Patents

by Mike Masnick


Filed Under:
east texas, free speech, judge ward, patents

Companies:
innolux



Judge Makes Company Pay More For Infringement Because The CEO Complained Publicly About The Patent System

from the first-amendment-issue? dept

Matt writes in and summarizes the details of a ridiculous ruling perfectly below, so I'll let him takeover and chime in again at the end:
"On Friday, a Texas federal judge in the U.S. District Court for the Eastern District of Texas issued an astonishing order. In essence, it fined InnoLux because its CEO stated his belief, in China, that the US sometimes over-enforces patents.

InnoLux admitted infringing some of Mondis's patents in connection with computer monitors. A jury found some of the infringement to be willful. So InnoLux was in a bad place, and was warming up to get skewered on damages. The judge (Judge Ward, who is famous for his scathing opinions) ordered that a 0.75% royalty be paid for all of the infringing monitors sold. But then the judge caught wind of a statement InnoLux's CEO made to a Chinese newspaper, that "patent infringement is 'being taken too seriously sometimes.'" The judge doubled the royalty rate to 1.5%. His basis?
"The court finds that this statement by InnoLux's CEO shows InnoLux's lack of respect for this court and the jury's verdict. It is also an affront to the U.S. patent system - a system of constitutional origin. The court, therefore, finds that this also warrants a strong enhancement because it further reflects the egregiousness of InnoLux's conduct."
This is an astonishing usurpation of authority. The patent law does not require (or permit) damage enhancements based on evidence of a lack of respect for judges or verdicts. Instead, "upon a finding for the claimant the court shall award 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." This means lost profits or a reasonable royalty or a little of both, but at least a reasonable royalty.

But even if the court had power to set damages at his own discretion, not bounded by a requirement that he award just enough to be "adequate to compensate," this would still be shocking. First, criticizing things that are "constitutional in origin" is the great American pastime, and is certainly not lawfully restricted by a court. American courts may only enforce Congressional laws (since Erie v. Tompkins, there is no federal common law). So whatever authority the court thinks it has to spank someone for something non-damaging that they have said must come from the court's interpretation of a Congressional enactment. But since Congress shall make no law restricting the freedom of speech, any interpretation that provides for a damage enhancement on the basis of non-damaging speech must be incorrect. In any event, the First Amendment amended the document containing the IP clause, and therefore supercedes it.

Should I be worried if I criticize a regime that permits states to sell booze? While Constitutional in origin, it seems to make liquor a publicly owned and distributed good. Do we want to be a country of socialized inebriation? Must we tolerate bourbon lines? What's next, gin stamps?

The fact that the Framers missed the boat on patents does not, and should not, mean we cannot criticize their miss. Even if they got it right in their first outing, if it is being misapplied now given modern circumstances (it is) we should be free to point that out however and wherever we want without fear of government intrusion or repercussion.
Judge Ward, of course, is the judge who put Eastern Texas on the map as the place to go for patent lawsuits, so it's no surprise that he seems to think saying something bad about the US patent system opens you up to greater damages. But it seems like a pretty serious First Amendment issue when the judge is, quite clearly, punishing someone for their speech. What's really scary is that this could create a significant chilling effect on the people who need to speak out most: those attacked over questionable infringement claims. If they now know that they can face even higher damages merely for complaining about the patent system that put them in this mess in the first place, isn't that a huge problem?

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  1. icon
    Marcus Carab (profile), 6 Oct 2011 @ 12:20pm

    Re: Re:

    This in no way allows for the court to double the "adequate compensation" because the CEO of the company said that he thinks the system is too strict. The wording of the law here specifically states that the damages award shall be for "adequate compensation of the infringment" it does not give leave to punish the company for commments made about the system.

    Even if you insist, wrongly as it turns out, that the judge has the standing in law to punish the company more just because there *might* be a chance the company *could* infringe again in the future, the judge simply could not punish them for infringments that:

    A) havnt happened yet
    B) havnt been found guilty of additional infringements


    I don't like this ruling, but there are a LOT of errors in what you just said

    - the law absolutely does allow additional punitive damages (up to triple, in fact) for willful infringement, which a jury had already found this to be

    - In a weird way, yes the court CAN punish them for infringements that haven't happened yet. That's what the court-mandated royalty rate is: it's not a legal "license", it's actually a royalty to cover "future willful infringement" - basically it says "yes you can continue to infringe this patent as long as you pay to do so"

    In the past, future infringement would typically be prevented with an injunction, but a case involving eBay changed that. Now the plaintiff is, in a lot of cases, powerless to prevent future infringement but able to receive a court-ordered royalty for it.

    It's pretty weird, I know...

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