Supreme Court Justices Signal Flexibility in Patent Infringement Damages

By | February 25, 2016
US Supreme Court in Washington DC in bright sunlight

The U.S. Supreme Court on Tuesday signaled a willingness to give federal judges more discretion to boost penalties for patent infringement as the justices heard arguments in cases brought by Stryker Corp. and Halo Electronics Inc.

Stryker, a medical device maker, and Halo, which makes circuit board transformers, were denied enhanced damages by a federal appeals court after winning patent infringement lawsuits against competitors.

During oral arguments before the high court, the companies said they should have been awarded enhanced damages because the infringement of their patents was willful, which can allow for a tripling of damages.

The nation’s top patent court, the U.S. Court of Appeals for the Federal Circuit in Washington, has said that to be awarded enhanced damages, a patent owner must prove a defendant acted despite a high likelihood of infringement and had no reasonable explanation for doing so.

Several of the justices indicated they might be willing to relax that standard, giving federal judges increased discretion in awarding enhanced damages.

Chief Justice John Roberts called the elaborate test “surprising” and said that “courts have been used to dealing with discretionary standards for a long time.”

Halo and Stryker both contended the test is too rigid, allowing a willful infringer to escape liability if it can muster any reasonable defense, even if it acted in bad faith.

Justice Elena Kagan said the existing standard may serve as an incentive for patent infringement because it gives willful violators a way to escape liability.

Carter Phillips, the lawyer arguing for Halo and Stryker’s opponents, told Kagan there are not enough deliberate infringers to justify changing the standard.

“My sense is there aren’t that many pirates out there,” Phillips said.

Industry groups are closely watching the cases because a lower bar to award enhanced damages, meant as punishment for deliberate and reckless copying, could hand patent owners a potent new weapon.

Stryker sued Zimmer Biomet Holdings Inc. in 2010 for infringing its patented handheld surgical cleaning wand and was awarded more than $210 million for willful infringement. But the Federal Circuit in 2014 overturned a lower court’s finding of willfulness, saying Zimmer’s defenses were reasonable.

Halo sued Pulse Electronics Corp. in 2007. The Federal Circuit similarly found that Pulse Electronics’ infringement of several Halo patents was not willful.

The cases were heard by the high court’s eight remaining justices following the Feb. 13 death of Justice Antonin Scalia.

The cases are Halo Electronics Inc. v. Pulse Electronics, No. 14-1513 and Stryker Corp. v. Zimmer Inc. et al, No. 14-1520, in the Supreme Court of the United States.

(Reporting by Andrew Chung; Editing by Alexia Garamfalvi and Will Dunham)

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