Remedies for Patent Infringement

Terms:


Equitable Remedy
An equitable remedy is one which does not involve the payment of pecuniary (money) damages, but rather involves a court order to take some action or cease from some behavior.

Civil Action
When the law permits one private party to sue another private party it is known as a civil action, as opposed to criminal actions which are brought by governmental entities (the state, the federal government, etc.).

Treble Damages
The law sometimes permits a court, at its discretion, to award triple damages to a plaintiff, which is known as treble damages.


Title 35 Chapter 29 (§§281–297) addresses the remedies available to patent owners when someone infringes on their rights. §281 simply provides for civil actions for patent infringement. While other sections are relevant to damages (such as §287 which limits damages in cases where the patent holder or its licensees have failed to mark the goods with a notice of patent, or §292 which imposes penalties on other parties for falsely using a patent owner's mark), of greatest interest to us are §§283-285.

Injunctions §283

§283 permits courts to

“grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent….”

As discussed above, we no longer separate courts of equity from courts of law, but the terminology remains and the concept of equitable remedies as distinct from remedies at law is a vital one for a plaintiff seeking redress from a court. As with copyright and trademark law, monetary damages are often inadequate to protect patent owners. Unless a patent owner is able to stop infringers from using their inventions without permission, the value of patents would be seriously undermined.

By issuing an injunction, a court is ordering the infringer to stop making use of the patented invention. Of course, when the patent expires, any party (including the prior infringer) is free to make use of the product.

EXAMPLE: Mike has designed a new shape for snow plow blades which results in a lighter blade which moves snow more efficiently than traditionally designed plows. Most importantly, the plow includes an attachment which allows a skillful operator to plow snow into the shape of a snowman (the coal eyes, carrot nose, and other finishing touches, alas, must be performed by hand). He applies for, and is granted, a patent in 2015. In 2017, Arturo begins manufacturing plow blades which infringe on Mike’s design. Because Arturo did not have to incur the research and development costs which Mike incurred, he is able to sell the blades for far less than Mike can and still reap a healthy profit. A few months after Arturo starts making the blades, Mike sues for infringement. The court issues an injunction ordering Arturo to stop making and selling the infringing product. Other damages (discussed below) might also be awarded. In 2035, Arturo is free to return to his plow production, as the patent will have expired.

Many patent cases are very complex (and expensive!), involving complicated technologies, extensive testimony by expert witnesses, and tremendous amounts of evidence. For this reason, patent owners would obviously prefer that a court issue a temporary injunction which will prevent the accused infringer from continuing his actions until such time as the trial ends. As a general rule, the decision by a court to issue a preliminary injunction depends on four factors which are well established in case law:

  1. a reasonable likelihood of success on the merits;
  2. irreparable harm if the injunction were not granted;
  3. the balance of the hardships and
  4. the impact of the injunction on the public interest.

Ranbaxy Pharms., Inc. v. Apotex, Inc., 350 F.3d 1235, 1239 (Fed. Cir. 2003) (citations omitted).

Nutshell at 147 suggests that a “clear showing” of success on the merits is required, but the cases do not seem to bear this out. See e.g., Schwabel Corp. v. Conair Corp., 122 F. Supp 2d 71 (D.C. Mass. 2000); Garvey Corp. v. Barry-Wehmiller Design Group, Inc., 365 F. Supp. 2d 893 (D. Ill. 2005). That said, courts do seem to agree that preliminary injunctions are

“extraordinary and drastic [and] should not be granted unless the movant, by a clear showing, carries the burden of persuasion”  -Garvey Corp. at 896 (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997), emphasis in original).

It therefore appears that the patent holder must clearly show that he has carried the burden, and the burden is to show a reasonable likelihood of success on the merits, whatever that might mean! Ultimately, the totality of the circumstances will dictate whether a plaintiff’s request for a preliminary injunction is granted. See Fitness Products International v. Precise Exercise Equipment, Inc., 71 U.S.P.Q. 2d (BNA) 1468 (2004) (factors must be weighed against each other while keeping in mind the magnitude and form of relief requested).

In order to defend against a request for a preliminary injunction, the defendant need only raise a substantial question as to the validity of the plaintiff’s patent. See A.K. Stamping Co. v. Instrument Specialties Co., 106 F. Supp. 2d 627, 662 (D.N.J. 2000) (citing two other Federal Circuit cases from 1997 and 2000).

Damages §284

§284 covers money damages and permits courts to award an amount that would compensate the patent holder, which must be at least what the patent owner could receive as royalties under a patent license agreement. Determining the amount of “reasonable royalties” can be a battle in itself, sometimes requiring extensive evidence, and is often something of a guessing game. See Hornbook at 511. 

Beyond the reasonable royalties minimum provided for by §284, a plaintiff could try to provide evidence as to his lost profits due to the infringing use. Here, the patent holder’s burden is substantially greater, requiring evidence as to market supply, the plaintiff’s ability to meet demand, the absence of non-infringing alternatives which would affect demand for the plaintiff’s product, etc. Nonetheless, because this might result in a higher award for the plaintiff, it is often worth the effort to provide the required evidence here.

Finally, this section explicitly allows a court to award treble damages at its discretion.

EXAMPLE (1): Mike proves that Arturo’s plow blades infringe on the valid patent issued to Mike. The court grants an injunction against Arturo which will prevent Mike from further harm, but damages are required to compensate Mike for the harm already done. Perhaps the market would have allowed Mike to demand a $5 per blade royalty from a licensee. If Arturo produced and sold 1000 blades, §284 would establish Mike’s minimum damages at $5000.

EXAMPLE (2): But perhaps Mike can establish the following: Because of Arturo’s infringing use, not only did Arturo sell 1000 blades but Mike had to sell his blades at a lower price than he otherwise would have. His profits would have been $8 per blade, but thanks to Arturo’s illegal competition Mike made only $4 per blade. If Mike sold 5000 blades he could recover the $20,000 lost profits caused by Arturo’s “price erosion.”

EXAMPLE (3): Finally, assume Arturo’s use was blatant and that he knowingly infringed on Mike's patent. Arturo has a track record of using new inventions without permission, and because he is rarely caught, he profits greatly, even when occasionally required to pay damages. The court might choose to award treble damages to Mike, not to compensate Mike, but rather to punish Arturo.

Attorney’s Fees §285

§285 permits courts to award reasonable attorney’s fees to the prevailing party in “exceptional cases.” The patent holder might be able to collect attorney’s fees in much the same circumstances as treble damages under §284. The accused infringer might be forced to pay attorney’s fees when the patent owner has “committed inequitable conduct or either partly engaged in bad faith litigation.” Hornbook at 515. While this section is rarely used successfully, the number of “exceptional cases” wherein parties act in particularly unsavory manners might surprise you (see the Interpretive Notes and Decisions section for §285 for an array of interesting cases).