Source: http://www.sufficientdescription.com/2017/06/entitlement-to-punitive-damages.html
Timestamp: 2019-04-20 17:03:00+00:00

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I have to admit, I’m not doing very well with this case. Monday’s post tried to correct a misinterpretation in my post on the 2013 FCA Liability decision affirming that Airbus / Eurocopter was entitled to punitive damages, and only a few hours after posting, I added an addendum to reflect another new interpretation. Maybe I should declare defeat and move on. But quantum of punitive damages and entitlement are intimately linked – entitlement to punitive damages turns on the court’s outrage at the infringer’s conduct, and the quantum must be proportionate to that same outrage – which is why I had to reexamine the Liability decision in order to blog on the punitive damages aspect of the Damages decision. And the issue is an important one. Punitive damages have traditionally been awarded only in exceptional circumstances in Canadian patent cases, and Bell is the case which comes closest to typical infringing behaviour. (Contrast the previous leading case, Lubrizol, in which the infringer breached an interlocutory injunction). Because punitive damages are a quasi-criminal sanction (Whiten 2002 SCC 18, ), parties must be able to predict, and so avoid, conduct that will attract punitive damages. So in this post, I will try, once again, to what substantive rules governing entitlement to punitive damages emerge from FCA Liability 2013 FCA 219 aff’g FC Liability 2012 FC 113. Consider this the post that I should have written on the punitive damages aspect of the 2013 FCA Liability decision.
I think that the objections to allowing juries to go beyond compensatory damages are overwhelming. To allow pure punishment in this way contravenes almost every principle which has been evolved for the protection of offenders. There is no definition of the offence except that the conduct punished must be oppressive, high-handed, malicious, wanton or its like--terms far too vague to be admitted to any criminal code worthy of the name. There is no limit to the punishment except that it must not be unreasonable.
These concerns still ring true in Canadian law. In the leading case, Whiten v. Pilot Insurance Co 2002 SCC 18, , the SCC recognized that “the incantation of the time-honoured pejoratives (‘high-handed’, ‘oppressive’, ‘vindictive’, etc.) provides insufficient guidance (or discipline) to the judge or jury setting the amount,” and called for “a more principled and less exhortatory approach.” But the principles the Court elaborated are hardly more determinate. The standard for imposing punitive damages is that conduct at issue has been “high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour” . With due respect, this is not much different from the “whole gamut of dyslogistic judicial epithets” that the Court had earlier disparaged . While the Court elaborated at length on the relevant principles, that does not in itself provide substantial certainty on the facts of a particular case.
In the US, enhanced damages are available for willful infringement, which, in broad terms amounts to knowing infringement of a patent when the infringer lacked a reasonable belief that the patent was invalid or not infringed, corresponding roughly to the second and third factors listed above. Empirical studies suggest that willfulness is routinely alleged in patent infringement cases in the US (over 90% of the time) – presumably whenever the defendant continues practicing the patent after the initial demand letter – and a determination on willfulness is made in about one-third of decided cases, and the infringer is determined to have infringed willfully about 40% of the time: see Kimberly A. Moore, Empirical Statistics on Willful Patent Infringement, 14 Fed. Cir. B.J. 227, 232, 234 (2004); Seaman, Willful Patent Infringement and Enhanced Damages After In re Seagate: An Empirical Study, 97 Iowa L. Rev. 417, 441 tbl.1 (2012). While these statistics are somewhat out of date, considering the recent changes in the law, in broad terms they nonetheless suggest that if knowing infringement of a patent which the infringer believes to be valid is enough to justify punitive damages, “don’t worry about it,” will not be appropriate advice. In short, it matters which of the factors listed above are necessary to an award of punitive damages.
In Bauer v Sport Maska 2014 FCA 158, decided after Bell Liability, the FCA reviewed the cases and stated that it is “”uncontroversial . . . that punitive damages are not awarded simply because a defendant knowingly infringed a patent”  and see to the same effect, , . Additional elements are required. In particular, breach of an interlocutory or permanent injunction may attract punitive damages: see Lubrizol Corp. v. Imperial Oil Ltd, 58 C.P.R. (3d) 167, (FCTD) rev’d  3 FC 40, 67 CPR(3d) 1 (FCA) (dicussed in FC Damages [387-88]; Apotex Inc. v. Merck & Co 2002 FCT 626 (FCTD). The FCA in Bauer described Eurocopter as being a case in which “the award of punitive damages was based on the defendant’s willful infringement of a patent which it knew to be valid, combined with deliberate and outrageous bad faith conduct” .
The question then is which of the additional elements in Bell were necessary. Another question, which is just as important in practical terms, is how the elements, particular validity and knowledge, are proven.
 Bell Helicopter also submits that even if punitive damages are available in patent infringement cases, they were not appropriate in this case. It submits that infringing a patent is not conduct which intrinsically merits punishment where the infringer did not know of the existence of the patent or reasonably held that the patent was invalid. I agree that it would be difficult to uphold a punitive damages award in such circumstances. However, these are not the circumstances applicable to this case.
 Where a person infringes a patent which it knows to be valid, appropriates the invention as its own, and markets it as its own knowing this to be untrue, punitive damages may be awarded when an accounting for profits or compensatory damages would be inadequate to achieve the objectives of retribution, deterrence and denunciation of such conduct.
This says clearly that punitive damages should not be awarded if the infringer reasonably believed the patent to be invalid. This is certainly very helpful guidance. There are, nonetheless, a couple of problems which arise from the application of this principle to the facts of this case.
