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From Intellectual Property Law Daily, September 8, 2017

Enhanced damages denied to Halo after remand from Supreme Court

By Linda O’Brien, J.D., LL.M.

In an action by electronics supplier Halo Electronics against a competitor over the alleged infringement of Halo’s patented transformer technology, the totality of the evidence did not warrant an award of enhanced damages, the federal district court in Las Vegas has ruled. The case was decided on remand after the U.S. Supreme Court rejected the Federal Circuit’s Seagate test for determining whether enhanced damages were appropriate under Section 284 of the Patent Act (Halo Electronics, Inc. v. Pulse Electronics, Inc., September 6, 2017, Gordon, A.).

Halo Electronics owns a patent on a design for transformers that expand to accommodate heat and reduce cracking and warping when exposed the high temperatures of consumer electronics. In 2002, Halo discovered that a much larger competitor, Pulse Electronics, had begun selling transformers that appeared to incorporate Halo’s transformer technology. Halo sent two letters to Pulse, proposing that the company pay Halo for a license. Pulse did not respond.

In 2007, Halo sued Pulse for patent infringement. Following trial, a jury found that: (1) Pulse had directly infringed Halo’s patent and had induced its customers to infringe; (2) the infringement was highly likely to be willful; and (3) Halo’s patent was valid. Halo was awarded $1.5 million in damages, but the court denied a request for enhanced damages, which required a finding that the defendant was both subjectively and objectively reckless. The U.S. Court of Appeals for the Federal Circuit affirmed the district court decision.

In June 2016, the U.S. Supreme Court vacated the district court and Federal Circuit decisions, abrogating the then-existing standard for enhanced damages. The case was remanded to determine whether enhanced damages were appropriate under the new standard. Halo also moved for an award of attorney fees.

Enhanced damages. The court found that, given the totality of the evidence, enhanced damages were not warranted. Section 284 of the Patent Act provides that, in a case of infringement, the district court may increase the damages up to three times the amount found or assessed. In In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), the Federal Circuit adopted an enhanced damages test that required a claimant show that infringement was objectively and subjectively willful. The Supreme Court rejected the Seagateenhanced damages test as "unduly rigid" and impermissibly encumbering a district courts’ discretion, the court explained.

In the instant case, evidence indicated that Pulse had independently developed expanding transformer designs that were similar to Halo’s patented design, and that evidence supported Pulse’s belief that Halo’s patent was invalid or Pulse’s products were noninfringing. Pulse also obtained two legal opinions about the validity of Halo’s patent, the first of which was commissioned before Pulse was contacted by Halo to pay for a license. Halo’s letters regarding a license did not state that Pulse was infringing its patent. Furthermore, Pulse presented evidence to show that prior art disclosed each element of the asserted claims, which raised substantial questions as to the obviousness of the Halo patent. Thus, Pulse’s infringement was not so egregious and unusual that enhanced damages were appropriate, the court determined.

Attorney fees. The totality of the evidence revealed that Pulse did not defend the case so unreasonably as to make it an exceptional case. Moreover, Halo’s request for fees was untimely for not having been filed within 14 days of the entry of judgment, and it failed to itemize or describe the requested fees, the court concluded.

The case is No. 2:07-cv-00331-APG-PAL.

Attorneys: Craig E. Countryman (Fish & Richardson PC) and E. Leif Reid (Lewis Roca Rothgerber Christie LLP) for Halo Electronics, Inc. Charles Richard Bruton (Dentons US LLP) for Pulse Electronics Inc., f/k/a Pulse Engineering Inc., and Pulse Electronics Corp., f/k/a Technitrol, Inc.

Companies: Halo Electronics, Inc.; Pulse Electronics, Inc.; Pulse Electronics, Corp.

MainStory: TopStory Patent NevadaNews

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