U.S. Supreme Court Eases Way for Larger Patent Damage Awards

Updated on
  • Stryker wins round in patent fight against Zimmer Biomet
  • Ruling says lower court was too rigid in limiting damages

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 Monday that 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.

QuickTake U.S. Supreme Court

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 especially egregious instances of willful infringement.

‘Major Victory’

"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."

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

The latest Supreme Court 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.

Copying Alleged

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 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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE