Tag Archives: infringement

Medical Device Maker Awarded $248.7 Million In Patent Case

A U.S. district court in Michigan recently ruled that Zimmer Inc. must pay Stryker Corp. over $248 million for willful infringement of multiple patents covering wound debridement technology, following a ruling by the U.S. Supreme Court. The litigation dated back to December 2010, when a lawsuit filed by Stryker claimed rival Zimmer’s Pulsavac Plus device for cleaning wounds during orthopedic surgical procedures infringed three of Stryker’s patents for a surgical cleaning wand.  In 2013, a federal jury awarded Stryker $70 million in damages plus royalties, after which the presiding U.S. district court judge ruled the infringement was willful and awarded enhanced treble damages and reasonable attorneys’ fees.

On appeal to the U.S. Court of Appeals for the Federal Circuit, the nation’s only appellate-level court with jurisdiction to hear patent cases, the Federal Circuit upheld the U.S. district court’s finding that Stryker’s patents were valid and infringed by Zimmer. However, the Federal Circuit determined Zimmer’s infringement was not willful and thus overturned the enhanced damages award and attorneys’ fees.  Under the governing two-prong test set forth in In re Seagate Technology, LLC, a patentee could only be awarded enhanced damages for willful infringement if it proved by clear and convincing evidence that: (1) the infringer acted with “objective recklessness;” and (2) the infringer acted with “subjective knowledge” of wrongdoing.

Stryker appealed to the U.S. Supreme Court. The Supreme Court agreed to hear the case in tandem with Halo Electronics, Inc. v. Pulse Electronics, Inc., wherein the Court expressly rejected the Federal Circuit’s two-prong test as “unduly rigid.”  The Supreme Court in Halo explained that the Federal Circuit’s test allowed some of the worst patent infringers to evade liability through the ingenuity of their attorneys, and therefore redefined the standard with a renewed emphasis on an infringer’s subjective, pre-litigation knowledge.  The Supreme Court also lowered the burden of proof from clear and convincing evidence to a preponderance of the evidence and increased the district court’s discretion to decide when to award enhanced damages, noting it should “be reserved for egregious cases typified by willful misconduct.”  The Federal Circuit remanded the case back to the U.S. district court to apply the Supreme Court’s new enhanced damages standard.

On remand, the U.S. district court judge ruled that Zimmer must pay over $248 million for willfully infringing Stryker’s patents, reaffirming the court’s earlier decision awarding enhanced treble damages on the 2013 jury verdict. The court found that “Zimmer’s conduct was more egregious than most, and Zimmer is precisely the type of egregious infringer the Supreme Court had in mind when it relaxed the… standard to provide district courts with the freedom to exercise their discretion to enhance damages in cases of willful infringement.”  Remarkably, the court noted that while the jury’s original $70 million verdict “may sound large in the abstract, but in context may not be enough, without enhancement, to deter infringing conduct” after finding Zimmer had sales of $7.7 billion in 2016.  The case is Stryker Corp. v. Zimmer Inc., Case No. 1:10-cv-01223, in the U.S. District Court for the Western District of Michigan and the patents-in-issue are U.S. Patent Nos. 6,022,329; 6,179,807; and 7,144,383.

Post-Halo decisions such as Stryker Corp. v. Zimmer Inc. highlight the importance of conducting timely, competent analysis of a patent to help avoid enhanced damages for willful infringement.  For instance, conducting a freedom-to-operate or validity opinion before a product goes into production may demonstrate good faith and impact the opinion’s usefulness as a defense against willful infringement claims.  The competence and qualifications of the person reviewing patents at issue also factor into a court’s consideration of enhanced damages, wherein courts have held that the opinions of people without expertise in reading patent claims are not a good faith belief in non-infringement.  Thus, it is important to speak with a patent professional at the onset to investigate the merit of any patent infringement concerns to help avoid enhanced damages for willful infringement in the future.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation.  Holst is a former Patent Examiner in the Biomedical Device Technology Center at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary.  At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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Manufacturer Not Liable Of Patent Infringement For Constructing One Component In U.S. And Remaining Components Abroad

On February 22, 2017, the United States Supreme Court addressed whether a manufacturer—who shipped a single component of a multicomponent invention outside the U.S. for assembly abroad—could be held liable for patent infringement under 35 U.S.C. § 271(f)(1) of the Patent Act. In Life Techs. Corp. v. Promega Corp., the Supreme Court chose quantity over quality and held that the supply of a single component cannot constitute a “substantial portion” of an multicomponent invention to trigger patent infringement liability.  No. 14-1538, 2017 WL 685531 (U.S. Feb. 22, 2017).

