Patent Damages at Issue as U.S. High Court Accepts Stryker Case

The U.S. Supreme Court will use cases involving surgical tools and electronic components to determine when a patent owner can collect increased damages after winning an infringement verdict.

Stryker Corp. is seeking to triple the $70 million a jury said Zimmer Biomet Holdings Inc. should pay for using inventions that let surgical devices clean bones without paying. In a second case, Halo Electronics Inc. is seeking to increase the $1.5 million in damages it was awarded from larger rival Pulse Electronics Inc. The court agreed Monday to hear both cases together.

The justices will look at an appeals court’s rulings that have made it more difficult to get enhanced damages, even if a jury finds that the infringer knew of the patent and used the invention anyway. Companies can say they had a reasonable belief the patent was invalid or not infringed to escape the penalty for “willful infringement.”

The effect is “immunizing infringers from enhanced damages so long as they present at least one plausible defense,” Stryker said in its petition with the high court.

Stryker and Halo, in separate petitions, argued the standard set by the U.S. Court of Appeals for the Federal Circuit, which handles patent cases, is too rigid.

The near-elimination of higher damage awards is part of a string of cases that have reduced the amount that patent owners can collect at trial. The difficulty for the courts has been in finding a balance between deterring abusive lawsuits by patent owners out for a quick buck and ensuring competitors’ disputes are resolved fairly.

‘Rigid Rules’

The justices likely took the case because they “view this as another example of the Federal Circuit imposing rigid bright-line rules as a predicate for reaching a legal conclusion,” said Brad Wright, a patent lawyer with Banner & Witcoff in Washington.

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.” 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.

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 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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