Patent Infringement Penalties
The costs may be significant to take an infringer to court, but if the patentee can prove infringement, the rewards can far outweigh the risks. Just ask Centocor, a subsidiary of Johnson & Johnson. Centocor claimed that Humira, a rheumatoid arthritis drug developed by Abbott Laboratories, infringed on an arthritis treatment it licensed from New York University. The courts agreed and, in June 2009, awarded Centocor $1.67 billion -- the largest patent infringement award in history, at the time we wrote this [source: Poltorak].
To see how and why an award can get so big, let's look at all of the financial damages that typically make up a patent infringement judgment.
- Lost profits -- If the patent holder proves that he or she lost profits because of the infringement, the patent holder can recover money for the sales he or she would have made, as well as interest on the money owed.
- Royalties-- Patentees who license their inventions to other companies receive royalty payments, money paid by licensees for the right to use the patent. When an infringer loses a patent case, that party becomes, in essence, a licensee and may have to pay a reasonable royalty for any future sales derived from the patented product, device or technology.
- Court costs -- In most patent infringement cases, both parties named in the suit are responsible for their own court costs. In some cases, however, the infringer may have to pay the patent holder's court costs.
- Treble damages -- Finally, a court may decide to award treble damages to a patentee, especially in cases of willful infringement. This refers to a financial award worth three times the amount of the actual financial losses suffered. This may seem excessively harsh, but the government imposes stiff penalties to discourage individuals or companies from using someone else's ideas in the first place.
In addition to the financial award, the court may issue a post-trial injunction -- an order that the patent defendant stop infringing the patent now and in the future. A patent holder may also request the court to issue a preliminary injunction, which prevents the accused infringer from using or selling the patent during the trial. To win a preliminary injunction, the patentee must prove to the court that he or she can easily defend any validity claims made against the patent.
Winning a patent infringement case may seem like the end of a long war, but many companies are involved with numerous cases at the same time. Apple Computers, for example, has 3,013 patents in its portfolio and faces ongoing patent infringement battles on many fronts [source: Elmer-DeWitt]. Its line of mobile technology patents alone has led to lawsuits with Nokia, EMG, Elan Microelectronics, HTC and more [source: Krill]. Because of this constant patent conflict, companies try to reduce their liability by taking out intellectual property insurance. We'll explore that topic next.