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Take Heed Before Launching New Products and Processes – Supreme Court to Review Enhanced Patent Infringement Damages Standard

The Supreme Court announced that it accepted Halo Electronics, Inc. v. Pulse Electronics, Inc., No. 14-1513 and Stryker Corp. v. Zimmer, Inc., No. 14-1520, two cases that could lower the bar for awarding enhanced damages to patent owners upon a finding of infringement. Either way, the court’s decision will have a significant impact in determining whether to bring infringement claims and deciding whether to risk a claim of infringement.

Under federal patent law, a court “may increase damages awarded in a patent case by up to three times the amount found or assessed.” Under the current Federal Circuit test, in order to prove willful infringement, a patent owner must prove by clear and convincing evidence that (1) there was an objectively high likelihood that the infringer’s actions constituted infringement, and (2) the accused infringer either knew or should have known of the infringement.

In 2014, the Supreme Court struck down a similar standard used by the Federal Circuit to determine if a case was “exceptional” under 35 U.S.C. § 285 which required that proof that the litigation was both brought in subjective bad faith and objectively baseless. Instead, the Supreme Court ruled that an “exceptional” case under the statute is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position…or the unreasonable manner in which the case was litigated.” Octane Fitness LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014). In Octane, the Court emphasized the need to exercise equitable discretion and avoid precise rules or formulas when awarding attorneys’ fees.

In view of the Supreme Court’s recent decision in the Octane case relaxing the exceptional case standard, companies would be wise to consider obtaining an opinion of counsel before moving forward with new products and processes. The Court will likely issue a decision sometime between March and June, 2016.

We will continue to monitor cases like these and report any developments that may impact your business. If you would like additional information regarding the intellectual property cases pending before the Supreme Court, please contact your Davis & Kuelthau attorney.