U.S. Supreme Court Resistant to Changing Patent Damages Standards

In a case with broad implications for medical patent protection, the U.S. Supreme Court showed little enthusiasm for lowering a strict appellate standard for enhanced damages during oral arguments last week.

The eight justices considered a consolidated case involving two instances of patent infringement, both of which challenged the federal appellate courts’ two-part test to determine whether an infringement is willful, thereby opening a patent violator up to triple compensatory damages.

The justices sharply questioned both sides in the case but expressed a clear reticence toward dismantling the existing standard.

The case conjoins two separate patent suits — one involving medical device makers Stryker and Zimmer and the other involving electronics companies Pulse Electronics and Halo Electronics.

Stryker accused Zimmer of violating its patents for a pulsed lavage product and took its case to the U.S. Court of Appeals for the Federal Circuit before it was merged with the other case, in which Halo took Pulse to court for allegedly selling a patent-violating product overseas. That case came before a federal appellate circuit panel before being merged at the high court-level.

While Stryker and Halo told the justices that the appellate court’s rigidly defined test for treble damages is appropriate, Zimmer and Pulse contended that the appellate standard has no basis in law and makes it difficult for patent holders to properly punish violators.

The justices did not appear well disposed toward Stryker’s and Halo’s points in favor of replacing the standard with judicial discretion, repeatedly questioning the impact this would have on patent litigation.

Many of the accusers’ points also were expressed by the U.S. Attorney’s Office during arguments Tuesday.

Justice Stephen Breyer contended that such an unsettled system would give large companies with deep pockets an advantage over smaller competitors; the opposite of what the U.S. patent system was designed to do.

Justices Ruth Bader Ginsburg and Sonya Sotomayor questioned how companies would define a standard for granting treble damages if they did away with the current system.

Justice Samuel Alito seemed to question the value of a system that eschews legal tests in favor of assessing “the state of mind of the infringer at the time of the infringer’s conduct.”

Chief Justice John Roberts followed a similar train of thought, noting that the violator could have had “a good-faith belief that the patent [in question] wasn’t valid.”

The justices posed some potent puzzlers for alleged infringers Zimmer and Pulse as well, with Sotomayor questioning the value of preserving an appellate standard for damages so rigidly defined that “any defense whatsoever in the litigation that’s not frivolous … gets you out of enhanced damages.”

The case — Halo Electronics v. Pulse Electronics and Stryker Corp. v. Zimmer — is likely to be decided this summer.

Read a transcript of the arguments here: www.fdanews.com/02-23-16-SupremeCourt.pdf. — Cameron Ayers