Court Reinstates Punitive Damages Award
January 17, 2001
Last Month at the Federal Circuit - February 2001
Judges: Judges: Archer (author), Newman, and Lourie
In Tronzo v. Biomet, Inc., No. 00-1007 (Fed. Cir. Jan. 17, 2001), the Federal Circuit affirmed a district court’s reduction of compensatory damages, but reversed the reduction of punitive damages.
Dr. Raymond Tronzo charged Biomet, Inc. (“Biomet”) with infringement of U.S. Patent No. 4,743,262 (“the ‘262 patent”) and asserted state law claims of breach of confidential relationship, fraud, and unjust enrichment. Tronzo alleged that he had confidentially disclosed to Biomet his ideas relating to his hip implant technology and that Biomet had misappropriated those ideas and integrated them into Biomet’s implant technology. A jury found in favor of Tronzo on all counts and Tronzo was awarded over $7 million in compensatory damages and $20 million in punitive damages. On appeal (“Tronzo I”), the Federal Circuit affirmed the district court’s judgment on the state law counts, but reversed the district court’s finding of patent infringement, remanding to the district court for reconsideration of the damages calculation.
On remand, the district court reduced Tronzo’s compensatory damages from $7,134,000 to $520, the amount that Tronzo had spent in patent prosecution costs. In light of that reduction, the district court also reduced the punitive damages to $52,000. Additionally, the district court denied Tronzo’s motion for a new trial on damages.
On appeal, the Federal Circuit affirmed the district court’s reduction of Tronzo’s compensatory damages, finding that Tronzo had failed to establish his actual damages beyond the costs incurred from prosecution of his patent. Specifically, the Federal Circuit rejected Tronzo’s attempt to use either Biomet’s profits from its hip implant device or Biomet’s payments to the designers of that implant as a surrogate measure of Tronzo’s actual damages. Furthermore, the Federal Circuit rejected Tronzo’s argument that the district court’s reduction in the compensatory damages constituted a remittitur requiring a new trial.
As to the district court’s reduction of Tronzo’s punitive damages award, the Federal Circuit reversed, holding that Biomet was barred from raising the issue before the district court on remand. As an initial matter, the Federal Circuit noted that Biomet had never specifically raised the issue of the punitive damages award in Tronzo I despite the fact that the district court had awarded punitive damages. According to the Federal Circuit, since the issue of compensatory damages was within the scope of the initial judgment of the district court, it was necessarily within the scope of the Tronzo I mandate and was, thus, barred from further review on remand. Rejecting Biomet’s arguments that the constitutionality of the punitive damages became an issue only after the compensatory damages had been reduced, the Federal Circuit asserted that Biomet could have raised the constitutionality of the punitive damages in Tronzo I. Finally, the Federal Circuit held that this was not an exceptional case meriting the district court’s revisiting of the punitive damages award because there had been no substantial change in the evidence.