Supreme Court Allows Larger Damages in Intentional Patent Infringement

By Greg Stohr | June 13, 2016

The U.S. Supreme Court eased the way for larger damage awards when a company intentionally copies a patented invention.

Voting unanimously, the justices said a key 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 gives Stryker Corp. a new chance to increase a $70 million award it won in a suit against Zimmer Biomet Holdings Inc. over surgical devices.

The U.S. Court of Appeals for the Federal Circuit, which handles patent cases, had said triple damages were available only if the patent-holder could show “objective recklessness” by the infringer. That standard had all but eliminated enhanced damages in patent cases.

Writing for the Supreme Court, 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.” Still, he said the Federal Circuit test “unduly confines the ability of district courts” to award enhanced damages in appropriate cases.

Courts have struggled to find a balance between deterring abusive lawsuits by patent owners and ensuring that competitors’ disputes are resolved fairly.

Halo Electronics

The court ruled in the Stryker case, as well as 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. After additional costs were added, 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.

Willfulness Finding

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 Monday set aside both rulings and sent the cases back to the Federal Circuit.

The cases are Stryker Corp. v. Zimmer Inc. 14-1520 and Halo Electronics Inc. v. Pulse Electronics Inc., 14-1513, both U.S. Supreme Court.

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