Earlier this week the United States Supreme Court issued its in Halo Electronics v. Pulse Electronics, which granted district courts discretion to award enhanced damages for patent infringement pursuant to 35 U.S.C. §284. This case, heard together with companion case Stryker v. Zimmer, overruled the test adopted by the United States Court of Appeals for the Federal Circuit in 2007, when sitting en banc the Federal Circuit adopted a rigid two-part test for determining when a district court could increase damages pursuant to §284.
The 2007 decision of the Federal Circuit was In re Seagate Technology, which held that 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.” The patent owner next had to demonstrate, again by clear and convincing evidence, that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.”
The text of §284 relating to the enhancement of damages is simple, straightforward and says: “[T]he court may increase the damages up to three times the amount found or assessed.”
Simply stated, there is absolutely no textual support in the statute for the Federal Circuit’s Seagate two-part test. In other words, the Federal Circuit created the Seagate test from whole cloth and in direct contradiction with the express, easy to understand and straightforward terms of the statute. That is why the Supreme Court ruled the language of the statute clearly gives district courts discretion to increase damages.
The Supreme Court similarly overruled the Federal Circuit’s practice of reading complicated, multi-step processes into simple, one-sentence statutes when in 2014 it overruled the Federal Circuit’s approach to awarding attorneys fees under 35 U.S.C. §285. That statute merely said: “The court in exceptional cases may award reasonable attorney fees to the prevailing party.”
Despite the clear discretion given to district court judges by Congress the Federal Circuit had made it virtually impossible to obtain attorneys fees and actually impossible for district court judges to exercise their own independent discretion as they were explicitly authorized to do. The Supreme Court correctly pointed out the error of the Federal Circuit ways in Highmark Inc. v. Allcare Health Management Systems, Inc., 134 S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014).
One of the most interesting aspects of the Supreme Court’s recent ruling in Halo Electronics is just how easy it was for the Supreme Court to notice the egregious nature of the misreading of §284 by the Federal Circuit. Essentially, the Supreme Court told the Federal Circuit that they needed remedial reading lessons. The statute is clear: “may” means district courts have discretion. The Supreme Court also seemed instruct the Federal Circuit to stop making stuff up that clearly isn’t found within the statute.
As right as the Supreme Court is in Halo, Octane Fitness, and Highmark, there is a healthy dose of hypocrisy at work. Indeed, the Supreme Court should take their own advise with respect to 35 U.S.C. §101, which is also a one sentence statute that they have continually read bizarre requirements into without any textual support.
The one sentence statute that the Supreme Court has so helplessly struggled with and severely misconstrued, §101, says: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”
Currently, in order for an invention to be patent eligible it must be one of the four enumerated categories of invention mentioned within §101, namely a process, machine, manufacture or composition of matter. But that is not enough. The patent applicant is prohibited from seeking patent claims that cover matter that falls merely within one of the three so-called judicial exceptions to patent eligibility. Of course, there is no authority for the Supreme Court to create judicial exceptions to patent eligibility within the text of §101, and likewise there is no authority for such judicial exceptions to exist anywhere else within the Patent Act. Nevertheless, these judicially created exceptions do exist thanks to the Supreme Court reading them into the statute where they do not exist. Sound familiar? In essence, with respect to §101 the Supreme Court legislates from the bench just as the Federal Circuit was doing with respect to §284 and §285.
It is truly ironic, even downright funny, how the Supreme Court can so clearly see that the Federal Circuit is not being true to the simple, easy to understand, straightforward terms of a statute but at the same time lack the capacity to similarly see that they are themselves doing the very same thing. If intellectual honesty means anything the Supreme Court would hold themselves to the same standard and stop applying judicial exceptions to patent eligibility that enjoy no textual support in the statute. I’m not going to hold my breath.
Worse yet however, the Supreme Court not only reads things into §101 that are not present, but they also read out language that is explicitly present. For example, in Association for Molecular Pathology v. Myriad Genetics, Justice Thomas, writing on behalf of a unanimous Court, said discoveries are not patent eligible. Of course, §101 says the opposite, saying that “whoever invents or discovers… may obtain a patent…” Thus, the statute specifically and unambiguously says that discoveries are patent eligible.
