Halo Electronics, Inc. v. Pulse Electronics, Inc.

(Slip Opinion) OCTOBER TERM, 2015 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
HALO ELECTRONICS, INC. v. PULSE ELECTRONICS,
INC., ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FEDERAL CIRCUIT
No. 14–1513. Argued February 23, 2016—Decided June 13, 2016*
Section 284 of the Patent Act provides that, in a case of infringement,
courts “may increase the damages up to three times the amount
found or assessed.” 35 U.S. C. §284. The Federal Circuit has adopt-
ed a two-part test for determining whether damages may be in-
creased pursuant to §284. First, a patent owner must “show by clear
and convincing evidence that the infringer acted despite an objective-
ly high likelihood that its actions constituted infringement of a valid
patent.” In re Seagate Technology, LLC, 497 F.3d 1360, 1371. Sec-
ond, the patentee must demonstrate, also by clear and convincing ev-
idence, that the risk of infringement “was either known or so obvious
that it should have been known to the accused infringer.” Ibid. Un-
der Federal Circuit precedent, an award of enhanced damages is sub-
ject to trifurcated appellate review. The first step of Seagate—
objective recklessness—is reviewed de novo; the second—subjective
knowledge—for substantial evidence; and the ultimate decision—
whether to award enhanced damages—for abuse of discretion.
In each of these cases, petitioners were denied enhanced damages
under the Seagate framework.
Held: The Seagate test is not consistent with §284. Pp. 7–15.
(a) The pertinent language of §284 contains no explicit limit or
condition on when enhanced damages are appropriate, and this Court
has emphasized that the “word ‘may’ clearly connotes discretion.”
Martin v. Franklin Capital Corp., 546 U.S. 132, 136. At the same
time, however, “[d]iscretion is not whim.” Id., at 139. Although there
——————
* Together with No. 14–1520, Stryker Corp. et al. v. Zimmer, Inc.,
et al., also on certiorari to the same court.
2 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Syllabus
is “no precise rule or formula” for awarding damages under §284, a
district court’s “discretion should be exercised in light of the consid-
erations” underlying the grant of that discretion. Octane Fitness,
LLC v. ICON Health & Fitness, Inc., 572 U. S. ___, ___. Here, 180
years of enhanced damage awards under the Patent Act establish
that they are not to be meted out in a typical infringement case, but
are instead designed as a sanction for egregious infringement behav-
ior. Pp. 7–9.
(b) In many respects, the Seagate test rightly reflects this historic
guidance. It is, however, “unduly rigid, and . . . impermissibly en-
cumbers the statutory grant of discretion to district courts.” Octane
Fitness, 572 U. S., at ___. Pp. 9–13.
(1) By requiring an objective recklessness finding in every case,
the Seagate test excludes from discretionary punishment many of the
most culpable offenders, including the “wanton and malicious pirate”
who intentionally infringes a patent—with no doubts about its validi-
ty or any notion of a defense—for no purpose other than to steal the
patentee’s business. Seymour v. McCormick, 16 How. 480, 488. Un-
der Seagate, a district court may not even consider enhanced damag-
es for such a pirate, unless the court first determines that his in-
fringement was “objectively” reckless. In the context of such
deliberate wrongdoing, however, it is not clear why an independent
showing of objective recklessness should be a prerequisite to en-
hanced damages. Octane Fitness arose in a different context but is
instructive here. There, a two-part test for determining when a case
was “exceptional”—and therefore eligible for an award of attorney’s
fees—was rejected because a claim of “subjective bad faith” alone
could “warrant a fee award.” 572 U. S., at ___. So too here: A patent
infringer’s subjective willfulness, whether intentional or knowing,
may warrant enhanced damages, without regard to whether his in-
fringement was objectively reckless. The Seagate test further errs by
making dispositive the ability of the infringer to muster a reasonable
defense at trial, even if he did not act on the basis of that defense or
was even aware of it. Culpability, however, is generally measured
against the actor’s knowledge at the time of the challenged conduct.
In sum, §284 allows district courts to punish the full range of culpa-
ble behavior. In so doing, they should take into account the particu-
lar circumstances of each case and reserve punishment for egregious
cases typified by willful misconduct. Pp. 9–11.
(2) Seagate’s requirement that recklessness be proved by clear
and convincing evidence is also inconsistent with §284. Once again,
Octane Fitness is instructive. There, a clear and convincing standard
for awards of attorney’s fees was rejected because the statute at issue
supplied no basis for imposing a heightened standard. Here, too,
Cite as: 579 U. S. ____ (2016) 3
Syllabus
§284 “imposes no specific evidentiary burden, much less such a high
one,” 572 U. S., at ___. And the fact that Congress erected a higher
standard of proof elsewhere in the Patent Act, but not in §284, is tell-
ing. “[P]atent-infringement litigation has always been governed by a
preponderance of the evidence standard.” Id., at ___. Enhanced
damages are no exception. P. 12.
