Recent Decisions Shed Light On How to Avoid Enhanced Damages for Patent Infringement

By Dorothy Wu Chiang. A member of our Patent Practice Group

In its June 2016 decision in Halo Electronics Inc. v. Pulse Electronics, Inc., whichwe covered in our June issue, the Supreme Court loosened the conditions under which a trial court may award enhanced damages to a patent owner. Haloemphasized that trial courts must retain discretion to punish “egregious” behavior by an infringer, based on the infringer’s knowledge at the time of the conduct in question. A defendant’s ability to muster a plausible defense after the fact should be of no consequence if its infringement at the time was willful and egregious.

This standard suggests that a company may take proactive measures that can prevent its behavior from being perceived as egregious. Specifically, before engaging in conduct that might infringe a competitor’s patent, a company might do well to obtain an opinion of counsel on the validity of that patent and the likelihood of infringing it. Already, some post-Halo decisions demonstrate that the presence or absence of such contemporaneous legal advice may affect a judge’s decision whether to assess enhanced damages against an infringer.

WBIP, LLC. v. Kohler, Co. involved competitors in the marine generator business. An internal Kohler memo requesting funding for developing products to compete with Westerbeke Corporation indicated that Kohler was aware of Westerbeke’s patents. Kohler took no action to evaluate the scope of the patents or avoid their claim limitations. Moreover, Kohler’s other activities demonstrated that it had deliberately tried to “plunder” Westerbeke’s business; Kohler employees had visited Westerbeke representatives at a trade show, questioned them about their technology, and released a competing product within a year.

Westerbeke assigned its patents to WPIB, which sued Kohler for infringement before Halo was decided.  The trial judge ruled that Kohler had willfully infringed WBIP’s patents and granted WPIB enhanced damages of 50%. Kohler appealed, and the Federal Circuit affirmed the district court in view of the Halo decision that had issued just weeks earlier. Halo required the Federal Circuit to review the enhanced damages based on whether the trial court had abused its discretion in awarding them. This deferential standard means that a trial judge’s award of enhanced damages is unlikely to be overturned.  More...