Primer on Patent Infringement: Enhanced Damages
Ben J. Smith is a patent attorney at Suiter Swantz IP. Ben received his B.S. in Mechanical Engineering from the University of Nebraska Lincoln and his Juris Doctor with distinction from the University of Nebraska College of Law.
Primer on Patent Infringement: Enhanced Damages
Parties found to infringe a patent may be subject to enhanced damages in egregious cases beyond typical infringement. District courts may consider the Read factors when determining whether to award enhanced damages.
What are Enhanced Damages?
The statutory provision for enhanced damages is defined in 35 U.S.C. § 284, which states that “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284. Here, the damages refer to “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.” Id. Thus, enhanced damages of up to three times the damages adequate to compensate for the infringement are permissible.
The purpose of enhanced damages is to serve as a deterrent against patent infringement. By imposing significantly higher financial penalties for infringers, the law seeks to discourage potential violators from engaging in unlawful use of patented technology. The possibility of facing treble damages can be a powerful motivator for businesses and individuals to respect intellectual property rights, fostering a culture of innovation and fair competition.
When are Enhanced Damages Appropriate?
The statutory provision for treble damages is silent as to when enhanced damages are appropriate. The Supreme Court has found that enhanced damages should “generally be reserved for egregious cases typified by willful misconduct.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1933-34 (2016).
The Court further indicates that district courts have discretion to award enhanced damages in such egregious cases typified by willful misconduct beyond typical infringement.
What are the Read Factors?
While enhanced damages play a crucial role in preserving the integrity of the patent system, courts must strike a balance between protecting patent holders and preventing misuse of this provision to target legitimate competition.
Courts may consider the following non-exhaustive list of factors, commonly called the Read factors, to determine when enhanced damages are appropriate. The Read factors include: (1) whether the infringer deliberately copied the patentee’s ideas or design; (2) whether the infringer, upon knowing of the other’s patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; (3) the infringer’s litigation behavior; (4) the infringer’s size and financial condition; (5) the closeness of the case; (6) the duration of the infringer’s misconduct; (7) remedial action taken by the infringer; (8) the infringer’s motivation for harm; and (9) whether the infringer attempted to conceal its misconduct. Pierce Mfg. v. E-One, Inc., 8:18-cv-617-TPB-TGW, 1 (M.D. Fla. Feb. 16, 2022) (citing to Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992).
Conclusion
Enhanced damages under 35 U.S.C § 284 serve as a potent weapon in the arsenal of patent holders to safeguard their intellectual property rights. By punishing infringers with treble damages, courts send a clear message that patent infringement will not be tolerated. As technology continues to advance, it is essential to uphold the patent system's credibility to foster innovation, reward inventors, and maintain a level playing field in the marketplace.
Suiter Swantz IP is a full-service intellectual property law firm providing client-centric patent, trademark, and copyright services. If you need assistance with an intellectual property matter and would like to speak with one of our attorneys, please contact us at info@suiter.com.
The Bayh Dole Act and the Analysis of Patent Rights
Ben Smith is a patent attorney at Suiter Swantz IP. He received his B.S. in Mechanical Engineering from the University of Nebraska Lincoln and his Juris Doctor with distinction from the University of Nebraska College of Law. Ben is admitted to the Nebraska Supreme Court and the U.S. District Court, District of Nebraska. He is also registered to practice before the United States Patent and Trademark Office.
Federal agencies commonly provide funding to private industry contractors for the research and development of inventions. Depending upon the technology area of the invention, the federal agency may be the primary or only infringer of a patent associated with the invention.
Thus, patent licensing between the contractor and the federal agency should be a consideration for the contractor prior to entering an agreement with the federal agency. This article provides a brief introduction of patent licensing for contractors entering into Funding Agreements and “other transactions” with federal agencies.
Funding Agreements are a statutorily defined term between federal agencies and contractors, and are further subject to provisions of the Bayh-Dole act. Under the Bayh-Dole Act, the contractor owes various licensing obligations to the federal agency for subject inventions. Other transactions between the federal agencies and contractors are not subject to provisions of the Bayh-Dole act. Advantageously, the contractor may negotiate with the federal agency for patent licensing of inventions subject to the other transactions.
Funding Agreements Defined
The Bayh-Dole Act generally describes the patent rights of Contractors for inventions discovered during the course of government Funding Agreements. See 35 U.S.C. 202-204; 37 CFR 401; FAR parts 27, 52. Funding Agreements are defined as “any contract, grant, or cooperative agreement entered into between any federal agency other than the Tennessee Valley Authority, and any Contractor for the performance of experimental, developmental, or research work funded in whole or in part by the federal agency. This term also includes any assignment, substitution of parties, or subcontract of any type entered into for the performance of experimental, developmental, or research work under a funding agreement as defined in the first sentence of this paragraph.” 37 CFR Section 401.2.
Patent Rights under Funding Agreements
Generally, contractors may not assert patent infringement against the United States, or a third party on behalf of the United States, for inventions developed under a Funding Agreement. Prior to the Bayh-Dole Act, contractors were required to assign patent rights funded by the federal agency, unless the federal agency otherwise made an exception. The Bayh-Dole act now permits contractors to retain ownership of patent rights for inventions made under Funding Agreements. In this regard, the contractor may assert the patent against accused infringers. However, the Bayh-Dole act requires the Funding Agreement to include a provision that the federal agency shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any subject invention. See 35 U.S.C. 202(c)(4). Patents prepared for the contractor must include the following statement at the beginning of the patent application: “This invention was made with government support under (identify the contract) awarded by (Identify the Federal Agency). The government has certain rights in the invention.” See 35 U.S.C. 202(c)(6); MPEP 310. In this regard, the federal agency, or a party acting on behalf of the United States, may assert the license as a defense to infringement of the patent claims. Thus, the contractor is prevented from using the patent to exclude the federal agency from practicing the claimed invention due to the government license rights stemming from the Bayh-Dole act.
An Alternative to Funding Agreements – Other Transactions
As an alternative to Funding Agreements, the federal agency may offer “other transactions” with reduced obligations regarding patent license rights. The other transactions may take the form of Technology Investment Agreements (TIAS) or prototype transactions. See 10 U.S.C. 2371, 2371b. Under the other transactions, the contractor may negotiate the allocation of intellectual property rights, including licensing, while also receiving funding to provide Research, Prototypes, or Production. The ability for the contractor to negotiate license rights may be advantageous where the United States is the primary or only potential infringer of the conceived invention. In fact, the ability of contractors to negotiate license rights may be one reason (among others) why federal agencies have substantially increased funding to contractors by the way of other transactions.
Key Takeaways
Contractors may seek funding from federal agencies in the form of Funding Agreements or other transactions. Prior to engaging in Funding Agreements, the contractor should consider the obligations for patent licensing to the federal agency under the Bayh-Dole act. The contractor should also consider whether the federal agency offers other transactions with reduced patent licensing requirements. This analysis should further be supplemented by a review of the available Funding Agreements and other transactions with contractor-specific intellectual property goals. Further intellectual property goals may include the allocation of rights for software and Technical Data between the contractor and the funding agency and/or government reporting requirements for subject inventions.
The views and opinions expressed in this paper are solely those of the author in his private capacity and do not represent those of Suiter Swantz pc llo. This article is provided for information purposes and is not intended to provide substantive legal advice. Further information may be found by contacting legal counsel.
Suiter Swantz IP is a full-service intellectual property law firm providing client-centric patent, trademark, and copyright services. If you need assistance with an intellectual property matter and would like to speak with one of our attorneys, please contact us at info@suiter.com.