(3) Having eschewed any rigid formula for awarding enhanced
damages under §284, this Court likewise rejects the Federal Circuit’s
tripartite appellate review framework. In Highmark Inc. v. Allcare
Health Management System, Inc., 572 U. S. ___, the Court built on
the Octane Fitness holding—which confirmed district court discretion
to award attorney’s fees—and rejected a similar multipart standard
of review in favor of abuse of discretion review. The same conclusion
follows naturally from the holding here: Because §284 “commits the
determination” whether enhanced damages are appropriate to the
district court’s discretion, “that decision is to be reviewed on appeal
for abuse of discretion.” Id., at ___. Nearly two centuries of enhanced
damage awards have given substance to the notion that district
courts’ discretion is limited, and the Federal Circuit should review
their exercise of that discretion in light of longstanding considera-
tions that have guided both Congress and the courts. Pp. 12–13.
(c) Respondents’ additional arguments are unpersuasive. They
claim that Congress ratified the Seagate test when it reenacted §284
in 2011 without pertinent change, but the reenacted language unam-
biguously confirmed discretion in the district courts. Neither isolated
snippets of legislative history nor a reference to willfulness in anoth-
er recently enacted section reflects an endorsement of Seagate’s test.
Respondents are also concerned that allowing district courts unlim-
ited discretion to award enhanced damages could upset the balance
between the protection of patent rights and the interest in technolog-
ical innovation. That concern—while serious—cannot justify impos-
ing an artificial construct such as the Seagate test on the limited dis-
cretion conferred under §284. Pp. 13–15.
No. 14–1513, 769 F.3d 1371; No. 14–1520, 782 F.3d 649, vacated and
remanded.
ROBERTS, C. J., delivered the opinion for a unanimous Court. BREYER, J.,
filed a concurring opinion, in which KENNEDY and ALITO, JJ., joined.
Cite as: 579 U. S. ____ (2016) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 14–1513 and 14–1520
_________________
HALO ELECTRONICS, INC., PETITIONER
14–1513 v.
PULSE ELECTRONICS, INC., ET AL.
STRYKER CORPORATION, ET AL., PETITIONERS
14–1520 v.
ZIMMER, INC., ET AL.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT
[June 13, 2016]
CHIEF JUSTICE ROBERTS delivered the opinion of the
Court.
Section 284 of the Patent Act provides that, in a case of
infringement, courts “may increase the damages up to
three times the amount found or assessed.” 35 U.S. C.
§284. In In re Seagate Technology, LLC, 497 F.3d 1360
(2007) (en banc), the United States Court of Appeals for
the Federal Circuit adopted a two-part test for determin-
ing when a district court may increase damages pursuant
to §284. Under Seagate, a patent owner must first “show
by clear and convincing evidence that the infringer acted
despite an objectively high likelihood that its actions
constituted infringement of a valid patent.” Id., at 1371.
Second, the patentee must demonstrate, again by clear
and convincing evidence, that the risk of infringement
“was either known or so obvious that it should have been
2 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Opinion of the Court
known to the accused infringer.” Ibid. The question
before us is whether this test is consistent with §284. We
hold that it is not.
I
A
Enhanced damages are as old as U. S. patent law. The
Patent Act of 1793 mandated treble damages in any suc-
cessful infringement suit. See Patent Act of 1793, §5, 1
Stat. 322. In the Patent Act of 1836, however, Congress
changed course and made enhanced damages discretion-
ary, specifying that “it shall be in the power of the court to
render judgment for any sum above the amount found by
[the] verdict . . . not exceeding three times the amount
thereof, according to the circumstances of the case.” Pat-
ent Act of 1836, §14, 5 Stat. 123. In construing that new
provision, this Court explained that the change was
prompted by the “injustice” of subjecting a “defendant who
acted in ignorance or good faith” to the same treatment as
the “wanton and malicious pirate.” Seymour v. McCor-
mick, 16 How. 480, 488 (1854). There “is no good reason,”
we observed, “why taking a man’s property in an invention
should be trebly punished, while the measure of damages
as to other property is single and actual damages.” Id., at
488–489. But “where the injury is wanton or malicious, a
jury may inflict vindictive or exemplary damages, not to
recompense the plaintiff, but to punish the defendant.”
Id., at 489.
The Court followed the same approach in other decisions
applying the 1836 Act, finding enhanced damages appro-
priate, for instance, “where the wrong [had] been done,
under aggravated circumstances,” Dean v. Mason, 20 How.
198, 203 (1858), but not where the defendant “appeared in
truth to be ignorant of the existence of the patent right,
and did not intend any infringement,” Hogg v. Emerson,
11 How. 587, 607 (1850). See also Livingston v. Wood-
Cite as: 579 U. S. ____ (2016) 3
Opinion of the Court
worth, 15 How. 546, 560 (1854) (“no ground” to inflict
“penalty” where infringers were not “wanton”).
In 1870, Congress amended the Patent Act, but pre-
served district court discretion to award up to treble dam-
ages “according to the circumstances of the case.” Patent
Act of 1870, §59, 16 Stat. 207. We continued to describe
enhanced damages as “vindictive or punitive,” which the
court may “inflict” when “the circumstances of the case
appear to require it.” Tilghman v. Proctor, 125 U.S. 136,
143–144 (1888); Topliff v. Topliff, 145 U.S. 156, 174
(1892) (infringer knowingly sold copied technology of his
former employer). At the same time, we reiterated that
there was no basis for increased damages where “[t]here is
no pretence of any wanton and wilful breach” and “nothing
that suggests punitive damages, or that shows wherein
the defendant was damnified other than by the loss of the
profits which the plaintiff received.” Cincinnati Siemens-
Lungren Gas Illuminating Co. v. Western Siemens-
Lungren Co., 152 U.S. 200, 204 (1894).