Relevant Law

35 U.S.C. § 271(f) of the Patent Act was enacted by Congress to plug a loophole in the enforceability of patent rights by reaching components that are manufactured in the U.S. but assembled overseas. §271(f)(1) states:

 (1)   Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

Thus, a manufacturer may be liable for patent infringement under §271(f)(1) for shipping from the U.S. “all or a substantial portion” of the components of a patented invention when those components are assembled abroad. Notably, the Patent Act did not define the phrase “substantial portion” as used in the context of §271(f)(1).

Background

In Life Techs. Corp., Promega was the exclusive licensee to a patent claiming a toolkit for genetic testing.  The toolkit was utilized by law enforcement agencies for forensic identification, in addition to clinical and research institutions.  Promega sublicensed the toolkit patent to Life Technologies for the worldwide manufacture and sale of the toolkit in limited law enforcement fields of use.  Life Technologies manufactured one component—of the five component toolkit—in the United States.  That single component was then shipped to Life Technologies’ facility in the United Kingdom where it was combined with the remaining four components of the toolkit.  When Life Technologies began selling these kits outside of the licensed fields of use, Promega sued for patent infringement under § 271(f)(1).

The jury returned a willful infringement verdict of $52 million in favor of Promega. The district court, however, granted Life Technologies’ motion for judgment as a matter of law finding that §271(f)(1)’s reference to a “substantial portion of the components” did not embrace the supply of a single component.  The U.S. Court of Appeals for the Federal Circuit reversed and reinstated the jury’s verdict.  The Federal Circuit noted that the dictionary definition of “substantial” included “important” or “essential.”  Thus, in light of expert testimony that the component manufactured in the U.S. was a “major” component of the toolkit, the Federal Circuit concluded the “substantial component” requirement of §271(f)(1) was satisfied.

U.S. Supreme Court

On appeal, the essential question before the Supreme Court was whether a “substantial portion” under §271(f)(1) referred to either a quantitative or qualitative measurement. Because the Patent Act did not define the phrase “substantial portion,” the Court turned toward its ordinary meaning.  The Court found that, as did the Federal Circuit, “substantial” may refer to either quality or quantity.  The Court noted, however, that context was key and the disputed term’s neighbors were the first clue to its quantitative meaning.  In particular, the Court found that both “all” and “portion” conveyed a quantitative connotation, while a qualitative interpretation would have rendered the modifier “of the components” unnecessary.  Rejecting Promega’s proposal for a “case specific approach” that applied either a qualitative or quantitative test, the Court concluded that this would simply complicate matters for the factfinder.  Thus, the Court held that the phrase “substantial portion” has a quantitative, not qualitative, meaning under §271(f)(1).  The Court then expressly rejected the notion that a single component of a multicomponent patented invention would ever trigger liability under §271(f)(1).  Nevertheless, the Court failed to reveal a magic number of components that would constitute “a substantial portion” under §271(f)(1).  As Justices Alito and Thomas succinctly stated in their concurrence in part and in judgment, “today’s opinion establishes that more than one component is necessary, but does not address how much more.”

Practical Effects

The Supreme Court’s decision will likely spur further patent litigation, as questions remain over how many and what components may constitute “a substantial portion” to trigger §271(f)(1) liability. Thus, manufacturers and patent owners alike should speak with their patent attorney to determine whether a patent infringement suit can be avoided—or should be brought—if components of a multicomponent patented invention are built in the U.S.  Patent applicants with the United States Patent and Trademark Office should also speak with their patent attorney about crafting multiple claim limitations that are more likely to be satisfied by potential infringers.  For more information, please see: Life Techs. Corp. v. Promega Corp., No. 14-1538, 2017 WL 685531 (U.S. Feb. 22, 2017).

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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Should You Fight a Patent Infringement Demand Letter or Ignore it?

cease and desistRecently in The Wall Street Journal, Colleen Chien—an associate professor at Santa Clara University School of Law—suggests that the best way to respond to a cease and desist letter alleging patent infringement “may be to take a deep breath—and then do… nothing.”  Ms. Chien clarifies that “[t]his means… looking at the claim, determining that a license isn’t needed—and then filing the letter away, rather than responding.”  According to Ms. Chien, patent infringement demand letters often originate from so-called “patent trolls” on fishing expeditions looking for a quick settlement.  A “patent troll” is a pejorative term for a non-practicing entity that earns the majority of its revenue from the licensing or enforcement of its patents.  The Wall Street Journal article found patent trolls brought the majority of patent cases in the U.S. between January-June of 2015 and half the time targeted companies making less than $100 million.  Patent trolls also embark on campaigns that target entire industries for their use of another’s technology, such as Wi-Fi.  In these cases, a company’s contract with its technology provider might provide for patent infringement indemnification.  Ms. Chien recommends that “[a] company that keeps cool and does nothing is more likely to fly below the radar.”

