Under theories of patent infringement, there are no criminal penalties, but civil remedies are available in the United States under federal law. There are several forms of relief available to the patent owner who has successfully proven patent infringement. In such a civil action, the courts may afford either or both of two basic remedies — a judgment for monetary damages or an injunction. An injunction may be either preliminary or permanent. To recover damages, a patent owner must prove either the infringer was notified of the infringement and continued to infringe or if the patented device contianed a patent notice. Infringement remedies are only available for infringements that occur during the life of the patent.
Federal Court, Arbitration or the ITC
Remedies for patent infringement are obtained through suit in federal court. Alternatively, the patent owner and accused infringer can agree to settle their dispute through arbitration or arbitration may be required by a contract under which the dispute arises. The court action is quite formal and provides for appeals. Arbitration, while following the general rules of court proceedings, is less formal, and the decision of the arbitrator is binding. Generally, arbitration is less costly and faster than litigation in federal court. In either forum, the same basic remedies are available.
An alternative source of limited relief is available through the International Trade Commission (ITC) when the source of the infringing products is outside of the United States. The ITC can exclude from importation products that infringe a valid U.S. patent and cause injury to a domestic business. However, no compensation for past infringement or attorney’s fees are available in an ITC proceeding.
The patent statutes provide for the recovery of compensatory damages as the primary monetary remedy for patent infringement. The primary award should be the best approximation of the amount necessary to restore the owner to the financial position he or she would have enjoyed had the infringer not engaged in unauthorized acts in violation of the owner’s exclusive patent rights. The three traditional modes of measuring compensatory damages are lost profits, established royalty, and reasonable royalty.
Lost profits, in the form of sales diversion, price erosion, or increased expense, are an appropriate basis for recovery when the patent owner or an exclusive licensee exploits the lawful exclusive rights of the patent directly by manufacture, use, or sale.
If the owner chooses to exploit the patent through offering licenses at an established royalty rate, that rate is the appropriate basis for recovery.
Absent sufficient evidence of lost profits or an established royalty, the patent owner may in any case recover against the infringer not less than a reasonable royalty. A reasonable royalty is the royalty that willing parties would have agreed to had they negotiated a license under the patent.
The remedy against continued infringement of a patent is an injunction. In a patent infringement suit, an injunction is a court order prohibiting the manufacture, use, or sale of the patented invention. Violation of an injunction is considered contempt of court and is dealt with by contempt proceedings. In such a proceeding, only violation of the injunction need be proven. This may, however, require proof of infringement, as when a prior infringer attempts to avoid the claims of the patent by modification of the article or process. Typically, an injunction is issued at the conclusion of the case after all of the evidence and arguments have been heard. However, under appropriate circumstances, a preliminary injunction may be issued at the outset, thereby suspending the contested conduct while the case is being decided.
Preliminary injunctions are issued to protect the patent owner’s rights during the time of the lawsuit and will not be granted except upon a strong showing of probable success on the merits, irreparable injury, and an imbalance in the relative hardships. The standards for preliminary injunctions in patent infringement suits are basically the same as for preliminary injunctions in other types of suits. The patent owner must establish (1) a strong probability of success on the merits at the final hearing and (2) irreparable injury. In patent cases, the courts require a particularly strong showing of probable success.
The U.S. Court of Appeals for the Federal Circuit applies a four-factor test for preliminary injunctive relief against patent infringement. No one factor, taken individually, is necessarily dispositive. The four factors are:
1. reasonable likelihood of success on the merits,
2. irreparable harm,
3. balance of hardships tipping in its favor, and
4. the impact of the injunction on the public interest.
A patent owner prevailing on the merits of a patent infringement claim will usually be granted a permanent injunction against future infringement unless the public interest otherwise dictates. An injunction may be denied as to further use or sale of particular items if a damage award has provided the patentee full compensation for those items.
Damages can only be awarded if proper notice of the patent was given. Notice is given by the patent owner by marking the patented product with the designation “patented,” or the abbreviation “pat.,” followed by the patent number. Such notice should be applied to the patented article or articles made by a patented process. If this is not possible, labels bearing the notice should be applied to the packaging for the articles. In the absence of this marking, actual notice of the specific patent must be given to an infringer, and damages can then only be obtained for infringements after notice.