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The Supreme Court Writes a New Chapter on Patent Damages — Making an Award of Attorneys’ Fees and Multiple Damages Easier to Obtain and Once Again Changing the Patent Landscape

by • July 4, 2016 • No Comments

This article can review the new history concerning patent litigation, patent injures, and new changes effectuated by Congress and the Supreme Court.

First, a little history. Once upon a time there were a series of Plaintiff’s lawyers who brought a multitude of questionable litigations involving vague patents, which they attempted to apply across all industries. The litigations were typically settled for less than the cost of defense. Major corporations may be sued for such things as via a desktop with the internet and performing rudimentary business transactions over the internet. This fairy tale is unfortunately really real, and the perpetrators of these suits are known as “patent trolls.” Patent trolls have discovered affirmatory courts to practice their trade, particularly in the Eastern District of Texas. Patent trolls are typically non-practicing entities (NPEs), meaning which they do not manufacture, use or sell the patented invention, but just own the patent (or a series of patents) for the purpose of asserting it in litigation.

Patent trolls became a plague on businesses and it did not go unnoticed. On September 16, 2011, President Barack Obama signed into law the America Invents Act (AIA) which, one of other things, provided for a series of post-grant opposition proceedings, i.e., such as the Inter Partes Review (after the patent is issued), which created it simpler for defendants in patent cases to turn to the United States Patent Office (“Patent Office”) to challenge the validity of the patent. A defendant in a patent case who elects to pursue an Inter Partes Review can proceed at the Patent Office on the issue of validity for a fraction of the cost of defending itself in federal court. More newly, different types of states have attempted to enact statutes intended to thwart patent trolls.

The Inter Partes Review proceedings effectively reduced the number of patent litigations in the last few years, manufacturing the mere threat of litigation less onerous for the accutilized infringer. The trial court typically stays the case during the proceedings at the Patent Office. Additionally, the defendant does not waive any non-infringement defense it may have in electing to proceed at the Patent Office. The non-infringement defense is later litigated in court if the patent is determined to be valid after the proceedings at the Patent Office have concluded. For financial and business method patents, there are special proceedings known as Covered Business Method Petitions (CBMs), which are really much like to Petitions for Inter Partes Review.

The proceedings at the Patent Office have a number of advantages for accutilized infringers. At the Patent Office, the challenger may prove invalidity under the preponderance of the evidence standard – i.e., is it additional many likely than not which the patent is invalid? In federal court, invalidity must be built by clear and convincing evidence. Clear and convincing evidence means which the evidence presented by a party during a trial must be highly and substantially probable. These differences are worthwhile. Under the preponderance of the evidence standard, the jury is frequently instructed to ponder of evidence as a scale, and which the proof is sufficient if the scale tips actually slightly in the Plaintiff’s favor.

As a outcome of these new proceedings, the pendulum appeared to have swung in favor of accutilized infringers. So on June 13, 2016, the Supreme Court, in the case of Halo Electronics, Inc. v. Pulse Electronics, No. 14-1513 (U.S. 2016) (the “Halo decision”) lowered the standard for Plaintiffs to receive an award of attorneys’ fees and multiple injures in patent cases. This decision worthwhilely changes the patent landscape in favor of patent owners and presents new challenges in avoiding enhanced injure awards in patent litigation.

3dp_ipcase_copyright_infringmentNow, a little background on our patent statutes. The patent statutes provide which “[u]pon finding for the claimant the court shall award the claimant injures enough to compensate for the infringement, but in no actuallyt less than a reasonable royalty for the use created of the invention by the infringer, together with interest and costs as fixed by the court . . . the court may increase the injures up to three times the amount discovered or assessed.” 35 U.S.C. § 284. Further, “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” 35 U.S.C. § 285.

