It Was About time…

for the Supreme Court to restore some balance to the patent system. The power of patents has eroded over the last decade, with the Supreme Court concluding that an infringer can only be enjoined from infringing in rare circumstances (Ebay v MercExchange) that pretty much any process that does not require a machine is not patentable (Bilski v Kappos), that many biotechnology inventions are not patentable (Mayo v Prometheus Laboratories), and that most software inventions are not patentable (Alice v CLS Bank). The clear-cutting of patent rights by the Supreme Court and the tolerance of Congress for patent infringers led to the concept of ‘efficient infringement’ – the idea that it’s a good business practice to simply steal a patented invention because (a) the patent owner may not sue, and (b) the patent may not be enforceable.

The Supreme Court has now decided a case that increases the risks of deliberate infringement to the point that such infringement may no longer be ‘efficient.’   The case is Halo v Pulse, decided on June 13.  The subject of Halo is ‘treble’ damages under the patent statute, which provides that a patent infringer may be liable for money damages of up to three times the patent owner’s actual damages.  Before Halo, treble damages generally were not available to patent owners because the Federal Circuit Court created barriers that were rigid and all but insurmountable.  InHalo, the Supreme Court rejected the Federal Circuit’s rigid rules and decided that the trial judge has discretion to award treble damages.  The Supreme Court pointed to decisions from the 19th and 20thcenturies to guide judges in considering whether to award treble damages.  Said the Court:

Awards of enhanced damages under the Patent Act over the past 180 years establish that they are not to be meted out in a typical infringement case, but are instead designed as a “punitive” or “vindictive” sanction for egregious infringement behavior.  The sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or – indeed- characteristic of a pirate.

…

Consistent with nearly two centuries of enhanced damages under patent law, however, such punishment should generally be reserved for egregious cases typified by willful misconduct.

An ‘efficient infringement’ would by definition be willful and deliberate.  Now a potential infringer must consider whether it wishes to risk treble damages when considering whether to ‘efficiently’ infringe a patent.

— Robert Yarbrough, Esq.