On the other hand, The Wall Street Journal article cautions that there are times when doing nothing simply “won’t work.”  For instance, a larger competitor might file a patent infringement lawsuit against a startup to disrupt their business or squash the competition.  Other times, patent holders may be seeking high damage awards from a jury and are therefore more willing to pursue a patent infringement claim.  Indeed, The Wall Street Journal article points out that “any company that’s worth investing in will likely eventually appear on the radar of a patent troll.”  Ms. Chien recognizes that in these circumstances such attacks “aren’t likely to go away if ignored.”  Unless addressed quickly, a legitimate patent infringement claim could result in a finding of willful patent infringement and an award of treble damages.  Thus, it is important to speak with a patent professional at the onset of receiving a cease and desist letter to investigate the merit of any patent infringement allegation, determine the validity of the patent and recommend an appropriate response, whether it be a design-around, obtaining a license, or simply filing the letter away and resolving the threat by “doing nothing.”  See Colleen Chien, The Best Way to Fight a Patent Demand May Be to Do Nothing, The Wall Street Journal, November 23, 2015 at R5, available at http://www.wsj.com/articles/the-best-way-to-fight-a-patent-demand-may-be-to-do-nothing-1448248065.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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“Patent Trolls” In The United States Supreme Court

Patent

On May 26, 2015, a United States Supreme Court Justice used the derogatory term “patent troll” for the first time in the United States Supreme Court’s recorded history.  In Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct. 1920, 1932 (May 26, 2015) the Court was asked to decide whether a company’s good faith belief that a patent was invalid could be a legitimate defense to patent infringement, specifically induced infringement.  The case involved a patent held by Commil USA, an accused patent troll, for improving the implementation of a wireless network over a large area.  A “patent troll” is a pejorative term for a non-practicing entity (“NPE”) that earns the majority of its revenue from the licensing or enforcement of its patents.  Commil USA sued Cisco Systems for patent infringement based on Cisco System’s use of similar technology, and inducing its customers to also infringe.  In defense, Cisco Systems admitted that it knew about Commil USA’s patent and that it’s use of Commil USA’s patented technology could constitute infringement.  Nevertheless, Cisco Systems argued that it shouldn’t be liable for patent infringement because it believed, in good faith, that Commil USA’s patent was invalid.  The Court was encouraged to allow a belief-of-invalidity defense in order to combat “abusive patent assertion” by the so-called patent troll Commil USA.

In a 6-2 decision, the Court ruled against Cisco System, holding accused patent infringers can’t evade claims of “induced infringement” by arguing they had a “good faith belief” the patent was invalid.  Notably, the Court recognized patents have a statutory presumption of validity.  Thus, Cisco System’s mere belief that it was acceptable to infringe Commil USA’s patent simply because the patent was no good, undermined the statutory presumption of validity.  The Court’s decision ultimately took away a powerful defense for accused patent infringers.

While the Court’s decision was significant in itself, Justice Antonin Scalia’s strongly worded dissent was further noteworthy.  Disagreeing with the majority, Justice Scalia argued it was “impossible” for anyone to induce infringement if they believed the patent was invalid in the first place.  Justice Scalia claimed the majority’s decision had ultimately “increase[d] the in terrorem power of patent trolls”—the first time the contentious term had ever been used in a United States Supreme Court opinion.  Thus, Justice Scalia’s reaction to the majority’s decision in Commil USA, LLC v. Cisco Systems, Inc. indicates the debate over how to combat abusive patent litigation is far from over.

  • Luke C. Holst is a registered patent attorney with experience in both patent prosecution and patent litigation. Holst is a former Patent Examiner at the U.S. Patent and Trademark Office; Law Clerk to the Honorable Mark W. Bennett at the U.S. District Court for the Northern District of Iowa; and Legislative Counsel at the U.S. Capitol to an Iowa Congressman on the U.S. House of Representatives Committee on the Judiciary. At McGrath North, Holst works on patent issues, other intellectual property matters, and litigation.
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