Justices Nix Test for Treble Patent Damages

     WASHINGTON (CN) — The Supreme Court on Monday struck down a test designed to enhance damages in patent-infringement cases.
     Though Congress created the treble-damages scheme under Section 284 the Patent Act in 1952, Chief Justice John Roberts began today’s decision by noting that the precedent for enhanced damages dates back to the law’s beginnings in 1793.
     Section 284 “provides that, in a case of infringement, courts ‘may increase the damages up to three times the amount found or assessed,'” according to the ruling.
     The en banc Federal Circuit, a Washington-based court that generally handles all patent-ruling appeals, had been ruling on the 2007 case In re Seagate Technology LLC when it adopted a two-part test for determining when trial court can increase damages pursuant to Section 284.
     Roberts notes that the Seagate test requires a patent owner to first “show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.”
     “Second, the patentee must demonstrate, again by clear and convincing evidence, that the risk of infringement ‘was either known or so obvious that it should have been known to the accused infringer,'” according to the ruling.
     The Supreme Court picked up and consolidated two cases last year to decide whether the Seagate test conflicts with Section 284.
     In the first case, Halo Electronics v. Pulse Electronics, the Federal Circuit affirmed a ruling out of Nevada that said Pulse neither directly nor willfully infringe patents owned by Halo involving electronic components.
     The second case, Stryker v. Zimmer, ended with the Federal Circuit vacating treble damages that a Michigan court had awarded Stryker for infringing patents that concern “pulsed lavage devices.”
     Roberts emphasized today the language of Section 284 “contains no explicit limit or condition, and we have emphasized that the ‘word “may” clearly connotes discretion.'”
     It is fair to recognize “that enhanced damages are generally appropriate under §284 only in egregious cases,” Roberts emphasized.
     But the Seagate test that the Federal Circuit fashioned “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts,” according to the ruling.
     “In particular, it can have the effect of insulating some of the worst patent infringers from any liability for enhanced damages,” Roberts wrote.
     The Supreme Court called it problematic that Seagate’s two-part test “requires a finding of objective recklessness in every case before district courts may award enhanced damages.”
     “Such a threshold requirement excludes from discretionary punishment many of the most culpable offenders, such as the ‘wanton and malicious pirate’ who intentionally infringes another’s patent — with no doubts about its validity or any notion of a defense — for no purpose other than to steal the patentee’s business,” the ruling states. “Under Seagate, a district court may not even consider enhanced damages for such a pirate, unless the court first determines that his infringement was ‘objectively’ reckless. In the context of such deliberate wrongdoing, however, it is not clear why an independent showing of objective recklessness — by clear and convincing evidence, no less — should be a prerequisite to enhanced damages.”
     As for the recklessness requirement, Roberts emphasized that Section 284 “imposes no specific evidentiary burden, much less such a high one.”
     Justices Anthony Kennedy and Samuel Alito joined a concurring opinion by Justice Stephen Breyer.

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