Halo v. Pulse Part V

As noted last Friday, the Federal Circuit released a nonprecedential decision in Halo Electronics, Inc. v. Pulse Electronics, Inc., opinion by Judge Bryson joined by Judges Prost and Reyna.  This case, which originated in 2007 and has been before the Federal Circuit now five times, is as readers will recall also the subject of the Supreme Court’s 2016 decision, holding that awards of enhanced damages under 35 U.S.C. § 284 are discretionary, and stating that “[t]he sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.”  I won’t go into all the detail about why the case has been pending so long, but the story does make for mildly interesting reading and can be found at pp. 2-6 of the opinion.  Anyway, the issue on appeal this time around was whether the district court abused its discretion in not awarding enhanced damages and fees, despite the jury’s determination that Pulse’s infringement was willful, and whether the lower court correctly calculated the prejudgment interest Pulse owed Halo.

On enhanced damages, the court reaffirms prior case law holding that “willfulness requires ‘no more than deliberate or intentional infringement,’” and that it “does not require ‘wanton, malicious, and bad faith’ conduct, of the sort that may warrant enhanced damages” (p.8, citations omitted).  In other words, “once there is a finding of willfulness, enhancement requires the district court to answer a further question about the egregiousness of the defendant’s misconduct under the totality of the circumstances” (p.9).  Further, “[i]n a jury trial, willfulness is for the jury, while enhancement is for the court once an affirmative finding of willfulness has been made by the jury” (p.8).  Applying those standards here, the court rejects Halo’s argument that the district judge’s “decision is irreconcilable with the jury’s verdict on willfulness” (p.10), stating:

the district court correctly noted that the jury’s finding was “but one factor” in determining whether “this is a ‘rare’ case warranting extraordinary punishment for a defendant.” App. 19. Nor did the court reject the jury’s willfulness verdict by considering “evidence that [Pulse] had a basis to believe that it was not infringing Halo’s patent or that the patent was invalid during the relevant time periods when it was infringing.” App. 21. Consideration of such evidence suggests that the court regarded the issue of Pulse’s reckless disregard as a close question that did not warrant enhanced damages. . . .

 

According to the district court, there was “significant evidence suggesting that at the relevant times when it infringed, Pulse believed that Halo’s patents were invalid or not infringed (id.).

As Dennis Crouch notes on Patently-O, however, there is reason to question whether the district and appellate courts are giving adequate deference to the jury determination.  As Professor Crouch notes, “the underlying jury verdict required clear and convincing evidence [under the pre-2016 standard that was then in place] that Pulse acted with reckless disregard with knowledge that its actions constituted infringement of a valid patent (or that it was so obvious that Pulse should have known it was infringing a valid patent). The jury was presented with evidence Pulse’s actions as well as Pulse’s invalidity excuses and other justifications and still found willfulness.  The district court second guessed this determination by finding that Pulse’s actions were not too egregious and that the adjudged infringer had raised a reasonable defense.  But, these aspects were an inherent part of the jury’s verdict decided according to the heightened clear and convincing evidence standard.”  I will say that, in my view, as a matter of policy enhanced damages should be awarded only when there is reason to believe that actual damages will provide an inadequate deterrent, such as when there is evidence that the defendant concealed the infringement; and that, unpopular though this opinion may be among the U.S. patent litigation bar, I really don’t think it makes a lot of sense in 2025 to have juries determining patent infringement cases at all, just because common law courts in England in 1789 permitted it.  (The English courts stopped doing so long ago, and to my knowledge no other country follows this practice anymore either.)  But, the law is the law, and I am inclined to agree that on the facts presented here, the judges may be engaging in impermissible second-guessing.  The Federal Circuit does state, after all, in footnote 2, that

The jury found that it was “highly probable that Pulse’s infringement was willful.” App. 539. That finding reflected the instruction that to prove willful infringement, Halo had to prove that “prior to the filing date of the complaint, Pulse acted with reckless disregard of the claims of Halo’s patents.” Dkt. No. 470 at 18. The jury was further instructed that to demonstrate “reckless disregard,” Halo had to prove that “Pulse actually knew, or it was so obvious that Pulse should have known, that Pulse’s actions constituted infringement of a valid patent.”

It is hard to square the jury’s finding, by clear and convincing evidence, that “Pulse actually knew, or it was so obvious that Pulse should have known, that Pulse’s actions constituted infringement of a valid patent” with the Court of Appeals’ statement that the district court may have regarded “Pulse’s disregard as a close question that did not warrant enhanced damages.”  Going forward, of course, since the Supreme Court’s 2016 decision in this case, a jury’s determination of willfulness would be made under the normal preponderance of the evidence standard, whereby it is may be more reasonable to assume that willfulness despite having been found by the jury could be a close question.

On the prejudgment interest issue, the district court in 2016 “awarded prejudgment interest to Halo without determining the amount,” and that when the court “closed the case a year later . . . it still had not issued a written order on the calculation of prejudgment interest” (pp. 14-15).  Because Halo “did not file anything regarding the prejudgment interest issue until July 30, 2020, nearly three years later,” the Federal Circuit concludes that “Halo unreasonably delayed filing its motion” (p.17).  (Similarly, Halo waited too long to request a new trial on damages following the Supreme Court’s 2018 decision in WesternGeco v. ION that extraterritorial damages caused by domestic infringement may be recoverable (pp. 17-19).)  Nevertheless, the district court, having found that “Halo unreasonably delayed its renewed request for prejudgment interest,” held that Halo was “entitled to prejudgment interest at the rate set forth in Nev. Stat. Stat. § 17.130, compounded annually, from the time of service of the summons and complaint through September 6, 2017” (p.19).  The Federal Circuit holds that the “court did not abuse its discretion in ruling that it should decide the prejudgment interest issue despite Halo’s delay in raising it” (id.), or in choosing the Nevada statutory rate compounded annually (p.20).  But the district court did err in “allowing prejudgment interest to accrue until September 6, 2017,” because under Ninth Circuit law in case like this one “involving more than one judgment, the relevant date of judgment is the date of the judgment that ‘sufficiently ascertained’ the damages at issue,” and here that date is May 2013 (pp. 22-24).  So the case will be remanded for the district court to award the correct amount of prejudgment interest, and for an award of postjudgment interest at the (unfortunately for Halo, lower T-bill) rate specified in the applicable federal statute for postjudgment interest, 28 U.S.C. § 1961 (though there will be some further complications, see pp. 24-25 & n.8,  that I need not get into here lest I lose the few readers who have made it this far without falling asleep).  There are two final matters I will note, however.  The first is that although prejudgment interest here may well be undercompensatory, given the 2013 end date for the prejudgment interest and the lower rate accorded for postjudgment interest, the Supreme Court's decision in Halo v. Pulse makes it clear that one thing enhanced damages are not supposed to do (even assuming they were available here) is to compensate for otherwise uncompensable losses the plaintiff has suffered.  Second, although the final award remains to be seen, it stands to reason it may be less than the $3,182,049.62 award by the district court in March 2023.  And this case has been going for 18 years, with multiple trips to the Federal Circuit and one to the Supreme Court.  Can it possibly have been worth it?