Takeaway: The Supreme Court’s recent holding in Halo v. Pulse changes the rigid standard for willful infringement to a discretionary, case-by-case inquiry, and provides willful infringement accusations with more viability and flexibility. 

For the past decade, the Federal Circuit’s two-prong test in In re Seagate controlled whether enhanced damages for willful patent infringement could be awarded. Seagate required that a patentee alleging willful infringement show clear and convincing evidence that (1) an infringer acted despite an objectively high likelihood of infringement, and (2) the risk of infringement was either known or so obvious that it should have been known to the infringer. But on June 13, 2016, in Halo Electronics, Inc. v. Pulse Electronics, Inc., the Supreme Court held the Seagate test to be incorrect and “unduly rigid,” and instructed that emphasis should return to the “subjective willfulness” of the infringer in light of the facts of each case. The Court also held that the correct burden of proof is not clear and convincing evidence, but rather a preponderance of the evidence, and that the correct standard of review is for abuse of discretion.

Before Halo, a large fraction of willful infringement accusations failed to pass the objective prong of the Seagate test, and would often be dismissed during summary judgment. That is now less likely, because accused infringers may no longer rely on “objectively reasonable” noninfringement or invalidity defenses in order to predictably avoid a finding of willfulness. Indeed, on remand of one of the cases under consideration in Halo, the Federal Circuit affirmed the district court’s finding of willful infringement, which it had previously reversed on the basis of the accused infringer’s “objectively reasonable” defense. See Stryker Corp. et al. v. Zimmer, Inc., et al., No. 2013-1668 (Fed. Cir. Sept. 12, 2016). More recently, the Federal Circuit vacated and remanded a district court’s finding of no willfulness under the Seagate objective prong, instructing the district court to consider whether the infringer’s conduct constituted egregious misconduct beyond typical infringement. WesternGeco, LLC v. ION Geophysical Corp., No. 13-1527 (Fed. Cir. Sept. 21, 2016).

Absent the rigid requirements of the Seagate test, and with higher discretion given to the district courts, the bar for proving willful infringement may be markedly lower, with consideration given to more varied evidence. For example, the Federal Circuit recently affirmed a jury’s finding of willfulness based only on the infringer’s knowledge of the asserted patent. See, e.g., WBIP, LLC v. Kohler Co., No. 2015-1038, 2015-1044 (Fed. Cir. July 19, 2016). And in at least one post-Halo case, pre-issuance letters advising accused defendants of a pending patent application were found to be relevant to a willfulness inquiry, as they showed that the defendants had some knowledge of the scope of the eventually-issued patent. See Kahr v. Cole et al., No. 1-13-cv-01005 (E.D. Wis. July 28, 2016) (Griesbach, J.).

These post-Halo changes show that the new standard for proving willful infringement, while amorphous in some ways, is more attainable. Willful infringement may therefore be a more important consideration now, for both patent owners and potential infringers, than it has been in the past decade.