Courts of Appeals likewise characterized enhanced
damages as justified where the infringer acted deliberately
or willfully, see, e.g., Baseball Display Co. v. Star Ball-
player Co., 35 F.2d 1, 3–4 (CA3 1929) (increased damages
award appropriate “because of the deliberate and willful
infringement”); Power Specialty Co. v. Connecticut Light &
Power Co., 80 F.2d 874, 878 (CA2 1936) (“wanton, delib-
erate, and willful” infringement); Brown Bag Filling
Mach. Co. v. Drohen, 175 F. 576, 577 (CA2 1910) (“a bald
case of piracy”), but not where the infringement “was not
wanton and deliberate,” Rockwood v. General Fire Extin-
guisher Co., 37 F.2d 62, 66 (CA2 1930), or “conscious and
deliberate,” Goodyear Tire & Rubber Co. v. Overman
Cushion Tire Co., 95 F.2d 978, 986 (CA6 1938).
Some early decisions did suggest that enhanced dam-
ages might serve to compensate patentees as well as to
punish infringers. See, e.g., Clark v. Wooster, 119 U.S.
4 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Opinion of the Court
322, 326 (1886) (noting that “[t]here may be damages
beyond” licensing fees “but these are more properly the
subjects” of enhanced damage awards). Such statements,
however, were not for the ages, in part because the merger
of law and equity removed certain procedural obstacles to
full compensation absent enhancement. See generally 7
Chisum on Patents §20.03[4][b][iii], pp. 20–343 to 20–344
(2011). In the main, moreover, the references to compen-
sation concerned costs attendant to litigation. See Clark,
119 U.S., at 326 (identifying enhanced damages as com-
pensation for “the expense and trouble the plaintiff has
been put to”); Day v. Woodworth, 13 How. 363, 372 (1852)
(enhanced damages appropriate when defendant was
“stubbornly litigious” or “caused unnecessary expense and
trouble to the plaintiff ”); Teese v. Huntingdon, 23 How. 2,
8–9 (1860) (discussing enhanced damages in the context of
“counsel fees”). That concern dissipated with the enact-
ment in 1952 of 35 U.S. C. §285, which authorized district
courts to award reasonable attorney’s fees to prevailing
parties in “exceptional cases” under the Patent Act. See
Octane Fitness, LLC v. ICON Health & Fitness Inc., 572
U. S. ___, ___ (2014) (slip op., at 7).
It is against this backdrop that Congress, in the 1952
codification of the Patent Act, enacted §284. “The stated
purpose” of the 1952 revision “was merely reorganization
in language to clarify the statement of the statutes.” Aro
Mfg. Co. v. Convertible Top Replacement Co., 377 U.S.
476, 505, n. 20 (1964) (internal quotation marks omitted).
This Court accordingly described §284—consistent with
the history of enhanced damages under the Patent Act—as
providing that “punitive or ‘increased’ damages” could be
recovered “in a case of willful or bad-faith infringement.”
Id., at 508; see also Dowling v. United States, 473 U.S.
207, 227, n. 19 (1985) (“willful infringement”); Florida
Prepaid Postsecondary Ed. Expense Bd. v. College Savings
Bank, 527 U.S. 627, 648, n. 11 (1999) (describing §284
Cite as: 579 U. S. ____ (2016) 5
Opinion of the Court
damages as “punitive”).
B
In 2007, the Federal Circuit decided Seagate and fash-
ioned the test for enhanced damages now before us. Un-
der Seagate, a plaintiff seeking enhanced damages must
show that the infringement of his patent was “willful.”
497 F.3d, at 1368. The Federal Circuit announced a two-
part test to establish such willfulness: First, “a patentee
must show by clear and convincing evidence that the
infringer acted despite an objectively high likelihood that
its actions constituted infringement of a valid patent,”
without regard to “[t]he state of mind of the accused in-
fringer.” Id., at 1371. This objectively defined risk is to be
“determined by the record developed in the infringement
proceedings.” Ibid. “Objective recklessness will not be
found” at this first step if the accused infringer, during the
infringement proceedings, “raise[s] a ‘substantial question’
as to the validity or noninfringement of the patent.” Bard
Peripheral Vascular, Inc. v. W. L. Gore & Assoc., Inc., 776
F.3d 837, 844 (CA Fed. 2015). That categorical bar ap-
plies even if the defendant was unaware of the arguable
defense when he acted. See Seagate, 497 F.3d, at 1371;
Spine Solutions, Inc. v. Medtronic Sofamor Danek USA,
Inc., 620 F.3d 1305, 1319 (CA Fed. 2010).
Second, after establishing objective recklessness, a
patentee must show—again by clear and convincing evi-
dence—that the risk of infringement “was either known or
so obvious that it should have been known to the accused
infringer.” Seagate, 497 F.3d, at 1371. Only when both
steps have been satisfied can the district court proceed to
consider whether to exercise its discretion to award en-
hanced damages. Ibid.
Under Federal Circuit precedent, an award of enhanced
damages is subject to trifurcated appellate review. The
first step of Seagate—objective recklessness—is reviewed
6 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Opinion of the Court
de novo; the second—subjective knowledge—for substan-
tial evidence; and the ultimate decision—whether to
award enhanced damages—for abuse of discretion. See
Bard Peripheral Vascular, Inc. v. W. L. Gore & Assoc.,
Inc., 682 F.3d 1003, 1005, 1008 (CA Fed. 2012); Spectra-
lytics, Inc. v. Cordis Corp., 649 F.3d 1336, 1347 (CA Fed.
2011).
C
1
Petitioner Halo Electronics, Inc., and respondents Pulse
Electronics, Inc., and Pulse Electronics Corporation (col-
lectively, Pulse) supply electronic components. 769 F.3d
1371, 1374–1375 (CA Fed. 2014). Halo alleges that Pulse
infringed its patents for electronic packages containing
transformers designed to be mounted to the surface of
circuit boards. Id., at 1374. In 2002, Halo sent Pulse two
letters offering to license Halo’s patents. Id., at 1376.
After one of its engineers concluded that Halo’s patents
were invalid, Pulse continued to sell the allegedly infring-
ing products. Ibid.
In 2007, Halo sued Pulse. Ibid. The jury found that
Pulse had infringed Halo’s patents, and that there was a
high probability it had done so willfully. Ibid. The Dis-
trict Court, however, declined to award enhanced damages
under §284, after determining that Pulse had at trial
presented a defense that “was not objectively baseless, or a
‘sham.’ ” App. to Pet. for Cert. in No. 14–1513, p. 64a (quot-
ing Bard, 682 F.3d, at 1007). Thus, the court concluded,
Halo had failed to show objective recklessness under the
first step of Seagate. App. to Pet. for Cert. in No. 14–1513,
at 65a. The Federal Circuit affirmed. 769 F.3d 1371
(2014).
2
Petitioners Stryker Corporation, Stryker Puerto Rico,
Cite as: 579 U. S. ____ (2016) 7
Opinion of the Court
Ltd., and Stryker Sales Corporation (collectively, Stryker)
and respondents Zimmer, Inc., and Zimmer Surgical, Inc.
(collectively, Zimmer), compete in the market for orthope-
dic pulsed lavage devices. App. to Pet. for Cert. in No. 14–
1520, p. 49a. A pulsed lavage device is a combination
spray gun and suction tube, used to clean tissue during
surgery. Ibid. In 2010, Stryker sued Zimmer for patent
infringement. 782 F.3d 649, 653 (CA Fed. 2015). The
jury found that Zimmer had willfully infringed Stryker’s
patents and awarded Stryker $70 million in lost profits.
Ibid. The District Court added $6.1 million in supple-
mental damages and then trebled the total sum under
§284, resulting in an award of over $228 million. App. in
No. 14–1520, pp. 483–484.
Specifically, the District Court noted, the jury had heard
testimony that Zimmer had “all-but instructed its design
team to copy Stryker’s products,” App. to Pet. for Cert. in
No. 14–1520, at 77a, and had chosen a “high-risk/high-
reward strategy of competing immediately and aggressively
in the pulsed lavage market,” while “opt[ing] to worry
about the potential legal consequences later,” id., at 52a.
“[T]reble damages [were] appropriate,” the District Court
concluded, “[g]iven the one-sidedness of the case and the
flagrancy and scope of Zimmer’s infringement.” Id., at
119a.
The Federal Circuit affirmed the judgment of infringe-
ment but vacated the award of treble damages. 782 F.3d,
at 662. Applying de novo review, the court concluded that
enhanced damages were unavailable because Zimmer had
asserted “reasonable defenses” at trial. Id., at 661–662.
We granted certiorari in both cases, 577 U. S. ___
(2015), and now vacate and remand.
II
A
The pertinent text of §284 provides simply that “the
8 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Opinion of the Court
court may increase the damages up to three times the
amount found or assessed.” 35 U.S. C. §284. That lan-
guage contains no explicit limit or condition, and we have
emphasized that the “word ‘may’ clearly connotes discre-
tion.” Martin v. Franklin Capital Corp., 546 U.S. 132,
136 (2005) (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517,
533 (1994)).
At the same time, “[d]iscretion is not whim.” Martin,
546 U.S., at 139. “[I]n a system of laws discretion is
rarely without limits,” even when the statute “does not
specify any limits upon the district courts’ discretion.”
Flight Attendants v. Zipes, 491 U.S. 754, 758 (1989). “[A]
motion to a court’s discretion is a motion, not to its incli-
nation, but to its judgment; and its judgment is to be
guided by sound legal principles.” Martin, 546 U.S., at
139 (quoting United States v. Burr, 25 F. Cas. 30, 35 (No.
14,692d) (CC Va. 1807) (Marshall, C. J.); alteration omit-
ted). Thus, although there is “no precise rule or formula”
for awarding damages under §284, a district court’s “dis-
cretion should be exercised in light of the considerations”
underlying the grant of that discretion. Octane Fitness,
572 U. S., at ___ (slip op., at 8) (quoting Fogerty, 510 U.S.,
at 534).
Awards of enhanced damages under the Patent Act over
the past 180 years establish that they are not to be meted
out in a typical infringement case, but are instead de-
signed as a “punitive” or “vindictive” sanction for egre-
gious infringement behavior. The sort of conduct warrant-
ing enhanced damages has been variously described in our
cases as willful, wanton, malicious, bad-faith, deliberate,
consciously wrongful, flagrant, or—indeed—characteristic
of a pirate. See supra, at 2–5. District courts enjoy discre-
tion in deciding whether to award enhanced damages, and
in what amount. But through nearly two centuries of
discretionary awards and review by appellate tribunals,
“the channel of discretion ha[s] narrowed,” Friendly, In-
Cite as: 579 U. S. ____ (2016) 9
Opinion of the Court
discretion About Discretion, 31 Emory L. J. 747, 772
(1982), so that such damages are generally reserved for
egregious cases of culpable behavior.
