By Jeff Steck
In a recent district court decision, Andrew Corp. v. Beverly Mfg. Co., (N.D. Ill. Feb. 16, 2006), already summarized in these pages, the court excluded a non-infringement opinion from evidence when opinion counsel—because of a conflict of interest—ought never to have provided the opinion in the first place. (The opining law firm found itself representing both the patentee and the accused infringer.) The case, then, will be tried under the fiction that the accused infringer, Beverly, knew of the relevant patent but failed to obtain legal advice. Beverly, of course, will be at much greater risk of enhanced damages for willful infringement. The court appreciated that Beverly may be guilty of nothing worse than an unfortunate selection of counsel, and it recognized that choosing a remedy was “unpleasant,” but the court did not take into account the possibility that any resulting award of enhanced damages may well be unconstitutional.
Enhanced damages in an infringement action are a form of punitive damages, and the award of punitive damages is subject to substantive Due Process restrictions. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). Consistent with Due Process, the Supreme Court requires that “punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.” Id. at 419. The “reprehensible” actions that permit an award of punitive damages must themselves be tied to the actions that gave rise to liability in the first place:
A defendant’s dissimilar acts, independent from the acts upon which liability was premised, may not serve as the basis for punitive damages. A defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.538 U.S. at 422-423. It is by no means clear that the actions of Beverly’s counsel—even if they can be imputed to Beverly—were sufficiently reprehensible to warrant what (in a typical patent case) could amount to millions of dollars in enhanced damages. Even if they were, the connection between Beverly’s purported infringement and its counsel’s ethical lapse is tenuous: it would have done little good to the patentee if Beverly had retained different opinion counsel. (To the contrary, if any counsel were going to advice Beverly to cease infringement, one would think that counsel representing the patentee itself would have done so.)
Through little or no fault of its own, Beverly has been deprived of what is traditionally the most important exculpatory evidence on willfulness. The substantive effect of Due Process on enhanced damages for willful infringement is not entirely clear, but it is questionable whether punitive damages can be based on a fictitious reconstruction of an infringer’s state of mind.
Jeffrey Steck is a partner at MBHB and an experienced litigator. He was also an editor of the California Law Review at the University of California at Berkeley, where he received his JD.