How does the Supreme Court get it so hopelessly wrong? It would seem that they don’t take the time to actually read §101 any more than does the Federal Circuit when they have interpreted §284 and §285. If the Supreme Court would only read §101 they would be forced to limit themselves to the law rather than concern themselves with rewriting the law in an image they prefer.
So while many will celebrate the Supreme Court ruling in Halo Electronics as the right decision let us not forget that they too need the same remedial reading class that the Federal Circuit does, just with respect to a different statute.
Join the Discussion
16 comments so far.
step backJune 17, 2016 04:51 pm
Never heard of MM before (except for the one on that “other” patent blog).
Definitely agree that our Supremes come straight out of Salem.
Night WriterJune 17, 2016 02:06 pm
If you want to understand the Supreme Court’s reasoning in 101, then you need to read Malleus Maleficarum.
DavidJune 16, 2016 04:14 pm
Jim @4; [email protected],
Noticed that passage as well – not only does it identify patents for IP as property, but it is yet another important example of the SCOTUS analogizing the rights inherent to patents for land to patents for intellectual property.
Gene QuinnJune 16, 2016 03:50 pm
Thanks for your comment. I’m looking forward to speaking at NAPP at the end of July, and looking forward to meeting you in person.
Gene QuinnJune 16, 2016 03:49 pm
Thanks Brad. I appreciate the comment. I hope all is well.
Jim RuttlerJune 16, 2016 01:37 pm
Anon @5: Yes, that is the passage. Thanks for posting. This is interesting to me for two reasons. The first is that the case is from the 1800’s. The Court is concerned about the historical roots of patent law going all the way back to the late 1700s. The second is that the Court quotes from the case “taking a man’s property in an invention…” The Court is recognizing that patents are a ‘man’s’ property.
This seems to bode well for at least partial limiting of the IPR proceedings as being unconstitutional.
But, Gene in this article is highlighting that it is possible for the Court to be somewhat inconsistent between opinions.
Brad OlsonJune 16, 2016 12:06 pm
Gene: Well-stated. You are indeed one of IP’s vanguards.
CuriousJune 16, 2016 11:47 am
The hubris of the Supreme Court — we are right because we said so and you are wrong because we said so. What, you were doing what we have done (e.g., read additional requirements into a very straight-forward section of 35 U.S.C.), we can do so because we said we can. You are not SCOTus, and therefore, you do not have that prerogative.
Jeffrey L. Wendt, President, NAPPJune 16, 2016 10:57 am
Gene – could not agree more. I also hope the Court takes cert. on the Jericho case (posted on another blog this AM).
And thanks for committing to speaking at the upcoming NAPP Annual Meeting & Conference in July. After all the years reading IPWatchdog, I look forward to meeting you.
step backJune 16, 2016 10:08 am
I think your copy of the US Constitution is missing a section:
“The righteousness of the opinions of the Supreme Court shall not be questioned.” –Article III Section 0
EGJune 16, 2016 08:53 am
Spot on. The hypocrisy of SCOTUS in interpreting the express language of 35 USC 101 as written is glaring.
AnonJune 16, 2016 05:42 am
Do you mean this:
Enhanced damages are as old as U. S. patent law. The
Patent Act of 1793 mandated treble damages in any successful
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 discretionary,
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.” Patent
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. McCormick,
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.
Jim RuttlerJune 15, 2016 10:41 pm
Did anyone catch the majority’s reference to patents being property? I wonder whether this was a nod to Cooper and MCM.
AnonJune 15, 2016 04:55 pm
DavidJune 15, 2016 04:47 pm
“Essentially, the Supreme Court told the Federal Circuit that they needed remedial reading lessons”
Someone call Harvard Law Review.
Simon ElliottJune 15, 2016 04:39 pm
Good burn from Gene