Supreme Court To Continue Undoing Rigid Tests In Patent Cases?

On October 19, 2015, the Supreme Court granted certiorari in two cases, Stryker Corp. v. Zimmer, U.S., No. 14-1520, and Halo Electronics, Inc. v. Pulse Electronics, Inc., U.S., No. 14-1513, on the sole issue of whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284. The test the Federal Circuit applied in Stryker and Halo Electronics is very similar to the rigid, two-part test the Court rejected in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 572 US __ (2014) for imposing attorney fees under the similarly-worded 35 U.S.C. § 285. The decisions in these cases, coupled with Octane Fitness, could alter patent litigation strategies.

The relevant text of the statute at issue here, 35 U.S.C. § 284, reads: "[i]n either event the court may increase the damages up to three times the amount found or assessed." As a comparison, the text 35 U.S.C. § 285 reads: "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party." As we discussed in our client alert " Supreme Court Makes Landmark Rulings on Attorney Fees in Patent Cases," the Federal Circuit had previously held in Brooks Furniture Mfg., Inc. v. Dutailier Int'l, Inc., 393 F. 3d 1378, 1381 (2005), that exceptional cases are those cases which are proven by clear and convincing evidence to be both "objectively baseless" and "brought in subjective bad faith" or "when there has been some material inappropriate conduct." In Octane Fitness, the Court overturned this test and held that:

an "exceptional" case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is "exceptional" in the case-by-case exercise of their discretion, considering the totality of the circumstances. As in the comparable context of the Copyright Act, "[t]here is no precise rule or formula for making these determinations,' but instead equitable discretion should be exercised 'in light of the considerations we have identified." (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023 (1994)).

In applying the enhanced damages provisions of 35 U.S.C. § 284, the courts have interpreted these provisions as containing a "willfulness" requirement, though the word...