Medical-device makers might soon have an easier time winning hefty financial damages from companies that infringe on their patents.
In a unanimous decision, the U.S. Supreme Court on Monday invalidated a test now used by courts to determine whether a company has willfully infringed on a patent—which can be used to award triple damages. The court ruled Monday that the test is too stringent.
The court, however, emphasized in its decision that triple damages should be reserved for “egregious cases of misconduct beyond typical infringement.”
In healthcare, the decision will likely affect cases involving medical devices. It won't likely affect patent cases involving pharmaceuticals because those cases don't typically involve damages.
Ted Mathias, a partner at Axinn Veltrop & Harkrider who represents medical-device makers, said the decision could make it easier for companies to win triple damages in patent infringement cases. He said the old test was “a very high and difficult bar for patent owners to meet and the Supreme Court has replaced that difficult standard with a more amorphous, less-defined standard that gives a lot more latitude to juries and district court judges in determining whether there has been willful infringement and whether damages should be enhanced.”
Not everyone, however, agrees.
Though the court did away with the old test, it said inflated damages should still be reserved only for the most egregious cases.
That means that it still might be just as difficult for companies to get triple damages in patent infringement cases, said Andy Pincus, a partner at Mayer Brown who filed an amicus brief in the case on behalf of BSA | The Software Alliance, in support of keeping the bar high for triple damages.
He said the Supreme Court is “trying to send a message to lower courts that this has to be really, really bad conduct, and they say just the mere fact of infringement by itself doesn't come close."
He added that the decision will, however, change what companies focus on when litigating such cases.
Mathias said medical device companies might also have to again start hiring attorneys to get opinions, before litigation starts, on whether they’re infringing, that they can present in court. He said companies used to do that as protection before the now-invalidated test was in place, but the test had reduced the need for such defense tactics because it set the bar so high.
The decision came in two cases that were consolidated for Supreme Court review, Halo Electronics Inc. v. Pulse Electronics Inc. and Stryker Corporation v. Zimmer.
In the Stryker case, the Michigan-based medical-device maker sued competitor Zimmer, accusing it of infringing on Stryker's patent for a handheld device used to clean wounds and remove tissue from wound sites. A jury ruled that Zimmer willfully infringed on the patent and should pay Stryker triple damages of $210 million. A federal appeals court, however, ruled that Zimmer infringed on the patent but didn't do so willfully, slashing those damages to $70 million.
In the Halo case, the small electrical components company sued Pulse for patent infringement. A jury decided to award Halo $1.5 million but the judge wouldn't triple the damages, and the federal circuit agreed with that decision.
Under the test invalidated by the Supreme Court on Monday, a company or individual had to show, with clear and convincing evidence, that the party infringed on the patent despite a high likelihood of infringement. A patent holder also had to prove, under that test, that the party accused of infringement either knew of that risk of infringement or should have known because it was so obvious.
Stryker had argued in court documents that the test wrongly protected those who infringed on patents. Zimmer, however, had argued that getting rid of the test would force more small companies to settle when accused of patent infringement, rather than risk having to pay triple damages.
