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Patents: Remedies

Patent holders can bring civil actions in federal court both in equity (injunctions) and at law (money damages). Often a holder will do both; seek an injunction to prevent future harm and money damages for past wrongs. In order to prove infringement the holder will have to prove that the defendant's making, using or selling of a process, machine, manufacture, or composition of matter "steps on" one or more of the patent holder's claims as described in the patent in question (see Infringement). The defendant will likely respond (i.e. assuming no settlement and plausible arguments) with one or more affirmative defenses (see Defenses).

Injunctions

Section 283 explicitly provides for equitable relief as follows:

§ 283. Injunction

The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.

In general, in order for the patent holder plaintiff to get a permanent injunction they will need to show: (1) that there is no adequate remedy at law or that they will suffer irreparable harm unless the injunction is granted; (2) that the "balancing of the equities" favors them; and (3) that granting the injunction is in the public interest. A preliminary injunction may also be available to the patent holder but here the burden is greater. In addition to a showing with respect to the factors above the patent holder will need to show that there is a strong likelihood that they will prevail on the merits.

In a fairly recent case, eBay v. MercExchange (USSC 2006), the Court may have signaled that it is less inclined to grant injunctions in certain situations. In eBay, a jury found that MercExchange had a valid patent and that eBay and Half.com had infringed upon it. Nonetheless the district court refused to grant a permanent injunction (which may have shut down eBay), but the appeals court reversed citing that general rule that “courts will issue a permanent injunction against patent infringement barring exceptional circumstances.” The USSC reversed indicating that both lower courts had gotten it wrong. The district court because its reasoning would deny injunctions too broadly and the appeals court because it did not apply the "four" (the Court apparently split factor 1 into two factors (1)(a) no remedy at law; or (1)(b) irreparable harm) factor analysis as described above. The Court apparently felt that there was a remedy at law going forward. Justice Kennedy gets to the heart of the matter in his concurrence:

When the patented invention is but a small component of the product the companies seek to produce (e.g. eBay) and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.

What is to be made of the eBay decision? It is too early to tell. But it does reinforce the view that American jurisprudence is first and foremost concerned with practical outcomes. The Court stepped in to prevent the "tail from wagging the dog" while leaving the door open for a decision that goes the other way under a different set of facts.

Money Damages

The statute provides for damages in section 284 as follows:

§ 284. Damages

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court. When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. Increased damages under this paragraph shall not apply to provisional rights under section 154 (d) of this title. The court may receive expert testimony as an aid to the determination of damages or of what royalty would be reasonable under the circumstances.

Notice that a court has discretion to grant treble damages. Treble damages are available when a court finds intentional wrongdoing on the part of the defendant. It may also grant, in exceptional cases, attorney fees to the prevailing party. The statute of limitations for a patent infringement claim is six years.

There are also special damages available for the infringement of a design patent as follows:

§ 289. Additional remedy for infringement of design patent

Whoever during the term of a patent for a design, without license of the owner,

(1) applies the patented design, or any colorable imitation thereof, to any article of manufacture for the purpose of sale, or
(2) sells or exposes for sale any article of manufacture to which such design or colorable imitation has been applied shall be liable to the owner to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties.

Nothing in this section shall prevent, lessen, or impeach any other remedy which an owner of an infringed patent has under the provisions of this title, but he shall not twice recover the profit made from the infringement.

This section imposes a severe penalty for infringement of a design patent in that there are no qualifications on the profit. The infringer will be disgorged of the "total profit" and not just the profit directly attributed to the patent infringed upon.

Comments: Many patent disputes, especially in the software space, are not settled via litigation but rather are resolved via licensing and cross licensing agreements. While this may appear to be "progress" (depending on your point of view) it tends to favor businesses that have large patent portfolios and therefore leverage during the negotiations process. Often licensing is a convenient insurance policy against litigation risk and may be a viable option for high growth online businesses that have some exposure.




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