In Halo Electronics, Inc. v. Pulse Electronics, Inc.,1 the Supreme Court held that 35 U.S.C. Section 284 provides for enhanced damages in egregious cases:
Section 284 gives district courts the discretion to award enhanced damages against those guilty of patent infringement. In applying this discretion, district courts are “to be guided by [the] sound legal principles” developed over nearly two centuries of application and interpretation of the Patent Act. Those principles channel the exercise of discretion, limiting the award of enhanced damages to egregious cases of misconduct beyond typical infringement.
The Court said that when exercising discretion in awarding enhanced damages under Section 284, the district courts should continue to take into account the particular circumstances of each case in determining whether the conduct is egregious.
In IP Power Holdings Ltd. v. Westfield Outdoor, Inc.,2 the district court granted defendant Westfield Outdoor’s motion to dismiss plaintiff IP Power Holding’s claim for willful patent infringement. The district court reasoned that the defendant provided its noninfringement position in response to the plaintiff’s letter accusing the defendant of infringement and therefore it was plausible that the defendant had a good-faith belief of noninfringement.
The plaintiff argued, however, that the defendant had actual notice of its patents because the plaintiff sent the defendant an infringement letter prior to the filing of the lawsuit. The district court rejected this assertion as insufficient. The district court explained:
Defendant argues the full correspondence history shows Defendant has consistently maintained it does not infringe—so Defendant is not willfully infringing, but instead continuing to market a reclining camp chair while defending against meritless letters and now patent litigation from Plaintiff. . . . The Court agrees with Defendant. . . . Defendant is not necessarily willfully infringing—it is equally as plausible it has investigated Plaintiff’s allegations and has formed a good-faith belief it does not infringe. . . . Thus, Defendant’s proffered letters make it implausible that Defendant is simply infringing despite notice of its infringement from Plaintiff, as the Letter Allegation implies.
In sum, the Letter Allegation is implausible in light of the context provided by Defendant’s proffered letters.
The IP Power Holdings Ltd. v. Westfield Outdoor, Inc. decision provides a powerful tool for accused infringers to mitigate the chance of a finding of willful infringement. Plausible and good-faith noninfringement arguments provided by an accused infringer to the patent owner can reduce the risk of willful infringement. However, providing noninfringement positions prior to actual litigation carries its own risks. Namely, early noninfringement positions must be carefully analyzed to ensure that such positions are accurate. Otherwise, an unsupported noninfringement position might itself be used by the patent owner to support its position of willful infringement.
1 Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 118 USPQ2d 1761, 2016 BL 187307 (2016).
2 IP Power Holdings Ltd. v. Westfield Outdoor, Inc., No. 219CV01878MMDNJK, 2020 WL 2992415 (D. Nev. June 4, 2020).