Bottom line: Halo Electronics, Inc. v. Pulse Electronics, Inc. (Fed. Cir. 2014) suggests that substantial arguments presented during litigation (i.e., post litigation) for invalidity of a patent may be used as a defense to willful patent infringement even for acts of patent infringement that occurred prior to litigation.
In 2002, Halo sent letters to Pulse with an invitation to license its patents. Pulse had its engineers look at the patents and determined that the patents were invalid due to prior art (i.e., prior Pulse products). Halo sued Pulse in 2007 for patent infringement. During litigation, attorneys for Pulse presented evidence regarding obviousness of the claims of Pulse’s patents. unrelated to the reasoning provided the Pulse engineers back in 2002.
The district court found infringement. Halo requested that the damages be trebled based on contention that Pulse willfully infringed the patents.
A willfulness determination is analyzed under a two-prong analysis. 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. This is a threshold issue. Second, if the threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer.
Although Pulse lost on the obviousness issue and the district court held that they were infringing the patent, the district court found no willfulness in Pulse’s infringementbased on Halo’s failuire to prove the first prong of the two prong analysis on willfulness.
Pulse presented evidence during litigation that raised a substantial question as to the validity of the Halo patents. Specifically, Pulse showed that the prior art disclosed each element of the asserted claims, that it would have been predictable to combine and modify the prior art to create the claimed invention, and that there were differences between the prior art considered by the PTO and the prior art introduced at trial.
As indicated in the second prong of the analysis, willfulness goes to the intent of the infringer. Did the infringer intend to infringe the patent at the time of the infringing act? In this case, the court found that Pulse infringed the patents between the years of 2002 to 2007. During this period of time, Pulse relied on the opinion of its own engineers that the Pulse patent was invalid, and hence not infringed. The district court did not indicate whether basis of the engineer’s opinion was reasonable. Nonetheless, the Federal Circuit affirmed the district court’s finding of no willful infringement based on a totality of the circumstances including the new prior art presented during trial. Pulse did not willfully infringe the Halo patents throughout the entire period pre and post initiation of the litigation.
The opinion highlights the rigid procedure under which the first prong of the willfulness analysis is determinedIn this case, the quality of the engineer’s opinion appears to be a minor issue. The reason is that even though Pulse had no knowledge of the new prior art that was introduced during trial, there was no objectively defined risk of patent infringement for their infringing acts pre-trial. An objective standard is something that exists outside of the realm of the alleged infringer, and it exists regardless of one’s personal knowledge.
Althoughthe defendant successfully averted a finding of willful infringement in this case without a non-infringement study for the 2002 – 2007 period, it is still very prudent to conduct one after learning of a relevant patent. The Federal Circuit did not expressly find that the new prior art presented at trial alone was sufficient to establish a lack of an objectively defined risk of patent infringement. The court affirmed the district court’s use of the totality of the record including the engineer’s opinion as well as the new prior art that was used during litigation in finding that Pulse did not willfully infringe Halo’s patents.