctive relief, and patentable subject matter.

I'm sure there will be lots of amici chiming in on this one . . .

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