Zimmer (NYSE:ZMH) today escaped a triple damages award that put it on the hook for more than $210 million owed to rival Stryker (NYSE:SYK), after a federal appeals court overturned a willful infringement ruling.
Kalamazoo, Mich.-based Stryker sued orthopedics rival Zimmer in December 2010, alleging infringement of 3 patents covering wound debridement technology with Zimmer’s Pulsavac Plus device.
In February 2013 a jury in the U.S. District Court for Western Michigan awarded $70 million to Stryker in damages plus royalties, ruling that Zimmer infringed all 3 patents claimed in the suit. Judge Robert Jonker trebled the damages in August of that year, ruling that the infringement was willful and ordering a permanent injunction.
In addition to tripling the damage award, Jonker granted Stryker’s bid for lost profit damages, awarding another nearly $2.4 million. The judge also granted Stryker’s motion for prejudgment interest, awarding nearly $11.2 million, plus reasonable attorney’s fees and additional prejudgment interest on those fees at a rate of 3.83%.
Today the U.S. Court of Appeals for the Federal Circuit overturned the willful infringement ruling, canceling the triple damages award and rolling back the award for attorney’s fees but upholding the rulings on infringement and validity, according to court documents.
"The district court failed to undertake an objective assessment of Zimmer’s specific defenses to Stryker’s claims. Instead, the district court’s analysis of objective reasonableness summarily asserted that the ‘jury heard testimony’ that Zimmer ‘all but instructed its design team to copy Stryker’s products,’" wrote Chief Judge Sharon Prost for the 3-judge panel. "The district court further concluded that the ‘pioneering’ nature of Stryker’s inventions and the secondary considerations of non-obviousness ‘made it dramatically less likely that Zimmer’s invalidity arguments were reasonable.’
"In sum, we find that Zimmer’s defenses to the infringement of each patent claim that Stryker asserted were not objectively unreasonable, and, therefore, it did not act recklessly," Prost wrote.
The appeals court also remanded the case to Jonker to reconsider other aspects.
"[B]ecause there exist further allegations of litigation misconduct in this case and because the standard for finding an exceptional case has changed since the district court issued its finding regarding attorneys’ fees, we remand this issue for further consideration by the district court," Prost wrote.