B
The Seagate test reflects, in many respects, a sound
recognition that enhanced damages are generally appro-
priate under §284 only in egregious cases. That test,
however, “is unduly rigid, and it impermissibly encumbers
the statutory grant of discretion to district courts.” Octane
Fitness, 572 U. S., at ___ (slip op., at 7) (construing §285 of
the Patent Act). In particular, it can have the effect of
insulating some of the worst patent infringers from any
liability for enhanced damages.
1
The principal problem with Seagate’s two-part test is
that it requires a finding of objective recklessness in every
case before district courts may award enhanced damages.
Such a threshold requirement excludes from discretionary
punishment many of the most culpable offenders, such as
the “wanton and malicious pirate” who intentionally in-
fringes another’s patent—with no doubts about its validity
or any notion of a defense—for no purpose other than to
steal the patentee’s business. Seymour, 16 How., at 488.
Under Seagate, a district court may not even consider
enhanced damages for such a pirate, unless the court first
determines that his infringement was “objectively” reck-
less. In the context of such deliberate wrongdoing, how-
ever, it is not clear why an independent showing of objective
recklessness—by clear and convincing evidence, no less—
should be a prerequisite to enhanced damages.
Our recent decision in Octane Fitness arose in a differ-
ent context but points in the same direction. In that case
we considered §285 of the Patent Act, which allows district
courts to award attorney’s fees to prevailing parties in
10 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Opinion of the Court
“exceptional” cases. 35 U.S. C. §285. The Federal Circuit
had adopted a two-part test for determining when a case
qualified as exceptional, requiring that the claim asserted
be both objectively baseless and brought in subjective bad
faith. We rejected that test on the ground that a case
presenting “subjective bad faith” alone could “sufficiently
set itself apart from mine-run cases to warrant a fee
award.” 572 U. S., at ___ (slip op., at 9). So too here. The
subjective willfulness of a patent infringer, intentional or
knowing, may warrant enhanced damages, without regard
to whether his infringement was objectively reckless.
The Seagate test aggravates the problem by making
dispositive the ability of the infringer to muster a reason-
able (even though unsuccessful) defense at the infringe-
ment trial. The existence of such a defense insulates
the infringer from enhanced damages, even if he did not
act on the basis of the defense or was even aware of it.
Under that standard, someone who plunders a patent—in-
fringing it without any reason to suppose his conduct is
arguably defensible—can nevertheless escape any come-
uppance under §284 solely on the strength of his attorney’s
ingenuity.
But culpability is generally measured against the
knowledge of the actor at the time of the challenged con-
duct. See generally Restatement (Second) of Torts §8A
(1965) (“intent” denotes state of mind in which “the actor
desires to cause consequences of his act” or “believes” them
to be “substantially certain to result from it”); W. Keeton,
D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on
Law of Torts §34, p. 212 (5th ed. 1984) (describing willful,
wanton, and reckless as “look[ing] to the actor’s real or
supposed state of mind”); see also Kolstad v. American
Dental Assn., 527 U.S. 526, 538 (1999) (“Most often . . .
eligibility for punitive awards is characterized in terms of
a defendant’s motive or intent”). In Safeco Ins. Co. of
America v. Burr, 551 U.S. 47 (2007), we stated that a
Cite as: 579 U. S. ____ (2016) 11
Opinion of the Court
person is reckless if he acts “knowing or having reason to
know of facts which would lead a reasonable man to real-
ize” his actions are unreasonably risky. Id., at 69 (empha-
sis added and internal quotation marks omitted). The
Court found that the defendant had not recklessly violated
the Fair Credit Reporting Act because the defendant’s
interpretation had “a foundation in the statutory text” and
the defendant lacked “the benefit of guidance from the
courts of appeals or the Federal Trade Commission” that
“might have warned it away from the view it took.” Id., at
69–70. Nothing in Safeco suggests that we should look to
facts that the defendant neither knew nor had reason to
know at the time he acted.*
Section 284 allows district courts to punish the full
range of culpable behavior. Yet none of this is to say that
enhanced damages must follow a finding of egregious
misconduct. As with any exercise of discretion, courts
should continue to take into account the particular cir-
cumstances of each case in deciding whether to award
damages, and in what amount. Section 284 permits dis-
trict courts to exercise their discretion in a manner free
from the inelastic constraints of the Seagate test. Con-
sistent with nearly two centuries of enhanced damages
under patent law, however, such punishment should
generally be reserved for egregious cases typified by will-
ful misconduct.
——————
* Respondents invoke a footnote in Safeco where we explained that in
considering whether there had been a knowing or reckless violation of
the Fair Credit Reporting Act, a showing of bad faith was not relevant
absent a showing of objective recklessness. See 551 U.S., at 70, n. 20.
But our precedents make clear that “bad-faith infringement” is an
independent basis for enhancing patent damages. Aro Mfg. Co. v.
