Ensure Fair Damages Awards that Incentivize Innovation
Damages awards should fairly compensate patent owners based on the economic value contributed by the patented invention. Damages below this level are unfair to patent owners and can diminish incentives to innovate, while damages that overcompensate rights holders result in a windfall and encourage speculative and wasteful litigation. Under current law, supracompensatory awards occur too frequently because they are often not based on competent evidence of economic value or monetary harm to the plaintiff. These awards make little sense when viewed in the context of complex technology products that can incorporate tens of thousands of distinct innovations of which the plaintiff’s invention is only one tiny piece. To support juries and courts in reaching fair damage awards, we must craft legal rules that are based on economic reality, reflect the complexity of modern technologies, and allow consideration only of evidence that is grounded in well-founded economic analysis.
Enhanced damages for willful infringement are appropriate only in egregious circumstances, such as those involving “wanton and malicious” behavior. Unfortunately, baseless claims of willfulness are routinely made in garden-variety infringement cases. Unfounded allegations of willfulness are distracting and prejudicial at trial, and courts should either dismiss them at the pleadings stage or prevent the jury from hearing them. The 2016 Supreme Court decision in Halo v. Pulse took a step in the wrong direction when it made a defendant who had an objectively reasonable defense to the alleged infringement potentially liable for enhanced damages. This decision should be reversed, and enhanced damages should only be imposed when the infringer acts despite an objectively high likelihood that its actions constitute infringement of a valid patent; and this risk was actually known to the infringer or so obvious that it should have been known.
Without correction, the Supreme Court’s subjective test for willfulness will undermine the patent system’s intended function of encouraging the broad dissemination of technical information. The system cannot fulfill this critical role if researchers and technologists are prevented from reading patents due to fears that this will be used as the basis for a future claim of willful infringement.