The Software IP Report

Determining Willful Patent Infringement: Ramifications of Halo Pulse Through the Courts

The Federal Circuit recently vacated and remanded a lower court’s holding that a patent infringement defendant could not have willfully infringed as a matter of law. Alfred E. Mann Found. for Sci. Research v. Cochlear Corp. (Fed. Cir. Nov. 17, 2016).  The lower court’s decision was based on the objective standard prong of the now defunct two-part test of In re Seagate; the Federal Circuit, in the course of also deciding issues of infrnigement and validity, remanded the willful infringement finding in light of Halo Electronics, Inc. v. Pulse Electronics, Inc.

A jury had returned a verdict including a finding of willful infringement by Cochlear, and awarded approximately $131 million in damages. In response to the verdict, Cochlear filed a motion for JMOL of no willful infringement. The lower court granted the motion, concluding that a reasonable jury could not find that the objective prong of the Seagate test was established by clear and convincing evidence, and that Cochlear had presented several reasonable non-infringement defenses.

Subsequent to the determination of no willful infringement as a matter of law by the Alfred lower court, the U.S. Supreme Court decided Halo Electronics, Inc. v. Pulse Electronics, Inc., altering the test for willful infringement, as discussed in prior posts. Citing Halo, Alfred appealed the lower court’s decision, seeking a vacation of the grant of the JMOL.

In Halo, the Supreme Court struck down the two-part test of Seagate requiring: 1) an objective showing that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent, and 2) a subjective showing that objective risk was known or so obvious that it should have been known. The Supreme Court rejected the Seagate test as “unduly rigid” and “impermissibly encumbering[ing] the statutory grant of discretion to district courts.” Halo at 1932. Specifically, the Court rejected Seagate’s requirement of “a finding of objective recklessness in every case before district courts may award enhanced damages.” Id.

The Court further rejected Seagate’s clear and convincing standard of proof. Id. at 1934. Opining that “[s]uch 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.” Id.

Based on the lower court’s reliance on the objective risk requirement, and on using a clear and convincing standard of proof, both of which were abrogated by Halo, the Federal Circuit succinctly vacated the decision on the motion for JMOL, remanding it back to the lower court for proceedings in line with Halo.

The outcome of Alfred provides a clear roadmap for those wishing to appeal a verdict based on a jury instruction or a dispositive motion relying on the objective prong, or the clear and convincing and convincing standard, of Seagate. Accordingly, we may see numerous decisions overturned as the rejection of Seagate works its way through the courts.