Convertible Top Replacement Co., 377 U.S. 476, 508 (1964); see supra,
at 2–5, 9–10; see also Safeco, 551 U.S., at 57 (noting that “ ‘willfully’ is
a word of many meanings whose construction is often dependent on the
context in which it appears” (some internal quotation marks omitted)).
12 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Opinion of the Court
2
The Seagate test is also inconsistent with §284 because
it requires clear and convincing evidence to prove reck-
lessness. On this point Octane Fitness is again instruc-
tive. There too the Federal Circuit had adopted a clear
and convincing standard of proof, for awards of attorney’s
fees under §285 of the Patent Act. Because that provision
supplied no basis for imposing such a heightened standard
of proof, we rejected it. See Octane Fitness, 572 U. S., at
___ (slip op., at 11). We do so here as well. Like §285,
§284 “imposes no specific evidentiary burden, much less
such a high one.” Ibid. And the fact that Congress ex-
pressly erected a higher standard of proof elsewhere in the
Patent Act, see 35 U.S. C. §273(b), but not in §284, is
telling. Furthermore, nothing in historical practice sup-
ports a heightened standard. As we explained in Octane
Fitness, “patent-infringement litigation has always been
governed by a preponderance of the evidence standard.”
572 U. S., at ___ (slip op., at 11). Enhanced damages are
no exception.
3
Finally, because we eschew any rigid formula for award-
ing enhanced damages under §284, we likewise reject the
Federal Circuit’s tripartite framework for appellate re-
view. In Highmark Inc. v. Allcare Health Management
System, Inc., 572 U. S. ___ (2014), we built on our Octane
Fitness holding to reject a similar multipart standard of
review. Because Octane Fitness confirmed district court
discretion to award attorney fees, we concluded that such
decisions should be reviewed for abuse of discretion.
Highmark, 572 U. S., at ___ (slip op., at 1).
The same conclusion follows naturally from our holding
here. Section 284 gives district courts discretion in meting
out enhanced damages. It “commits the determination”
whether enhanced damages are appropriate “to the discre-
Cite as: 579 U. S. ____ (2016) 13
Opinion of the Court
tion of the district court” and “that decision is to be re-
viewed on appeal for abuse of discretion.” Id., at ___ (slip
op., at 4).
That standard allows for review of district court deci-
sions informed by “the considerations we have identified.”
Octane Fitness, 572 U. S., at ___ (slip op., at 8) (internal
quotation marks omitted). The appellate review frame-
work adopted by the Federal Circuit reflects a concern
that district courts may award enhanced damages too
readily, and distort the balance between the protection of
patent rights and the interest in technological innovation.
Nearly two centuries of exercising discretion in awarding
enhanced damages in patent cases, however, has given
substance to the notion that there are limits to that discre-
tion. The Federal Circuit should review such exercises of
discretion in light of the longstanding considerations we
have identified as having guided both Congress and the
courts.
III
For their part, respondents argue that Congress ratified
the Seagate test when it passed the America Invents Act of
2011 and reenacted §284 without pertinent change. See
Brief for Respondents in No. 14–1513 27 (citing Lorillard
v. Pons, 434 U.S. 575, 580 (1978)). But the language
Congress reenacted unambiguously confirmed discretion
in the district courts. Congress’s retention of §284 could
just as readily reflect an intent that enhanced damages be
awarded as they had been for nearly two centuries,
through the exercise of such discretion, informed by set-
tled practices. Respondents point to isolated snippets of
legislative history referring to Seagate as evidence of
congressional endorsement of its framework, but other
morsels—such as Congress’s failure to adopt a proposed
codification similar to Seagate—point in the opposite
direction. See, e.g., H. R. 1260, 111th Cong., 1st Sess.
14 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
Opinion of the Court
§5(e) (2009).
Respondents also seize on an addition to the Act ad-
dressing opinions of counsel. Section 298 provides that
“[t]he failure of an infringer to obtain the advice of coun-
sel” or “the failure of the infringer to present such advice
to the court or jury, may not be used to prove that the
accused infringer willfully infringed.” 35 U.S. C. §298.
Respondents contend that the reference to willfulness
reflects an endorsement of Seagate’s willfulness test. But
willfulness has always been a part of patent law, before
and after Seagate. Section 298 does not show that Con-
gress ratified Seagate’s particular conception of willful-
ness. Rather, it simply addressed the fallout from the
Federal Circuit’s opinion in Underwater Devices Inc. v.
Morrison-Knudsen Co., 717 F.2d 1380 (1983), which had
imposed an “affirmative duty” to obtain advice of counsel
prior to initiating any possible infringing activity, id., at
1389–1390. See, e.g., H. R. Rep. No. 112–98, pt. 1, p. 53
(2011).
At the end of the day, respondents’ main argument for
retaining the Seagate test comes down to a matter of
policy. Respondents and their amici are concerned that
allowing district courts unlimited discretion to award up
to treble damages in infringement cases will impede inno-
vation as companies steer well clear of any possible inter-
ference with patent rights. They also worry that the ready
availability of such damages will embolden “trolls.” Trolls,
in the patois of the patent community, are entities that
hold patents for the primary purpose of enforcing them
against alleged infringers, often exacting outsized licens-
ing fees on threat of litigation.
