On June 13, 2016, the Supreme Court ruled unanimously, in an opinion by Chief Justice Roberts, that an award of enhanced damages pursuant to 35 U.S.C. § 284 should be within the sound discretion of a district court, albeit wherein this discretion is limited to “egregious cases of misconduct beyond typical infringement.” The decision in the combined Halo Electronics, Inc. v. Pulse Electronics, Inc. and Stryker Corp. v. Zimmer, Inc. cases reverses the Federal Circuit test established in In re Seagate Tech., LLC, which had required a patentee to satisfy a two-part test (having subjective and objective components) to establish willful infringement. The Court acknowledged that this discretion has limits that are “to be guided by sound legal principles.” Nevertheless, the Court found the previous test established by the Federal Circuit to be unduly rigid; for example, the objective-recklessness prong could permit a “wonton and malicious pirate” to escape punishment if she could “muster a reasonable (even though unsuccessful) defense at the infringement trial.” Moreover, the Court found nothing in the statute or its historical application that supported Seagate’s “clear and convincing” evidentiary standard.

The Supreme Court also simplified the standard of appellate review to a single “abuse-of-discretion” standard. This replaced the trifurcated appellate review standard established by the Federal Circuit – de novo review of objective recklessness, substantial evidence review of the subjective knowledge prong, and abuse of discretion for the ultimate decision to award enhanced damages. The Supreme Court relied heavily on the outcomes in the Octane Fitness LLC v. Icon Health & Fitness Inc. and Highmark Inc. v. Allcare Health Mgmt. Sys. Inc. cases decided in 2014, which established the current district court and appellate standards for determining that a case was exceptional and deserved an award of attorney’s fees under § 285. In those cases, as well as the present decision, the Supreme Court overturned tests established by the Federal Circuit as too rigid, and made it more difficult for appellate courts to overturn lower court determinations.