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Halo Electronics, Inc. v. Pulse Electronics, Inc.

United States Court of Appeals, Federal Circuit

August 5, 2016

HALO ELECTRONICS, INC., Plaintiff-Appellant
v.
PULSE ELECTRONICS, INC. AND PULSE ELECTRONICS CORPORATION, Defendants-Cross-Appellants

         Appeals from the United States District Court for the District of Nevada in No. 07-CV-0331, Judge Philip M. Pro.

          CRAIG E. COUNTRYMAN, Fish & Richardson P.C., San Diego, CA for plaintiff-appellant. Also represented by MICHAEL J. KANE, WILLIAM WOODFORD, Minneapolis, MN.

          Mark Lee Hogge, Dentons U.S. LLP, Washington, DC, for defendants-cross-appellants. Also represented by Shailendra K. Maheshwari, Charles R. Bruton, Rajesh Charles Noronha.

          Before Loueie, O'MALLEY, and HUGHES, Circuit Judges.

          LOURIE, CIRCUIT JUDGE.

         This case has returned to us on remand from the Supreme Court of the United States. In its earlier appearance in this court, Halo Electronics, Inc. ("Halo") appealed from the decisions of the United States District Court for the District of Nevada (1) granting summary judgment that Pulse Electronics, Inc. and Pulse Electronics Corp. (collectively, "Pulse") did not sell or offer to sell within the United States the accused products that Pulse manufactured, shipped, and delivered to buyers outside the United States and thus that Pulse did not directly infringe Halo's U.S. Patents 5, 656, 985 ("the '985 patent"), 6, 297, 720 ("the '720 patent"), and 6, 344, 785 ("the '785 patent") (collectively, "the Halo patents") with respect to those products; and (2) holding that, with respect to the accused products that Pulse sold and delivered in the United States, Pulse's infringement of the Halo patents was not willful, and thus declining to enhance damages under 35 U.S.C. § 284. See Halo Elecs., Inc. v. Pulse Eng'g, Inc., 810 F.Supp.2d 1173, 1205-08 (D. Nev. 2011) (sale and offer for sale); Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 2:07-CV-00331, 2013 WL 2319145, at *14-16 (D. Nev. May 28, 2013) (willfulness); Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 2:07-CV-00331, ECF No. 523 (D. Nev. May 28, 2013) (final judgment awarding damages without enhancement).

         Pulse cross-appealed from the district court's decisions (1) construing the claim limitation "electronic surface mount package" in the Halo patents; (2) construing the claim limitation "contour element" in Pulse's U.S. Patent 6, 116, 963 ("the '963 patent") that Pulse asserted in its counterclaim; and (3) holding that the asserted claims of the Halo patents were not invalid for obviousness. See Halo Elecs., Inc. v. Pulse Eng'g, Inc., 721 F.Supp.2d 989, 998-1001 (D. Nev. 2010) (claim construction); Halo, 2013 WL 2319145, at *l-7 (obviousness); Halo Elecs., Inc. v. Pulse Elecs., Inc., No. 2:07-CV-00331, 2013 WL 4458754, at *1-3 (D. Nev. Aug. 16, 2013) (obviousness).

         We affirmed the summary judgment of no direct infringement of the Halo patents by the accused products that Pulse manufactured, shipped, and delivered outside the United States because Pulse did not sell or offer to sell those products within the United States. Halo Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371, 1377-81 (Fed. Cir. 2014). In addition, applying the then-controlling standard for an award of enhanced damages and the related two-part test for willful infringement as stated in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), and its progeny, we affirmed the judgment of no willful infringement of the Halo patents with respect to products that were delivered in the United States and, consequently, the district court's decision not to enhance damages. Halo, 769 F.3d at 1381-83. On the cross-appeal, because we found no reversible error in the contested claim constructions, we affirmed the judgment of direct infringement of the Halo patents with respect to products that Pulse delivered in the United States and the judgment of inducement with respect to products that Pulse delivered outside the United States, but that were ultimately imported into the United States by others, as well as the judgment of noninfringement of Pulse's '963 patent. Id. at 1383. We also affirmed the judgment that the asserted claims of the Halo patents were not invalid for obviousness. Id.

