The 'Read' 'Enhanced Damages' Standard Must Be Applied Separately From The 'Seagate' 'Willful Infringement' Standard

Article by Derrick L. Wang*

This article previously appeared in Last Month at the Federal Circuit Newsletter, July 2011

Judges: Newman (author), Clevenger, Bryson

[Appealed from D. Minn., Judge Schlitz]

In Spectralytics, Inc. v. Cordis Corp., Nos. 09-1564, 10-1004 (Fed. Cir. June 13, 2011), the Federal Circuit affirmed the district court's determination that the plaintiff Spectralytics, Inc.'s ("Spectralytics") U.S. Patent No. 5,852,277 ("the '277 patent") was valid, that the defendants Cordis Corporation ("Cordis") and Norman Noble, Inc. ("Noble") willfully infringed the '277 patent, and that calculation of damages at a 5 percent royalty rate was valid. The Court, however, vacated the district court's denial of enhanced damages and attorneys' fees to Spectralytics, and remanded the case for reapplication of the law on those two issues.

Spectralytics and Noble manufacture medical devices, including coronary stents. At issue in this appeal is a process for cutting surgical devices, performed prior to Spectralytics' '277 patent by "Swiss-style" machines. The workpiece and the cutting tool on Swiss-style machines are separately and rigidly mounted to dampen vibration, but the vibration occurring during the cutting process nevertheless causes unwanted movement of the workpiece and cutting tool, thus limiting the precision of cutting. The '277 patent, by contrast, specifies that the workpiece be rigidly mounted directly on the cutting tool. Therefore, if the workpiece and the cutting tool do vibrate, they move in precise unison, eliminating relative movement between them and thus improving the precision and intricacy of cutting.

Spectralytics and Noble had both hoped to be selected by Cordis as a producer of surgical devices. However, after representatives of Noble toured the Spectralytics plant, Noble built a machine in which, like the '277 patent, the workpiece was mounted directly on the cutting tool. Cordis then entered into an exclusive supply contract with Noble, agreeing to indemnify Noble for any patent infringement.

Spectralytics sued Cordis for infringement of its '277 patent and added Noble as a defendant thirteen months later. The jury in the district court sustained the validity of the '277 patent, found that Cordis and Noble willfully infringed the patent, and awarded damages calculated as a 5 percent royalty on Noble's infringing sales to Cordis. The district court, however, denied Spectralytics' motion for enhanced damages and...