Respondents are correct that patent law reflects “a
careful balance between the need to promote innovation”
through patent protection, and the importance of facilitat-
ing the “imitation and refinement through imitation” that
are “necessary to invention itself and the very lifeblood of
Cite as: 579 U. S. ____ (2016) 15
Opinion of the Court
a competitive economy.” Bonito Boats, Inc. v. Thunder
Craft Boats, Inc., 489 U.S. 141, 146 (1989). That balance
can indeed be disrupted if enhanced damages are awarded
in garden-variety cases. As we have explained, however,
they should not be. The seriousness of respondents’ policy
concerns cannot justify imposing an artificial construct
such as the Seagate test on the discretion conferred under
§284.
* * *
Section 284 gives district courts the discretion to award
enhanced damages against those guilty of patent in-
fringement. 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. Martin, 546 U.S., at 139 (internal
quotation marks omitted). Those principles channel the
exercise of discretion, limiting the award of enhanced
damages to egregious cases of misconduct beyond typical
infringement. The Seagate test, in contrast, unduly con-
fines the ability of district courts to exercise the discretion
conferred on them. Because both cases before us were
decided under the Seagate framework, we vacate the
judgments of the Federal Circuit and remand the cases for
proceedings consistent with this opinion.
It is so ordered.
Cite as: 579 U. S. ____ (2016) 1
BREYER, J., concurring
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 14–1513 and 14–1520
_________________
HALO ELECTRONICS, INC., PETITIONER
14–1513 v.
PULSE ELECTRONICS, INC., ET AL.
STRYKER CORPORATION, ET AL., PETITIONERS
14–1520 v.
ZIMMER, INC., ET AL.
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT
[June 13, 2016]
JUSTICE BREYER, with whom JUSTICE KENNEDY and
JUSTICE ALITO join, concurring.
I agree with the Court that In re Seagate Technology,
LLC, 497 F.3d 1360 (CA Fed. 2007) (en banc), takes too
mechanical an approach to the award of enhanced dam-
ages. But, as the Court notes, the relevant statutory provi-
sion, 35 U.S. C. §284, nonetheless imposes limits that
help produce uniformity in its application and maintain its
consistency with the basic objectives of patent law. See
U. S. Const., Art. I, §8, cl. 8 (“To promote the Progress of
Science and useful Arts”). I write separately to express
my own understanding of several of those limits.
First, the Court’s references to “willful misconduct” do
not mean that a court may award enhanced damages
simply because the evidence shows that the infringer
knew about the patent and nothing more. Ante, at 11.
“ ‘[W]illfu[l]’ is a ‘word of many meanings whose construc-
tion is often dependent on the context in which it ap-
pears.’ ” Safeco Ins. Co. of America v. Burr, 551 U.S. 47,
2 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
BREYER, J., concurring
57 (2007). Here, the Court’s opinion, read as a whole and
in context, explains that “enhanced damages are generally
appropriate . . . only in egregious cases.” Ante, at 8–9
(emphasis added); ante, at 11 (Enhanced damages “should
generally be reserved for egregious cases typified by willful
misconduct” (emphasis added)). They amount to a “ ‘puni-
tive’ ” sanction for engaging in conduct that is either “de-
liberate” or “wanton.” Ante, at 8; compare Aro Mfg. Co. v.
Convertible Top Replacement Co., 377 U.S. 476, 508
(1964) (“bad-faith infringement”), and Seymour v. McCor-
mick, 16 How. 480, 488 (1854) (“malicious pirate”), with
ante, at 10–11, and n. 1 (“objective recklessness”). The
Court refers, by way of example, to a “ ‘wanton and mali-
cious pirate’ who intentionally infringes another’s pat-
ent—with no doubts about its validity or any notion of a
defense—for no purpose other than to steal the patentee’s
business.” Ante, at 9. And while the Court explains that
“intentional or knowing” infringement “may” warrant a
punitive sanction, the word it uses is may, not must. Ante,
at 10. It is “circumstanc[e]” that transforms simple
knowledge into such egregious behavior, and that makes
all the difference. Ante, at 11.
Second, the Court writes against a statutory background
specifying that the “failure of an infringer to obtain the
advice of counsel . . . may not be used to prove that the
accused infringer wilfully infringed.” §298. The Court
does not weaken this rule through its interpretation of
§284. Nor should it. It may well be expensive to obtain an
opinion of counsel. See Brief for Public Knowledge et al.
as Amici Curiae 9 (“[O]pinion[s] [of counsel] could easily
cost up to $100,000 per patent”); Brief for Internet Com-
panies as Amici Curiae 13 (such opinions cost “tens of
thousands of dollars”). Such costs can prevent an innova-
tor from getting a small business up and running. At the
same time, an owner of a small firm, or a scientist, engi-
neer, or technician working there, might, without being
Cite as: 579 U. S. ____ (2016) 3
BREYER, J., concurring
“wanton” or “reckless,” reasonably determine that its
product does not infringe a particular patent, or that that
patent is probably invalid. Cf. Association for Molecular
Pathology v. Myriad Genetics, Inc., 569 U. S. ___, ___
(2013) (slip op., at 13) (The “patent[’s] [own] descriptions
highlight the problem[s] with its claims”). I do not say
that a lawyer’s informed opinion would be unhelpful. To
the contrary, consulting counsel may help draw the line
between infringing and noninfringing uses. But on the
other side of the equation lie the costs and the consequent
risk of discouraging lawful innovation. Congress has thus
left it to the potential infringer to decide whether to con-
sult counsel—without the threat of treble damages influ-
encing that decision. That is, Congress has determined
that where both “advice of counsel” and “increased dam-
ages” are at issue, insisting upon the legal game is not
worth the candle. Compare §298 with §284.
