The United States Court of Appeals for the Federal Circuit recently issued a unanimous panel decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. This decision may have more far-reaching implications for patent reform than any other decision reached by any court in recent memory. The issue of particular interest in this case was willful infringement, and in a concurring opinion, Judges O’Malley and Hughes wrote that the majority was constrained by the Federal Circuit’s precedent in In re Seagate and Bard Peripheral Vascular v. W.L. Gore, but that recent Supreme Court decisions call into question the continued viability of that precedent. As such, Judges O’Malley and Hughes urged the Federal Circuit to reconsider en banc the standard for awarding enhanced damages under 35 U.S.C. 284.
The case came to the Federal Circuit on an appeal by Halo Electronics, Inc. (“Halo”), who appealed from multiple decisions of the United States District Court for the District of Nevada. First, Halo appealed the granting of summary judgment that Pulse Electronics, Inc. and Pulse Electronics Corp. (collectively “Pulse”) did not sell or offer to sell within the United States the accused products they manufactured for delivery to buyers outside the United States. Second, Halo also appealed the granting of summary judgment that Pulse did not directly infringe Halo’s U.S. Patents 5,656,985 (the “’985 patent”), 6,297,720(the “’720 patent”), and 6,344,785 (the “’785 patent”) (collectively “the Halo patents”). Finally, Halo appealed the holding that Pulse’s infringement of the Halo patents with respect to certain accused products that Pulse sold and delivered in the United States was not willful.
Pulse also cross-appealed from multiple decisions of the district court as well. First, Pulse appealed the district court’s claim relative to the limitation “electronic surface mount package” in the Halo patents. Pulse also appealed the district court’s claim construction of the limitation “contour element” in Pulse’s U.S. Patent 6,116,963 (the “’963 patent”) that Pulse asserted in its counterclaim. Finally, Pulse appealed the district court’s holding that the asserted claims of the Halo patents were not invalid for obviousness.
In a majority opinion written by Judge Lourie, the Federal Circuit concluded that Pulse did not sell or offer to sell within the United States those accused products that Pulse manufactured, shipped, and delivered outside the United States, thereby affirming summary judgment of no direct infringement of the Halo patents by those products. The Federal Circuit also found Halo’s argument on appeal concerning the issue of willfulness unpersuasive and affirmed the judgment of no willful infringement of the Halo patents with respect to products that were delivered in the United States.
On the cross-appeal, Federal Circuit found no reversible error in the contested claim constructions, and therefore affirmed the judgment of direct infringement of the Halo patents with respect to products that Pulse delivered in the United States and the judgment of inducement with respect to products that Pulse delivered outside the United States but were ultimately imported into the United States by others, as well as the judgment of noninfringement of Pulse’s ’963 patent. The Federal Circuit further affirmed the judgment of the district court that the asserted claims of the Halo patents were not invalid for obviousness.
The issue that will potentially consume the industry relates to willful infringement and the proper standard for determining whether enhanced damages are appropriate. Citing In re Seagate, Judge Lourie explained that establishing willful infringement requires a two-prong analysis that combines both an objective and a subjective inquiry. But is this the right standard to apply in light of 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)? Judges O’Malley and Hughes both voted with Judge Lourie, but they do not believe that this is the right standard in the wake of Highmark and Octane Fitness.
Indeed, it is hard to reconcile how an objective/subjective test could be appropriate for determining willfulness under 35 U.S.C. 284 when the Supreme Court has discredited the Federal Circuit’s understanding and application of Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49 (1993) . The importance of this could well be to stall any patent reform that otherwise will be presented in Congress next year. Those who followed patent reform will recall that the America Invents Act took years to usher through Congress and it was only after provisions relating to damages were dropped that a coalition was formed to push the other reforms across the finish line. With willful damages back, it seems extremely unlikely that we will see a coalition develop that could see any patent reform pass for the foreseeable future.
Tags: CAFC, damag, enhanced damages, Federal Circuit, patent, patent infringement damages, patents, willful infringement
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