These statutes, like many other statutes, do not articulate any exact test as to when a court should award enhanced injures and/or find the case “exceptional” and award attorneys’ fees. In a series of decisions issued by the Court of Appeals for the Federal Circuit, which initially hears all patent appeals in the initially instance, the Federal Circuit described the level of proof to establish enhanced patent injures. In In Re Seagate Technology, LLC, 497 F. 3d. 1360 (Fed. Cir. 2007), the Federal Circuit adopted a two-part test. Under Seagate, a patent owner was required to show by clear and convincing evidence: (1) which the infringer acted despite an objectively high likelihood which its actions constituted infringement of a valid patent; and (2) which the infringement was either known or so obvious it should have been known to the infringer. This is a higher standard of proof than is required in many civil cases which apply preponderance of the evidence standard.

Under this standard, if accutilized infringers may establish a reasonable basis for its defense (or for ignoring the patent), the Court, under Seagate, may generally not entertain enhanced injures. In close cases, prior to market commence, businesses frequently solicit legal opinions of counsel, commjust referred to as “freedom to operate” opinions. This opinion can later be utilized as evidence at trial to establish which the accutilized infringer had a reasonable basis to believe which the patent was not infringed and/or which the patent at issue was invalid. In order to use the opinion, yet, the attorney–client privilege must be waived. The attorney’s opinion is added on the issue of canful infringement. Because the Seagate standard was pretty effortless to meet, many companies did not actually feel the require to solicit a legal opinion preceding product commence. Moreover, if the Defendant may put on a reasonable defense, regardless of its motives at the time it added the accutilized product, it may escape a finding of enhanced injures.

Turning now to the Halo decision, the Supreme Court overturned the Seagate standard, finding which the pertinent language of the statute, 35 U.S.C. § 284, contains no explicit condition on when enhanced injures are appropriate, noting which the word “may” unquestionably denotes discretion. The Court discovered the Seagate standard unduly rigid for the reason by requiring which the patentee prove by clear and convincing evidence which the infringer had taken an objectively unreasonable risk of infringement, actually wanton and reckless infringers who were intent on stealing the patentee’s business can escape an enhanced injure award. Instead, the Court held which the lower court require not apply any rigid formula, but should take into account the particular circumstances of equite case. So, the require to establish objective recklessness by clear and convincing evidence was overturned. Instead, as in other areas of the law, the Courts can determine whether the accutilized infringer additional than many likely acted recklessly, i.e., “knowing or having reason to know” the factors concerning the infringement. The lower court’s determination can just be overturned for an abuse of discretion, a quite hard standard to overcome. This new approach lowers the standard for the reason: (1) it no longer applies the higher evidentiary standard of clear and convincing evidence; and (2) applies the “additional probable than not standard,” which is typically applied in civil cases.

What does this mean for your business? First, care should be given preceding a product commencees. This means securing counsel and soliciting a freedom to operate opinion preceding an entirely new product line is released. Common sense dictates which counsel be contacted early in the create system to avoid costly expenditures in the development of innovation which is covered by a competitor’s product. Counsel should in addition be contacted when a patent of concern comes to one’s attention. In addition, be careful how these issues are discussed inside your company. Discussions concerning patents which do not involve counsel are not protected by the attorney-client privilege. E-mails and other documents discussing your competitor’s patents and actually products may lay the discoveredation for establishing enhanced patent injures.

If an actual lawsuit has been filed against your company, an independent legal opinion should be receiveed of satisfactory patent counsel. The opinion, in many instances, can be held in reserve until the issue of canfulness is tried.

In conclusion, the Supreme Court’s new decision in Halo, in which it lowered the standard to receive enhanced injures, has created patents additional valuable. Enhanced injures are now simpler to receive in cases where infringement is built if the patentee can establish which the defendant knew or should have known of the factors surrounding the infringement. Greater care should be exercised when introducing new products by receiveing freedom to operate opinions.

Bill Cass is a Partner and Co-Chair of the Litigation and Additive Manufacturing Practices at with Cantor Colburn LLP (www.cantorcolburn.com). Bill’s cases involve hard innovation, which include medical devices, circuitry, mechanical engineering, material science, chemistry, and desktop software. Bill has spoken on topics concerning intellectual property internationally at EuroMold, IVA Sweden, Rapid (SME), and in addition at a White House Symposium on Additive Manufacturing.