The US Supreme Court [official website] vacated and remanded a Federal Circuit Court of Appeals [official website] decision on Monday in Halo Electronics, Inc. v. Pulse Electronics, Inc [SCOTUSblog materials]. The court held [opinion, PDF] in a unanimous decision that the federal circuit was too lax with its discretion in awarding enhanced damages but that the Seagate [opinion, PDF] test is too rigid with too many holes for infringers to slip through. 35 USC §284 [text] provides that a district court “may increase damages awarded to a patentee in an infringement claim, up to three times the amount found or assessed.” The Federal Circuit’s Seagate test created a two-prong analysis for deciding willful infringement. The test asked the court to find 1) that infringement occured “despite an objectively high likelihood” that the accused infringer’s actions constituted infringement, and 2)that the risk of infringement “was either known or so obvious that is should have been known to the accused infringer.” The federal courts in this matter refused to provide enhanced rewards regardless of the tests. The Supreme Court vacated these decisions. The court held that discretion is part of the statute when it states that a court “may” award enhanced damages, but that “discretion is not a whim.” The court ruled that enhanced damages are not appropriate in the typical infringement case but warranted for “egregious infringement behavior.” The court found the Seagate test to be “unduly rigid” while also allowing some of the worst infringers to escape under its “objective prong.” The “threshold requirement” [Patent Docs report] for finding willfulness liability under Seagate “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.”

The Supreme Court heard arguments [JURIST report] on the matter in February. It had consolidated the case with Stryker Corp. v. Zimmer [SCOTUSBlog profile]. The court granted certiorari [JURIST report] in October.