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.