Who Determines What Is Egregious? Judge or Jury: Enhanced Damages After Halo v. Pulse

Publication year2018

Who Determines What Is Egregious? Judge or Jury: Enhanced Damages After Halo v. Pulse

Brandon M. Reed
Georgia State University College of Law, breed10@student.gsu.edu

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Brandon M. Reed*


Enhanced damages in patent law are a type of punitive damage that can be awarded in the case of "egregious misconduct" during the course of patent infringement.1 Authorization for enhanced damages comes from 35 U.S.C. §284, which allows the district court to increase total damages up to three times the amount of actual damages found by the jury.2 It is well understood that, since enhanced damages are punitive in nature, enhancement should only be considered for cases of "wanton" or "deliberate" infringement.3 However, determining what constitutes this "egregious" misconduct has vastly transformed over time to include a negligence standard, a

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two-prong recklessness standard, and recently a court-discretion standard.4

In the 2007 In re Seagate decision, the Court of Appeals for the Federal Circuit sought to clarify what determined willful infringement, creating a two-part test for enhanced damages.5 The first part of the Seagate test asked whether the infringer acted "despite an objectively high likelihood that its actions constituted infringement."6 The second part asked whether, subjectively, "the risk of infringement 'was either known or so obvious that it should have been known to the accused infringer.'"7 The Federal Circuit considered the test's objective prong a question of law for a judge, and considered the subjective prong a question of fact for the jury.8

Although Seagate guided district courts for nearly a decade, many opponents of the test considered the two-prong inquiry "unduly rigid," thus "insulating some of the worst patent infringers from any liability for enhanced damages."9 As a result, the Supreme Court

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abrogated the test with its 2016 decision Halo Electronics v. Pulse Electronics.10 Instead of creating a new test or determining how a judge or jury should decide whether enhanced damages are appropriate, the Supreme Court left the decision up to the discretion of the district courts.11 With this decision, the two-part framework no longer provides instruction on who decides whether to award enhanced damages.12 Without guidance on whether the judge or the jury determines whether to award enhanced damages, defendants will become increasingly uncertain of whether the court will find "egregious cases of misconduct" in "garden-variety cases" of infringement.13 This Note discusses the impact of Halo v. Pulse on determining whether a judge or a jury decides whether willful, egregious misconduct justifies enhanced damages under 35 U.S.C. § 284.

Part I of this Note introduces Section 284 of the Patent Act, examines the tests created by the Federal Circuit, and discusses

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historical interpretations of whether a judge or a jury should impose enhanced damages.14 Part II discusses the arguments made for allowing a judge or a jury to assess enhanced damages.15 Part III discusses a proposal for having the judge consider the issue of enhanced damages by holding a post-trial, Enhanced Damages hearing to determine the egregiousness of the case.16

I. Background

Although enhanced damages became a staple of patent law in 1793,17 the method of applying the remedy has changed drastically since its inception more than 220 years ago.18 Enhanced damages started as a mandatory trebling for all infringements, and progressed to a discretionary standard until Congress created the United States Court of Appeals for the Federal Circuit.19 Over the past thirty years, the Federal Circuit altered the issue's determination by first creating a legal duty and then progressing to the two-part objective and subjective test.20 Most recently, however, the Supreme Court rejected the Federal Circuit's strenuous tests and gave district courts discretion regarding enhanced damages.21 District courts are therefore left with broad discretion on enhanced damages and little guidance on how willfulness plays into their determination.22

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A. Creating Discretion for Enhanced Damages

Enhanced damages in patent law are "[d]amages for patent infringement in an amount up to three times that of compensatory damages, at the discretion of the court, based on the egregiousness of the defendant's conduct, including the willfulness of the infringement."23 Although the origins of enhanced damages trace back nearly to the ratification of the United States Constitution,24 the process for determining enhanced damages has changed over the past 220 years.25 The Patent Act of 1793 contained the first substantial legislation regarding enhanced damages.26 In the Act, treble damages—enhanced damages up to three times the amount of actual damages—were mandatory and automatically applied to the judgment in any case where the jury found infringement.27 With this new system in place, the infringer's state of mind was irrelevant; if the jury found infringement, the damages awarded were tripled.28

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Therefore, in this early system, neither the judge nor the jury had the discretion to determine whether, upon the merits of the case, enhanced damages were appropriate.29

The Supreme Court and Congress both came to the realization that trebling damages in all cases would lead to punishing good-faith infringement.30 In the Patent Act of 1836, Congress, therefore, removed the mandatory language and made enhanced damages discretionary.31 Trial judges, with the new-found discretion to enhance damages, retained control of the decision to enter a judgment for enhanced damages against a defendant for more than a century.32 Although a determination of "willfulness," per se, was not yet part of the enhanced damages assessment,33 historically it is clear

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that, in the late nineteenth and early twentieth centuries, a determination of enhanced damages was a question of law for the judge.34

B. Willfulness and the Federal-Circuit Era

The Patent Act of 1952 created Section 284, which gives the courts statutory authority to enhance damages.35 Although the new Act clarified the language of the enhanced-damages provision, how courts assessed the damages remained unchanged from the Act of 1836.36 Around the time of the Federal Circuit's establishment in 1982,37 the notion of "willfulness" in patent infringement started to gain recognition as a question of fact.38 Under this assessment of willfulness, it would seem logical that the determination to enhance damages would be left solely to the jury.39 Considering the due process rights of an alleged infringer, "[o]ur system of law generally subscribes to the precept that questions of law are determined by a

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judge, while questions of fact are determined by a jury."40 However, despite the understanding that willfulness is factual, judges regularly made the determination alone.41

Regardless of who determines infringement's willfulness, in Underwater Devices Inc. v. Morrison-Knudsen Co., the Federal Circuit—within the first year of its existence—attempted to settle at least what constituted willful infringement by applying a duty of due care.42 The Federal Circuit offered the guidance that there is a "duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity."43 By creating a test that mirrors a negligence standard, the Federal Circuit seemed to bolster the argument that willfulness is a question of fact for the jury.44 The Circuit's new test considerably weakened the standard for enhanced damages, and plaintiffs began to abuse the low-cost, high-reward activity of asking for the punitive-type damages in every infringement case.45 The standard particularly affected the case if the jury decided whether to enhance damages, because failing to obtain counsel created a presumption of willfulness.46 If the jury already

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found infringement, then a finding of willfulness would be a much easier assessment for the jury.47

In order to strengthen the analysis for willfulness and abandon the negligence standard established in Underwater Devices, the Federal Circuit created a new standard with their 2007 decision, In re Seagate.48 The court created a two-part test to determine enhanced damages.49 The first part of the test was an objective analysis requiring "a patentee [to] show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent."50 The court considered the second prong only if the patentee satisfied the "objective recklessness" prong.51 The second, subjective prong required the plaintiff to "demonstrate that this objectively-defined risk . . . was either known or so obvious that it should have been known to the accused infringer."52 The court instructed that the first prong—objective recklessness—was a question of law for the judge, while the second prong—subjective risk—was a question of fact for the jury.53 The court reasoned, in Bard Peripheral Vascular v. W.L. Gore, that the judge "is in the best position for making the determination of reasonableness" and left the willfulness analysis to both the judge and the jury in their respective parts of the test.54

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C. Abrogation of the Seagate Test by Halo v. Pulse

The Seagate test seemed to accomplish its intended goal: the abuse of unfounded willful-infringement claims decreased because it was much more difficult for a patent holder to prove both objective recklessness and subjective belief in the risk of infringement.55 However, many people, particularly patent holders, thought the rule was too rigid and the test let many potential bad-faith infringers off the hook by merely making a colorful invalidity argument against the claims in question.56

Two cases...

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