In a broad and sweeping ruling, the United States Supreme Court issued an opinion on June 13, 2016, in the case of Halo Electronics, Inc. v. Pulse Electronics, Inc. that will make it easier for patent holders to collect enhanced damages against infringers. The patent law permits patent holders to potentially recover "treble" (i.e. triple) damages in cases of patent infringement. When a district court should or should not award such damages has been a hotly contested point since the United States Court of Appeals for the Federal Circuit in 2007 articulated a set of standards that made it very difficult to recover enhanced damages. The prior standards required the patent owner to prove, with clear and convincing evidence, that (i) the infringer had continued its actions even though those actions created a high risk of infringement and (ii) the infringer either knew or should have known the risk of infringement. The Supreme Court did away with those standards as not supporting the relevant statute that governs enhanced damages. The Supreme Court's new standards permit district courts wide latitude in awarding enhanced damages when the district court finds that the infringement was of an "egregious" nature.
The Supreme Court also replaced a three-part standard of review of a district court's enhanced damages award with a simple, one-part standard that greatly increases the probability that the district court's decision will not be changed by the Federal Circuit in an appeal. Under the prior three-part standard, one part was reviewed de novo, a second part was reviewed for substantial evidence, and the third part was reviewed for abuse of discretion. Under the new standard, the district court's decision on enhanced damages is simply reviewed for abuse of discretion. The abuse of discretion appeal standard severely restricts the appeals court's ability to change a district court's decision.
The consequences of the Supreme Court's decision will likely be significant. Viable claims for patent infringement will now hold greater value because there is an increased likelihood that a patent infringement claim will not only result in a larger verdict, but will also more likely withstand an appeal. It may also increase the volume of patent cases filed as patent holders may see a greater return in filing such infringement actions.
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