Monday, September 12, 2016

Stryker v. Zimmer: Federal Circuit Remands for Consideration of Enhanced Damages

Opinion by Chief Judge Prost, joined by Judges Newman and Hughes, hereStryker v. Zimmer was one of two cases (the other was Halo v. Pulse) in which the Supreme Court granted cert to determine the appropriate standard for awarding enhanced damages under section 284 of the U.S. Patent Act.  For my blog post on the Supreme Court's June 13 decision, see here.  For my post on the Federal Circuit's decision on remand in Halo v. Pulse, see here.  As in that case, the Federal Circuit reads Halo as supporting the proposition that subjective willfulness alone may result in a damages enhancement.   Note also the panel's statement, however, that just because the defendant is found to have willfully infringed doesn't necessarily mean the case is "exceptional" for purposes of awarding attorneys' fees (pp. 18-20):
After taking into consideration the circumstances of a particular case, a court may exercise its  discretion and award enhanced damages under 35 U.S.C. § 284. Halo Elecs., Inc., 136 S. Ct. at 1933. “[H]owever, such punishment should generally be reserved for egregious cases typified by willful misconduct.” Id. at 1934.
In making its willfulness determination, the district court applied the standard we had previously articulated in Seagate, which required a patentee to establish, by clear and convincing evidence, both that there was an objectively high likelihood that the accused infringer’s actions constituted patent infringement, and that the risk was “either known or so obvious that it should have been known to the accused infringer.” See 497 F.3d at 1371. The Supreme Court rejected this approach and explained that “[t]he subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.” Halo Elecs., Inc., 136 S. Ct. at 1932. The Supreme Court also rejected the use of a clear and convincing standard in favor of a preponderance of the evidence standard. Id. at 1934.
On appeal, Zimmer did not appeal the jury’s finding of subjective willfulness under the Seagate test. On the record in this case, willful misconduct is sufficiently established by the jury’s finding. The jury made its determination under the clear and convincing evidence standard, which is a higher standard than is now necessary. We therefore affirm the jury’s finding of willful infringement.
In doing so, we think the best course is to vacate the award of enhanced damages and remand to the district court for consideration of this issue. As Halo makes clear, the decision to enhance damages is a discretionary one that the district court should make based on the circumstances of the case, “in light of the longstanding considerations . . . as having guided both Congress and the courts.” Id. at 1934. Thus, it is for the district court to determine whether, in its discretion, enhancement is appropriate here. We therefore vacate the district court’s award of enhanced damages and remand to the district court so that it may exercise its discretion. . . .
The district court’s award of attorneys’ fees was based solely on its determination that Zimmer was liable of willful infringement. Though we uphold the district court’s willfulness determination, it does not necessarily follow that the case is exceptional. As with the determination of whether enhanced damages are appropriate, “[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.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014). Because there exist further allegations of litigation misconduct in this case and because the standard for finding an exceptional case has changed since the district court issued its ruling regarding attorneys’ fees, we also remand this issue for further consideration by the district court.
Earlier in the opinion (p.6), the Court reiterated that the defendant's invalidity and noninfringement arguments were "not unreasonable."  Perhaps this will affect the district court's decision whether to enhance damages (and if so by how much), and whether to award fees?

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