Objective Reasonableness Still at Play in Willfulness Cases

WesternGeco v. Ion Geophysical (Fed. Cir. 2016) [WesternGeco]

Following Halo v. Pulse, the Supreme Court vacated and remanded WesternGeco’s case for further consideration.  Now on remand, the Federal Circuit now vacates the district court judgment denying willfulness.

The patent act authorizes district court to award enhanced damages. 35 U.S.C. 284 (“the court may increase the damages up to three times the amount found or assessed”).  In Halo v. Pulse, the Supreme Court held that the statute grants district courts discretion in awarding enhanced damages – although noting that the punitive damages should ordinarily be limited to egregious infringement – “typified by willful infringement.”  In rejecting the Federal Circuit’s Seagate test, the Court held proof of “subjective willfulness” is sufficient to prove egregious infringement.  “The subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless.”  Halo at 1933.  As with other punitive damage regimes – proof sufficient for an award does not necessitate such an award. In patent cases, punitive damages remain within the discretion of the district court even after sufficient evidence establish the egregious behavior.

In WesternGeco, the jury issued a verdict on subjective willfulness — that “ION actually knew, or it was so obvious that ION should have known, that its actions constituted infringement of a valid patent claim.”  However, following that verdict, the district court excused the willfulness under the objective willfulness prong of Seagate – finding that ION’s non-infringement and invalidity defenses were “not unreasonable.”

On remand, the district court will first determine whether the jury verdict was supported by substantial evidence and, if so, whether enhanced damages should be awarded.  The Federal Circuit writes:

The district court, on remand, should consider whether ION’s infringement constituted an “egregious case[] of misconduct beyond typical infringement” meriting enhanced damages under § 284 and, if so, the appropriate extent of the enhancement.

Slip Opinion. On remand, we vacate the district court’s judgment with respect to enhanced damages for willful infringement under 35 U.S.C. § 284 and reinstate our earlier opinion and judgment in all other respects.

Using Objective Evidence Going Forward: An interesting aspect of the WesternGeco decision is its discussion of the ongoing relevance of “the objective reasonableness of the accused infringer’s positions.” In particular, the Federal Circuit held that objective reasonableness is part of the “totality of the circumstances” that to be considered before awarding enhanced damages.  In some ways this holding is in tension with the Halo decision itself. Halo does not mention the “totality of the circumstances” approach and writes harshly against the objective test as merely awarding “attorney[] ingenuity.”  Judge Dyk explains the holding as follows: (1) “Halo relied upon the patent attorney fee case of Octane Fitness for the relevant standard of district court’s discretion; (2) Octane Fitness in turn held looked to the copyright case attorney fee case of Fogerty v. Fantasy; and (3) Fogerty required consideration of a “totality of the circumstances,” which “could” include objective unreasonableness.” Thus, the Federal Circuit writes: “objective reasonableness is one of the relevant factors.”