The U.S. Supreme Court today ordered an appeals court to reconsider whether the damages should be trebled in Stryker‘s (NYSE:SYK) $70 million patent infringement win over Zimmer Biomet (NYSE:ZBH), relaxing the standard for enhanced damages awards in patent infringement cases.
The U.S. Court of Appeals for the Federal Circuit in 2014 rolled back the original $228 million verdict, finding that Stryker failed to prove willful infringement. Stryker had sued orthopedics rival Zimmer in December 2010, alleging infringement of 3 patents covering wound debridement technology by 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%.
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.
Today the Supremes vacated the appeals court’s ruling and ordered it to reconsider the case in light of the decision, finding that the Federal Circuit’s test was too rigid and allowed egregious infringers to evade liability.
Writing for the majority, Chief Justice John Roberts said that the main problem with the test is that “it requires a finding of objective recklessness in every case before district courts may award enhanced damages.”
“Such a threshold requirement excludes from discretionary punishment many of the most culpable offenders, such as the ‘wanton and malicious pirate’ who intentionally infringes another’s patent – with no doubts about its validity or any notion of a defense – for no purpose other than to steal the patentee’s business,” Roberts wrote. “Under [the Fed. Circ. test], a district court may not even consider enhanced damages for such a pirate, unless the court first determines that his infringement was ‘objectively’ reckless. In the context of such deliberate wrongdoing, however, it is not clear why an independent showing of objective recklessness – by clear and convincing evidence, no less – should be a prerequisite to enhanced damages.”
Federal law, Roberts noted, “allows district courts to punish the full range of culpable behavior. Yet none of this is to say that enhanced damages must follow a finding of egregious misconduct.”
“As with any exercise of discretion, courts should continue to take into account the particular circumstances of each case in deciding whether to award damages, and in what amount,” he wrote. “Consistent with nearly 2 centuries of enhanced damages under patent law, however, such punishment should generally be reserved for egregious cases typified by willful misconduct.”