On Tuesday, February 23, 2016, the United States Supreme Court will hear oral arguments in Halo Electronics, Inc. v. Pulse Electronics, Inc. (14-1513) and Stryker Corporation v. Zimmer, Inc. (14-1520), which have been consolidated for appeal. These two cases will force the Court to dive into one of the most thorny patent litigation issues – the issue of enhanced damages for willful patent infringement.
The statute in question says very little that is relevant, merely saying that the district court judge “may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. Simple and straightforward enough, but over the years the United States Court of Appeals for the Federal Circuit has issued rulings that make it virtually impossible for a victorious patent owner to ever receive enhanced damages. The rigid structure of the enhanced damages test has effectively removed the permissive and discretionary language of the statute, which just says that the district court judge “may increase the damages.”
In the Supreme Court’s recent decisions in Highmark Inc. v. Allcare Health Management Systems, Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014) the Court, interpreting 35 U.S.C. § 285, found that there was no textual support in the statute to impose an onerous, rigid test for the awarding of attorneys’ fees to a prevailing party in a patent infringement lawsuit. Most notably, the Supreme Court explained to the Federal Circuit that they misinterpreted a key ruling of the Supreme Court when they created the test that would result in attorneys’ fees never being award. That same exact misinterpretation is at the heart of Federal Circuit case law relating to the awarding of enhanced damages to a victorious patent owner.
Of course, even with what seems to be open and shut cases, it is difficult, if not impossible, to actually predict how the Supreme Court will rule. Still, given that patent matters are handled only by the Federal Circuit, the fact that the Supreme Court accepts a case suggests that the Court has serious doubts about how the Federal Circuit has ruled. Ordinarily, the Supreme Court does not take a patent case to compliment the Federal Circuit on their analysis.
Despite the way it looks on the surface, how the matter of enhanced patent damages will play at the Supreme Court is unclear. Patent damages generally, and enhanced damages specifically, are a complicated issue. Technology corporations would rather not have to worry about the consequences of infringing patents and have lobbied over the last decade for what many believe to be weaker patent rights both in the federal judiciary and in Congress. Front and center is always the issue of patent trolls, and the Supreme Court has even several times mentioned the patent troll problem without the issue being before the Court directly, with neither party even being accused of being a troll.
A ruling by the Supreme Court that district courts have discretion to award up to triple damages will send shockwaves through the entire patent industry. With oral arguments weeks away and a decision anticipated before the end of June, we will know soon enough what the Court decides. The impact the decision has on the industry and marketplace will likely take several months, or perhaps years, to know.