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Opinion analysis: Where have I read this before? Justices tread familiar path limiting Federal Circuit control over remedies in patent cases

This week brings the Court’s first patent decision of the October Term 2015, an opinion by Chief Justice John Roberts for a unanimous Court disposing of Halo Electronics v. Pulse Electronics and Stryker Corp. v. Zimmer, Inc. The briefing and argument presented the cases as similar to the Court’s decisions two years ago in Octane Fitness v. ICON Health and Fitness and Highmark Inc. v. Allcare Health Management Systems, and the Court’s opinion for the two new cases closely tracked those earlier decisions.

Both sets of cases involve provisions of the Patent Act that govern the remedies in patent cases. The older cases (Octane and Highmark) involved Section 285, which governs awards of attorney’s fees; Halo and Stryker involve Section 284, which provides that the trial court “may” award treble damages. In both cases, the Federal Circuit constructed a doctrinal framework that closely cabined the district court’s ability to provide the enhanced relief. In this case, for example, the Federal Circuit’s doctrine permits enhanced damages only if the behavior is both “objectively” reckless and subjectively intentional. Most pointedly, that framework prevents an award of enhanced damages against any defendant that can identify a substantial legal defense by the time of trial, even if at the time of the infringement it had no justification for its conduct.

Two Terms ago, in Octane and Highmark, the Court rejected the Federal Circuit’s framework for Section 285, concluding that the district court has broad discretion over the propriety of a fee award and that the Federal Circuit should review those determinations only for abuse of discretion. Monday’s opinion takes precisely the same approach. As in Octane and Highmark, the Court emphasized that the “language contains no explicit limit or condition,” and that “the word ‘may’ clearly connotes discretion.” Against that view of the language, the Court could quote Octane for its holding that the Federal Circuit’s test “is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.”

The Court identified three specific problems with the Federal Circuit’s framework. First, by requiring a threshold finding of objective recklessness, the statute “excludes from discretionary punishment many of the most culpable offenders, such as the wanton and malicious pirate who intentionally infringes another’s patent with no doubts about its validity or any notion of a defense (punctuation normalized).” Echoing Octane, the Court underscored the incongruity of “making dispositive the ability of the infringer to muster a reasonable (even though unsuccessful) defense at the infringement trial,” which seems to permit “someone who plunders a patent [to] escape any comeuppance . . . solely on the strength of his [sic] attorney’s ingenuity.”

The Court’s treatment of the other two points offered little beyond a statement of the Federal Circuit’s practice and a quotation from the Octane and Highmark opinions rejecting the same practice. So, the Court rejected out of hand the Federal Circuit’s rule that requires clear and convincing evidence to support the predicate finding of recklessness. Quoting Octane, the Court noted that “patent-infringement litigation has always been governed by a preponderance of the evidence standard” and saw no basis for treating an award of enhanced damages any differently. Similarly, the Court dismissed the Federal Circuit’s reticulated multi-step framework for appellate review, quoting its conclusion in Highmark (Octane’s companion) that a determination committed “to the discretion of the district court” ordinarily “is to be reviewed on appeal for abuse of discretion.”

Given its holding, the most interesting aspect of the opinion is its repeated emphasis that “discretion is not whim.” The Justices clearly found the Federal Circuit’s preferred regime too high a barrier to enhanced damages, but some of them apparently worried that a wholly unconstrained regime would leave patent defendants subject to arbitrary and inappropriate enhancements. The opinion reads as if the Justices concerned about that point asked the Chief Justice to bolster the point, because it appears again and again in various formulations. In that vein, consider this quotation from an earlier opinion of the Chief Justice: “A motion to a court’s discretion is a motion, not to its inclination, but to its judgment; and its judgment is to be guided by sound legal principles.” In the same vein, quoting Judge Henry Friendly (for whom Roberts served as a law clerk), the Court emphasized that “through nearly two centuries of discretionary awards and review by appellate tribunals, ‘the channel of discretion has narrowed,’ so that such damages are generally reserved for egregious cases of culpable behavior.”

But however much effort the Chief Justice devoted to shoring up that point, it was not wholly successful: Justice Stephen Breyer (joined by Justices Anthony Kennedy and Samuel Alito) nevertheless felt it necessary to tender a separate concurrence, emphasizing the “limits” in Section 284 “that help produce uniformity in its application and maintain its consistency with the basic objectives of patent law.”

My reaction may be idiosyncratic, but to me the opinion suggests a tone of impatience on the part of the Chief Justice that the Federal Circuit is just not getting the message. For much of the Chief Justice’s tenure, the Court has been rejecting Federal Circuit patent doctrines that give the appellate courts centralized control over topics ordinarily resolved by trial courts. Monday’s opinion is noteworthy in that vein because it follows so closely upon a Supreme Court decision interpreting a statute that is almost identical to Section 284, adjoining it in the Patent Act. The plaintiffs presented Octane and Highmark to the Federal Circuit as requiring the Court to reconsider the rules for Section 284 that were so similar to the rules the Court had just rejected. From the Court’s perspective, the Federal Circuit’s unwillingness to take the Court’s decisions in Octane and Highmark seriously forced the Court to devote an hour of its argument calendar to a case that is analytically identical to cases that are still too recent for the United States Reports. Perhaps the Chief Justice is hoping the Federal Circuit will read the Court’s future opinions a bit more attentively.

PLAIN LANGUAGE: The Patent Act says that a trial court “may” award treble damages in patent cases. The court of appeals held that trial courts cannot award treble damages if the defendant can present any reasonable justification of its conduct at trial. The Supreme Court disagreed. The Supreme Court held that a trial court has the discretion to award treble damages whenever the conduct of the defendant is “egregious,” even if the defendant’s lawyers can come up with a reasonable defense after the fact.

Recommended Citation: Ronald Mann, Opinion analysis: Where have I read this before? Justices tread familiar path limiting Federal Circuit control over remedies in patent cases, SCOTUSblog (Jun. 16, 2016, 8:04 AM),