December 3, 2018
Medical device giants Zimmer Biomet and Stryker Corp. are getting ready to rumble at a federal appeals court Dec. 3 over the scope of damages awarded in a patent infringement case.
Zimmer is asking the U.S. Court of Appeals for the Federal Circuit to reconsider how much it has to pay Stryker for infringing patents covering wound cleaning devices. The case has dragged on for eight years with multiple appeals.
A lot of money is at stake. Zimmer wants the appeals court to throw out the district court’s award of $248.7 million in enhanced damages—which may be one of the largest-ever awards of enhanced damages in a patent infringement case. Zimmer says the award of enhanced damages is out of proportion to its infringing acts.
Patent litigators and patent law professors are divided about whether the full amount of the award is likely to stick.
The appeals court is unlikely to disturb the district court’s damages analysis, Paul Ainsworth, an intellectual property attorney at Sterne, Kessler, Goldstein & Fox P.L.L.C., and law professor Timothy R. Holbrook told Bloomberg Law.
“I don’t see the Federal Circuit meddling with the outcome here,” said Holbrook, who teaches at Emory University and is the author of more than 40 publications on patent law.
“I’m not sure that the Federal Circuit is going to delve that deeply into the district court’s analysis as it’s discretionary,” Ainsworth said. Ainsworth’s practice focuses on patent and trade secret disputes, including those involving medical device companies.
That accords with the U.S. Supreme Court’s ruling in Halo Elecs., Inc. v. Pulse Elecs., Inc. That case dealt with the issue of when patent holders can get enhanced damages. Section 284 of the Patent Act gives judges in infringement cases the authority to “increase the damages up to three times the amount found or assessed.” The decision to increase damages is based on the egregiousness of the defendant’s conduct.
“In Halo, the Supreme Court made it easier to award enhanced damages,” Holbrook said. They lowered the burden of proof and made it discretionary, he said.
The high court said in Halo that the Federal Circuit shouldn’t second-guess district courts’ decisions in such matters but instead should review them under an abuse-of-discretion standard.
“This case will be an extremely interesting one to watch,” Steve Yelderman, a law professor at the University of Notre Dame, told Bloomberg Law Nov. 30.
“It will be interesting to see how piercing the Federal Circuit’s review will be versus how deferential they’ll be to the district court,” he said, particularly in terms of determining the amount of enhanced damages. Yelderman’s work on patent damages was cited during oral arguments at the Supreme Court earlier this year.
But the Federal Circuit may be unwilling to wade in.
“I don’t see the Federal Circuit wanting to relitigate all of this again,” Holbrook said.
Ainsworth told Bloomberg Law he won’t be surprised if the appeals court simply affirms the district court’s ruling without opinion.
“I wouldn’t be surprised if they Rule 36 it to avoid saying anything at all.” he said, referring to the rule that allows the court to affirm without writing an opinion.
Also, if the appeals court were to reverse, it would have to come up with a new test for when to award enhanced damages, Ainsworth said.
“I’m not sure they’re going to be able to convince the Federal Circuit a new approach to this is necessary,” Ainsworth said.
But Michael Hawes, a Houston intellectual property partner at Baker Botts LLP, told Bloomberg Law the Federal Circuit may wind up vacating the triple damages award and send it back to the district court to have it try again.
That’s because the district court awarded enhanced damages for the entire period of infringement rather than confining enhanced damages to the period during which Zimmer’s conduct was egregious.
“Zimmer is making the argument you have to look at the egregiousness of the conduct from the point of view of when it happened,” Hawes said. Zimmer says the district court failed to take into account the company’s change in behavior over the entire time period.
Zimmer has a decent shot at convincing the appeals court “you can’t take a one-size-fits-all approach,” Hawes said.
The case dates back to December 2010. Stryker sued Zimmer in the U.S. District Court for the Western District of Michigan. It alleged infringement of patents on pulsed lavage devices, which are used to clean and irrigate wounds.
In 2013, the jury found that Zimmer infringed three patents belonging to Stryker, U.S. Patent Nos. 6,022,329, 6,179,807, and 7,144,383. The jury also found that Zimmer willfully infringed the patents, leading the court to award triple damages and attorneys’ fees to Stryker.
Zimmer has already paid Stryker more than $90.2 million in damages and interest, the company said in its appeal, and it may have to pay some amount of enhancement on top of that. But Zimmer argues that the district court’s award of the maximum possible enhanced damages is disproportionate and represents a clear error of judgment.
“That disproportionate ruling defies this Court’s previous assessment that Zimmer presented reasonable defenses and rests on a legally flawed approach that fails to give weight to mitigating factors or consider changes in culpability over time,” Zimmer said in its briefing papers.
Stryker begs to differ. “The record demonstrates that Zimmer copied Stryker’s products, failed to investigate Stryker’s patents even after becoming aware of them, and failed to take any remedial action even after being found liable for infringement,” the company said in its papers.
Former Solicitor General of the U.S. Seth P. Waxman, now with Wilmer Cutler Pickering Hale and Dorr LLP, will argue for Zimmer.
Sharon A. Hwang of McAndrews Held & Malloy Ltd. will argue for Stryker.
The case is Stryker Corp. v. Zimmer Inc., Fed. Cir., No. 2017-2541, oral argument 12/3/18.