A Dramatic Change in Patent Law

By Alicia Kysar

Alicia Kysar is a graduate of Columbia University who studied political science and Pre-Law.

In a decision that received very little media attention, June 13,  the Supreme Court dramatically changed the way in which patent infringement cases will work in the future. [1] The case responsible for the decision, Halo Electronics, Inc v Pulse Electronics, Inc.  fundamentally changed how enhanced damages in intellectual property law will be determined and granted.

The facts of the case depict a relatively standard dispute between two electronics companies on the usage of a new technology: Halo alleged that Pulse had infringed on the former’s patents for electronic packages that included transformers that could be mounted onto circuit boards. Instead of confronting Pulse outright about his alleged violation, Halo instead sent Pulse two letters in 2002, offering to provide them with licenses for the usage of the technology, thus legitimizing it and righting the infringement. An engineer working for Pulse, however, decided that Halo’s claim to the relevant patent was invalid, and Pulse continued selling the transformers in question. Eventually, Halo took legal action against Pulse, and the case reached the Supreme Court in 2015, with a decision handed down in 2016. [2]

The specific issue that was argued throughout various courts had to to do with the Patent Act’s allowance for triple damages: Section 284 of the Act grants that in cases of infringement, “the court may increase the damages up to three times the amount found or assessed.” [3] Thus for certain particularly egregious cases of copyright infringement, the court may decide to triple the damages already awarded, either by a judge or by a jury.

There were, however, specific standards in place that determined when the court could grant triple damages, and these guidelines had been established in the case In re Seagate Technology, LLC, and were fittingly referred to as the Seagate Test. It was a two-pronged test, with one objective and one subjective approach to establishing willful infringement.

The first part of the test was that the patent owner had the responsibility to show that the “clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” [4] As has now become a well-known aspect of intellectual property law, the “state of mind of the accused infringer is not relevant to this objective inquiry.” [5] Thus, regardless of whether or not the accused infringer was aware that their actions violated the Patent Act, they would be found responsible as long as there was an objectively high likelihood that they would have known. This prong of the test came to be known as the test of “objective recklessness.”

​The second part of the test was the subjective aspect. It stated that “the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” [6] Thus the objective aspect establishes whether or not there was a high likelihood that the accused infringer was violating a valid patent, while the subjective aspect asks whether or not the accused infringer should have known about this likelihood of infringement.

In Halo v Pulse, however, the Supreme Court found that the Seagate Test was “unduly rigid” and that it “impermissibly encumbers the statutory grant of discretion to district courts.” The court argued that there are many cases of willful and deliberate infringement that do not necessarily qualify as “objectively reckless,” and thus do not entitle the patent-holder to triple damages. This development in intellectual property law closes loopholes for willful patent infringers, thus opening up the possibility of many more cases in the future that are eligible for triple damages.

[1] ScotusBlog: Supreme Court of the United States Blog. “Halo Electronics, Inc. v Pulse Electronics, Inc.” February 23, 2016. http://www.scotusblog.com/case-files/cases/halo-electronics-inc-v-pulse-electronics-inc/
[2] Halo Electronics, Inc. v Pulse Electronics, Inc. http://www.supremecourt.gov/opinions/15pdf/14-1513_db8e.pdf
[3] 35 United States Code § 284 – Damages https://www.law.cornell.edu/uscode/text/35/284
[4] In Re Seagate Technology https://casetext.com/case/in-re-seagate-technology-llc?passage=YcOIr0u6GMbrUm5_Rtivyg
[5] In Re Seagate Technology https://casetext.com/case/in-re-seagate-technology-llc?passage=YcOIr0u6GMbrUm5_Rtivyg
[6] In Re Seagate Technology https://casetext.com/case/in-re-seagate-technology-llc?passage=YcOIr0u6GMbrUm5_Rtivyg

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