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Indiana manufacturer’s ‘willful infringement’ suit set for SCOTUS argument

February 22, 2016

Indiana medical device maker Zimmer Inc. will be fighting for its wallet Tuesday as part of a patent dispute before the Supreme Court of the United States.

The central issue is whether Zimmer willfully infringed on a competitor’s product and therefore can be forced to pay enhanced damages of more than $248 million. Zimmer argues that allowing the award to stand would create an incentive for companies to file “questionable patent suits” while its competitor, Stryker Corp., counters vacating the monetary penalty would undermine the deterrent effect of enhanced damages.

The case, Stryker  Corp. v. Zimmer, Inc., 14-1520, has been consolidated with Halo Electronics, Inc., v. Pulse Electronics, Inc. which raises the same issue.

Stryker filed suit against Zimmer in December 2010. The Puerto Rican company charged Zimmer infringed on its patents related to its portable, disposable, battery-powered, hand-held pulse lavage device. Doctors use these devices during surgeries for cleaning out wounds and removing necrotic tissue.   

The Stryker product greatly improved the device and ate into Zimmer’s position in the pulsed lavage marketplace. The U.S. District Court for the Western District of Michigan found Zimmer’s response was to hand a copy of Stryker’s product to an independent contractor with the instructions to “make one for us.”

The district court awarded summary judgment for all but one of Stryker’s patent claims. Proceeding to trial on that single claim, a jury found Zimmer willfully infringed and should pay Stryker $70 million in lost profits. Following the verdict, the district court awarded treble damages, boosting Zimmer’s penalty to over $248 million.

On appeal, the federal circuit affirmed the district court’s grant of summary judgment and the jury’s finding of infringement. However, the appellate court did not find that Zimmer had willfully infringed, holding the Indiana manufacturer asserted objectively reasonable defenses to each of Stryker’s patent claims.   

Consequently, the Federal circuit vacated the treble damages award.
 
In its petition for a writ of certiorari, Stryker asked the Supreme Court to reverse the federal circuit’s decision to toss the enhanced damages. It argued the appellate court improperly imposed a rigid willfulness standard that will neutralize the deterrent effect of monetary awards “because even bad-faith infringers can defeat enhanced damages on appeal simply by retaining skillful counsel to create a merely reasonable post-suit defense.”

Zimmer responded by highlighting judicial precedence that has set a strict test for determining willful infringement. The plaintiff must have proof the infringer either knew, or should have known because it was so obvious, that its action constituted an infringement of a valid patent.

Reversing the federal circuit would lower the willfulness threshold and allow district courts to award enormous punitive damages with little oversight, Zimmer asserted. “The unpredictability would drive companies to settle even marginal claims and would increase the incentives to file questionable patent suits, which already drain massive resources.”

An amicus curiae brief in support of neither party was filed by the Intellectual Property Owners Association. Members of the association’s board of directors include Hoosiers Douglas Norman of Eli Lilly and Co., Michael Jaro of Medtronic, Inc., and Michael Young of Roche, Inc.

The IPO supported the standard for willful infringement set by the federal circuit in In re Seagate Technology LLC. Echoing Zimmer, the association argued that keeping continuity would provide predictability in finding willfulness and imposing enhanced damages.

In addition, the IPO pushed for also requiring that the accused infringer’s bad faith be considered in the analysis for enhanced damages.

“Using bad faith as a touchstone (along with willful infringement) would eliminate the possibility that an accused infringer that has mounted a good faith defense against allegations of infringement would nonetheless be punished by an enhanced damages award,” the IPO argued. “It is important that accused infringers be free to challenge the validity or scope of patents asserted in litigation without running the risk that a good faith (though unsuccessful) defense will result in enhanced damages.”

 
 

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