If a district court holds you infringe a patent, just how much are you liable to pay?
35 USC 284 provides a court shall award damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. But a court may increase the damages up to three times the amount found or assessed.
Sounds simple but it has been difficult to get enhanced damages since the In re Seagate decision held that a patent owner must show by clear and convincing evidence: (1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent; and (2) the risk of infringement was known or so obvious that it should have been known to the accused infringer.
Part of the reason enhanced damages were rarely awarded is the Federal Circuit required clear and convincing evidence. Another was the Federal Circuit stated objective recklessness would not be found if the infringer raises a substantial question as to the validity or non-infringement during the litigation even when the defendant was unaware of the defense while infringing. It could be argued Seagate encouraged "efficient infringement" based on the idea if and when the patent owner comes after me us we will hire smart lawyers to come up with a reasonable defense to avoid payment of more than a reasonable royalty.
In Halo Electronics, Inc. v. Pulse Electronics, Inc., the Supreme Court rejected the Seagate test entirely stating the substantive requirement for “objective recklessness” and the “clear and convincing” burden of proof were inconsistent with 35 USC 284. But again left general guidance at best. When can you expect to get more than a reasonable royalty? I would say when the court sees the defendant is not just an infringer but a "pirate." You know the kind of guy everyone hates more than a patent troll. As the Supreme Court stated awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a 'punitive' or 'vindictive' sanction for egregious infringement behavior. The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, indeed—characteristic of a pirate. So District courts enjoy more flexibility than the Seagate test permitted but still enhanced damages will be generally appropriate under §284 only in egregious cases.
Copyright © 2016 Robert Moll. All rights reserved.
