Patent cases in the U.S. can produce eye-popping judgments that can make or break a company. One big reason such lawsuits, or even the threat of one, are so scary is because of a rule that lets judges triple the damages.
On Tuesday, the Supreme Court will take a closer look at how those triple damages should operate.
The case before the court is actually two cases, both of which involve a manufacturing company that wants “enhanced damages” from a defendant that infringed its patents.
While the legal details are fairly technical, the outcome is important because the Supreme Court’s ruling could make it easier for patent owners to obtain triple damages (the law allows for “up to three times the amount”) in the future. Apple (AAPL) , for instance, asked to triple the enormous verdict it won against Samsung (SSNLF) in 2013, but a judge refused after finding Samsung’s behavior did not qualify for the extra penalty.
Currently, the triple damages rule involves a test that requires a patent owner to show “clear and convincing” evidence that the defendant should have known about the patent but decided to infringe it anyway.
That test is a hard one to meet, and so the patent-owning companies in the case—Halo Electronics and Stryker Corp.—want the Supreme Court to make the criteria less rigid. The companies point to a ruling from last year in which the court threw out a similar rigid test in order to make it easier for parties in patent cases to obtain attorneys fees.
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The defendants, supported by tech companies like Google (GOOG) and Intel (INTC), say the history of damages law is on their side, and the Supreme Court should leave the existing standard in place.
So what’s going to happen? According to Jose Patino, a partner at Foley & Lardner who specializes in intellectual property, the court doesn’t like rigid rules in patent cases, but is also likely to try to find a middle ground to avoid opening the floodgates to triple damages claims.
“I think what will happen is the court will change the rule and modify the existing approach but there won’t be a wholesale abandonment of it like there was in Octane,” he said, citing the last year’s case over attorneys fees.
U.S. Sen. Chuck Schumer speaks to Fortune about “patent trolls”:
The triple damages case comes amid ongoing controversy over the U.S. patent system, especially over the role of nonpracticing entities (known derisively as “patent trolls”), which are shell companies whose only business is to seek licenses or file patent lawsuits. Earlier this month, for instance, a Texas jury ordered Apple to pay one such entity $625 million—a ruling that Apple is appealing.
While Congress appeared poised to pass a long-awaited patent reform law last spring, the process appears to have stalled once again, leaving it primarily to the Supreme Court to address the issues. The court’s task is more difficult as the sudden death of Justice Antonin Scalia increases the likelihood of 4-4 ties. (You can learn more about the legal details at SCOTUSblog and PatentlyO).