Third, as the Court explains, enhanced damages may
not “serve to compensate patentees” for infringement-
related costs or litigation expenses. Ante, at 3–4. That is
because §284 provides for the former prior to any en-
hancement. §284 (enhancement follows award of “dam-
ages adequate to compensate for the infringement”); see
ante, at 4. And a different statutory provision, §285,
provides for the latter. Ibid.; Octane Fitness, LLC v. ICON
Health & Fitness, Inc., 572 U. S. ___, ___–___ (2014) (slip
op., at 7–8) (fee awards may be appropriate in a case that
is “ ‘exceptional’ ” in respect to “the unreasonable manner
in which [it] was litigated”).
I describe these limitations on enhanced damages
awards for a reason. Patent infringement, of course, is a
highly undesirable and unlawful activity. But stopping
infringement is a means to patent law’s ends. Through a
complex system of incentive-based laws, patent law helps
to encourage the development of, disseminate knowledge
about, and permit others to benefit from useful inventions.
4 HALO ELECTRONICS, INC. v. PULSE ELECTRONICS, INC.
BREYER, J., concurring
Enhanced damages have a role to play in achieving those
objectives, but, as described above, that role is limited.
Consider that the U. S. Patent and Trademark Office
estimates that more than 2,500,000 patents are currently
in force. See Dept. of Commerce, Patent and Trademark
Office, A. Marco, M. Carley, S. Jackson, & A. Myers, The
USPTO Historical Patent Files: Two Centuries of Inven-
tion, No. 2015–1, p. 32, fig. 6 (June 2015). Moreover,
Members of the Court have noted that some “firms use
patents . . . primarily [to] obtai[n] licensing fees.” eBay
Inc. v. MercExchange, L. L. C., 547 U.S. 388, 396 (2006)
(KENNEDY, J., concurring). Amici explain that some of
those firms generate revenue by sending letters to “ ‘tens
of thousands of people asking for a license or settlement’ ”
on a patent “ ‘that may in fact not be warranted.’ ” Brief
for Internet Companies as Amici Curiae 12; cf. Letter to
Dr. Thomas Cooper (Jan. 16, 1814), in 6 Writings of
Thomas Jefferson 295 (H. Washington ed. 1854) (lament-
ing “abuse of the frivolous patents”). How is a growing
business to react to the arrival of such a letter, particularly
if that letter carries with it a serious risk of treble dam-
ages? Does the letter put the company “on notice” of the
patent? Will a jury find that the company behaved “reck-
lessly,” simply for failing to spend considerable time,
effort, and money obtaining expert views about whether
some or all of the patents described in the letter apply to
its activities (and whether those patents are even valid)?
These investigative activities can be costly. Hence, the
risk of treble damages can encourage the company to
settle, or even abandon any challenged activity.
To say this is to point to a risk: The more that busi-
nesses, laboratories, hospitals, and individuals adopt this
approach, the more often a patent will reach beyond its
lawful scope to discourage lawful activity, and the more
often patent-related demands will frustrate, rather than
“promote,” the “Progress of Science and useful Arts.” U. S.
Cite as: 579 U. S. ____ (2016) 5
BREYER, J., concurring
Const., Art. I, §8, cl. 8; see, e.g., Eon-Net LP v. Flagstar
Bancorp, 653 F.3d 1314, 1327 (CA Fed. 2011) (patent
holder “acted in bad faith by exploiting the high cost to
defend [ patent] litigation to extract a nuisance value
settlement”); In re MPHJ Technnology Invs., LLC, 159
F. T. C. 1004, 1007–1012 (2015) (patent owner sent more
than 16,000 letters demanding settlement for using “com-
mon office equipment” under a patent it never intended to
litigate); Brief for Internet Companies as Amici Curiae 15
(threat of enhanced damages hinders “collaborative ef-
forts” to set “industry-wide” standards for matters such as
internet protocols); Brief for Public Knowledge et al. as
Amici Curiae 6 (predatory patent practices undermined “a
new and highly praised virtual-reality glasses shopping
system”). Thus, in the context of enhanced damages, there
are patent-related risks on both sides of the equation.
That fact argues, not for abandonment of enhanced dam-
ages, but for their careful application, to ensure that they
only target cases of egregious misconduct.
One final point: The Court holds that awards of en-
hanced damages should be reviewed for an abuse of dis-
cretion. Ante, at 12–13. I agree. But I also believe that,
in applying that standard, the Federal Circuit may take
advantage of its own experience and expertise in patent
law. Whether, for example, an infringer truly had “no
doubts about [the] validity” of a patent may require an
assessment of the reasonableness of a defense that may be
apparent from the face of that patent. See ante, at 9. And
any error on such a question would be an abuse of discre-
tion. Highmark Inc. v. Allcare Health Management Sys-
tem, Inc., 572 U. S. ___, ___, n. 2 (2014) (slip op., at 4, n. 2)
(“A district court would necessarily abuse its discretion if
it based its ruling on an erroneous view of the law” (inter-
nal quotation marks omitted)).
Understanding the Court’s opinion in the ways de-
scribed above, I join its opinion.