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The test for enhanced patent damages in the US

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21/09/2016

A recent US Supreme Court ruling suggests the start of a possible trend towards enhanced patent damages.

The applicable statutory provision on enhanced patent damages [1] states that “the court may increase the damages up to three times the amount found or assessed”.  There is, however, little statutory guidance to assist the courts in the exercise of this discretion.  The so-called “Seagate” test (named after the leading case on the point) established by the Federal Circuit was two-fold: first, the patent owner needed to establish by “clear and convincing evidence that the infringer acted despite an objectively high likelihood that the actions constituted infringement of a valid patent” and, secondly, the patent had to demonstrate that the risk of infringement was “either known or so obvious that it should have been known to the accused infringer”.

In Halo Electronic, Inc. v Pulse Electronics, Inc. et al [2] the Supreme Court considered the existing Seagate test and found it wanting.  It was, in the words of the Court, “unduly rigid, and … impermissibly en­cumbers the statutory grant of discretion to district courts”. The Court explained that “awards of enhanced damages under the US Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead de­signed as a ‘punitive’ or ‘vindictive’ sanction for egre­gious infringement behavior”.  However, the discretion afforded the courts had become unduly fettered by adherence to the Seagate test.

The relaxation of the test for awarding triple damages may herald more awards of this type in the future although the Court was careful to state that they would not be applicable in a run of the mill infringement case.

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[1] 35 USC § 284
[2] together with Stryker Corp et al v Zimmer, Inc. et al

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