Patent Infringement Penalties Could Really Go Up

The U.S. Supreme Court ruled that a standard for awarding extra damages was too high, sent case against Zimmer Biomet back to lower court. The decision opens the door to higher damages in really egregious cases.

Nancy Crotti

The U.S. Supreme Court has ruled that federal judges should have more discretion in awarding damages in patent infringement cases.

In the unanimous decision, the justices ordered a federal appeals court to review a case in which Stryker Corp. won a patent suit against Zimmer Biomet but was denied the triple damages allowed by law. The ruling, which also applied to a case brought by circuit-board transformer maker Halo Electronics, could have ramifications for companies in a wide range of industries, from medical devices to software.

Chief Justice John Roberts wrote that requiring a court to find "objective recklessness" in every patent infringement case allows even the "wanton and malicious pirate" who intentionally infringes a patent to escape liability.  District courts "should take into account the particular circumstances of each case and reserve punishment for egregious cases typified by willful misconduct," Roberts added.

The court acknowledged industry concerns that such a ruling could squash innovation, but said that enhanced damages should not be awarded in "garden-variety cases."

The decision will change what medtech companies focus on when bringing such cases, according to patent attorney Ted Mathias, a partner at Axinn Veltrop & Harkrider in Hartford, CT.

The old standard was "a very high and difficult bar for patent owners to meet," Mathias told Modern Healthcare. "'The Supreme Court has replaced that difficult standard with a more amorphous, less-defined standard that gives a lot more latitude to juries and district court judges in determining whether there has been willful infringement and whether damages should be enhanced."\

Device makers might have to revert to soliciting attorneys' opinions on whether they are infringing in case they are eventually accused of doing so, Mathias added.

The Stryker case involved a pulsed lavage device, a combination spray gun and suction tube used to clean bone surfaces during surgery and improve wound visualization. Stryker claimed that Zimmer (which has since merged with Biomet) had "all-but instructed its design team to copy Stryker's products," willfully violating its patents on the device. A U.S. District Court agreed in 2010, tripling the damages awarded for lost profits to more than $210 million.

Although the District Court denied Zimmer's post-trial motions, the federal Circuit Court found on appeal in 2014 that the Zimmer had made a reasonable defense that it had not willfully infringed the patent, and vacated the enhanced damages.

Stryker said it was pleased with the Supreme Court's decision.

"We look forward to pursuing this matter in accordance with the Court's ruling," spokeswoman Yin Becker wrote in an email.

Zimmer Biomet said it was disappointed by the Supreme Court decision, but pointed out that "enhanced damages remain the exception, 'reserved for egregious cases typified by willful misconduct.'... Zimmer looks forward to continuing to defend itself in the lower court proceedings" that will ensue, wrote spokeswoman Monica Kendrick in an email.

Nancy Crotti is a contributor to Qmed.

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U.S. Supreme Court building image by 350z33 at English Wikipedia, CC BY-SA 3.0.