         Both parties petitioned for rehearing en banc, which this court denied. Halo Elecs., Inc. v. Pulse Elecs., Inc., 780 F.3d 1357 (Fed. Cir. 2015). Halo then filed a petition for a writ of certiorari in the Supreme Court. Halo's petition presented two questions:

1. Whether the Federal Circuit erred by applying a rigid, two-part test for enhancing patent infringement damages under 35 U.S.C. § 284, that is the same as the rigid, two-part test this Court rejected last term in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S.Ct. 1749 (2014) for imposing attorney fees under the similarly-worded 35 U.S.C. § 285.
2. Whether the Federal Circuit erred by holding that a U.S. defendant does not "sell" or "offer to sell" the patented invention "within the United States" under 35 U.S.C. § 271(a), even though it enters [into] a requirements contract with a U.S. customer that they negotiate and execute in the U.S., that is governed by California law, that specifies the material terms, and that creates legally binding obligations.

         Petition for a Writ of Certiorari, at i, Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. ___, 136 S.Ct. 1923 (2016) (No. 14-1513), 2015 WL 3878398, at *i. In addition, Pulse filed a conditional cross-petition for a writ of certiorari on the obviousness issue. Conditional Cross-Petition for a Writ of Certiorari, at i, Pulse Elecs., Inc. v. Halo Elecs., Inc., No. 15-121, 2015 WL 4550375, at *i (U.S. July 24, 2015).

         The Supreme Court granted Halo's petition in part, limiting its review to Question 1 relating to enhanced damages, and declining to review Question 2 relating to sale and offer-for-sale. Halo Elecs., Inc. v. Pulse Elecs., Inc., 577 U.S. ___, 136 S.Ct. 356 (2015). The Court also denied Pulse's conditional cross-petition relating to obviousness. Pulse Elecs., Inc. v. Halo Elecs., Inc., 577 U.S. ___, 136 S.Ct. 236(2015).

         On June 13, 2016, the Court announced its decision. Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S.___, 136 S.Ct. 1923 (2016). The Court held that Section 284 of the Patent Act "gives district courts the discretion to award enhanced damages ... in egregious cases of misconduct beyond typical infringement." Id. at 1935. The Court rejected the Seagate test as "unduly rigid" and "impermissibly encumber [in g] the statutory grant of discretion to district courts." Id. at 1932 (internal quotation marks omitted). Because we decided the enhanced damages issue under the Seagate framework, the Court vacated our decision and remanded the case for further proceedings.

         On remand, we recalled our mandate and reopened the case on July 14, 2016. Because the Supreme Court's review was limited to the issue of enhanced damages and left undisturbed the judgments on other issues, we reaffirm the summary judgment of no direct infringement of the Halo patents by the accused products that Pulse manufactured, shipped, and delivered outside the United States, and we also reaffirm all aspects of the cross-appeal. On those issues, we restate herein the reasoning stated in our earlier opinion. Because the district court applied the Seagate test in declining to enhance damages, however, we vacate its unenhanced damages award with respect to products that were delivered in the United States, and remand for further proceedings consistent with the Supreme Court's opinion on enhanced damages.

         Background

         Halo is a supplier of electronic components and owns the '985, '720, and '785 patents directed to surface mount electronic packages containing transformers for mounting on a printed circuit board inside electronic devices such as computers and internet routers. The Halo patents are all derived from an application filed on August 10, 1995. At issue here are claims 6-8 and 16 of the '985 patent, claims 1 and 6 of the '720 patent, and claims 40 and 48 of the '785 patent (collectively "the asserted claims"). Claim 6 of the '985 patent is representative and reads as follows:

6. An electronic surface mount package for mounting on a printed circuit board in an electronic device, said electronic surface mount package comprising: a one piece construction package having a side wall and an open bottom,
a plurality of toroid transformers carried within said package by a soft silicone material, said toroid transformers each having wires wrapped thereon,
a plurality of terminal pins molded within and extending from the bottom of said package, each of said pins extending through a bottom of said side wall and having a notched post upon which said wires from said transformers are wrapped and soldered thereon, respectively.

'985 patent col. 411. 19-33.

         Pulse, another supplier of electronic components, designs and sells surface mount electronic packages and manufactures those products in Asia. Some of Pulse's products were delivered by Pulse to customers in the United States, but the majority of them were delivered outside the United States, for example, to contract manufacturers for companies such as Cisco. Those contract manufacturers incorporated the electronic packages supplied by Pulse into end products overseas, including internet routers manufactured for Cisco, which were then sold and shipped to consumers around the world.

         For those products that Pulse delivered abroad, all purchase orders were received at Pulse's sales offices abroad. Halo, 810 F.Supp.2d at 1207. However, Pulse engaged in pricing negotiations in the United States with companies such as Cisco, and Pulse's employees in the United States approved prices that its agents quoted to foreign customers when the quoted prices fell below certain thresholds. Pulse also engaged in other activities in the United States, including meeting regularly with Cisco design engineers, ...


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