A U.S. Supreme Court ruling last week will make it easier to claim and prove willful infringement – and get treble damages in patent infringement cases – a prospect that could have an important chilling effect on infringers who stand to pay more dearly for their actions.
Voting unanimously, the justices said a federal appeals court had placed overly rigid limits on the ability of trial judges to award enhanced damages, which can total as much as three times the compensatory award. The ruling allows Stryker Corp. to seek an increase to the $70 million award it won in a suit against Zimmer Biomet Holdings Inc. over surgical devices, but the decision has much farther reaching implications.
The Fed Circuit had earlier ruled that treble damages were available only if the patent-holder could show “objective recklessness” by the infringer, and that standard had proved nearly impossible to establish. In the Supreme Court decision, Chief Justice John Roberts said that test “excludes from discretionary punishment many of the most culpable offenders.”
Roberts said enhanced damages shouldn’t be awarded in “garden-variety cases,” but he also said the Fed Circuit interpretation “unduly confines the ability of district courts” to award enhanced damages in especially egregious instances of willful infringement.
“The Supreme Court handed patent owners a major victory today,” said Brian Pandya, a patent litigation attorney at Wiley Rein. “The threat of willfulness had nearly been erased from patent litigation by recent Federal Circuit decisions, but now companies, especially tech companies, will need to factor that into their litigation strategies again.”
The ruling provides “a more flexible test that should be easier to meet, resulting in larger damages awards,” said Case Collard, a patent litigator with Dorsey & Whitney.
The court ruled in both the Stryker case and a similar appeal pressed by Halo Electronics Inc., which is seeking to increase the $1.5 million in damages it was awarded from larger rival Pulse Electronics Inc.
In the Stryker case, the trial judge tripled the jury award “given the one-sidedness of the case and the flagrancy and scope of Zimmer’s infringement” of a pulsed lavage, a technique that removes damaged tissue and cleans bones during joint-replacement surgery.
Stryker had developed a portable lavage device that would replace Zimmer’s bulky machines, and Zimmer responded by hiring someone to “make one for us,” according to a lower court opinion. With additional costs, the final judgment in the case was $228 million. The Federal Circuit upheld the infringement verdict but threw out the increased damage award, saying that Zimmer had presented “reasonable defenses” to Stryker’s claims.
Zimmer said it was disappointed by the ruling. “Nevertheless, the court still emphasized that enhanced damages remain the exception and are reserved for egregious cases typified by willful misconduct,” Monica Kendrick, a company spokeswoman, said in an e-mail.
Stryker spokeswoman Yin Becker said that company was pleased. “We look forward to vindicating the district court’s enhanced damages on remand,” she said in an e-mail.
In the Halo case, the trial judge threw out the jury’s finding of willfulness on the same legal grounds. The Federal Circuit upheld that decision. The Halo dispute involves a component called a surface mount transformer that’s attached to a circuit board. The companies compete to supply the transformers to Cisco Systems Inc. for use in internet routers. The Supreme Court set aside both rulings and sent the cases back to the Federal Circuit.
The Supreme Court cases are Stryker Corp. v. Zimmer Inc., 14-1520, and Halo Electronics Inc. v. Pulse Electronics Inc., 14-1513.