At  the FCA said this was not a case in which the infringer, Bell, reasonably believed the patent to be invalid, and in  the FCA said the infringer knew the patent to be valid. The difficulty is that Martineau J never made any explicit finding to that effect. While he repeated many times that Bell intentionally infringed, there is simply no discussion at all of whether Bell believed the patent to be valid. Nonetheless, the FCA holding can be reconciled, least formally, with Martineau J’s focus on intentional infringement to the exclusion of validity, if we consider the burden of proof. The substantive rule is explicitly stated by the FCA , namely that punitive damages are not normally available for what might be called “innocent” infringement, where the infringer did not know of the patent, nor even for intentional infringement, if the infringer had a reasonable belief that the patent was invalid. To that, add an evidentiary rule that we may infer that if the infringer knew of the patent, the onus is on the infringer to establish that it had a reasonable belief that the patent was invalid or not infringed. Taking those two rules together, we may conclude that because Bell never adduced any evidence that it reasonably believed the patent was invalid, it should be inferred that Bell believed the patent to be valid. Put another way, Bell’s silence allowed the court to infer that it believed the patent to be valid.
This view of the onus of proof allows us to explain the FCA’s statement that Bell believed the patent to be valid, and, if correct as an interpretation of the case, it means that Martineau J’s various references to Bell’s “misconduct” should therefore be implicitly taken to mean intentional infringement of a patent which it believed to be valid. But this is problematic as an interpretation of the decisions. Neither level of court actually talked about the onus of proof on this issue; this suggestion as to where the onus lay is based entirely on inference. As noted, Martineau J never addressed Bell’s belief as to validity at all. If he really was of the view that Bell’s belief that the patent was valid was a key issue, surely he would have mentioned it, even if it had been resolved on the basis of the onus of proof. (Martineau J did explicitly draw an adverse inference that Bell knew of the patent (FC Liability , but validity was not mentioned.) That’s why this interpretation allows at best a “formal” reconciliation of the FC and FCA decisions, and it may not be the correct interpretation at all. Maybe there is some other basis, not evident to me, that would support the finding that Bell believed the patent to be valid.
In this case, Martineau J drew an adverse inference from Bell’s failure to call any witnesses who could have testified to whether Bell knew of the 787 patent at all, even though Bell resisted, at least in part, on grounds of privilege: FC Liability ; FC Damages . (On its face the inference concerned only infringement, not validity, but, as just discussed, in light of the FCA Liability decision, I take it that it was also a finding that Bell believed the patent to be valid.) The inference was no doubt proper on purely evidentiary principles, and, as discussed in Knorr–Bremse, that is why it was initially permitted in US law. But it would be improper under current US law. The unintended consequences that led the Federal Circuit to reverse itself only became apparent over the course of years of experience in dealing with willfulness allegations. The unanimous en banc opinion of the Federal Circuit, directly addressing this issue in light of long experience, which is then legislatively affirmed, must carry very considerable persuasive weight. If Martineau J did indeed draw an inference from Bell’s silence that it believed the patent to be valid and infringed, then it appears we may be starting down the same path that was tried in US law and found wanting.
Under the first prong of Seagate, if, after the defendant infringed, its lawyer came up with a plausible but ultimately unsuccessful invalidity argument, this would preclude a finding of willfulness, because there was not an objectively high likelihood that the patent was valid. That position was rejected by Halo. In other words, the Federal Circuit’s position in Seagate is that it is not egregious to infringe a patent which is in fact of dubious validity, while the USSC’s position in Halo is that it can be egregious to infringe a patent without an actual subjective belief that the patent is invalid.
 [Halo] is nonetheless useful regarding the implication for a powerful and informed corporation to respect IP Policy from the start. Indeed, the US Supreme Court did allows more discretionary power to US courts to impose enhanced-damages awards against deliberate and intentional infringers, especially for those who disregard IP Laws in the hope that their attorney will develop plausible defenses for their conduct in case of future litigation.
In any event, even if we accept that culpability should be assessed against the knowledge of the actor at the time of the challenged conduct, it’s not clear that failure to investigate the validity of a known patent is necessarily morally blameworthy. Suppose a party is developing a new product, does a full preclearance search, and discovers hundreds of potentially infringing products. That is not at all unlikely for any moderately complex product today. Opinion letters may cost tens of thousands of dollars, and the adverse inference in US law prior to Knorr–Bremse “created an environment in which opinion letters were considered absolutely necessary. However, due to the costs involved with obtaining an opinion of counsel, companies that received many infringement notices found obtaining an opinion letter in response to each notice infeasible. Thus, an accused infringer was likely often forced to make judgment calls” Lee, A Matter of Opinion, 25 Berkeley Tech. L.J. 33, 40 (2010). As noted above, this problem was a significant motivation for the Federal Circuit to reverse itself in Knorr–Bremse. It may be that Halo will cause the same problem to re-emerge, though it is still too early to say for sure.
One response to all this would be to suggest that it is not necessarily egregious misconduct to infringe without having formed any opinion as to the validity of the patent, even if the party actually knows of the patent. The question would be, instead, whether the decision not to investigate the validity of the patent was itself egregious misconduct; if not, punitive damages should not be awarded even if the patent did turn out to be a strong one. This seems to me to be quite a reasonable position. The objective test in Seagate can be seen as a kind of halfway house between that and Halo’s, which allows punitive damages based purely on a subjective test, as Seagate allows the party with knowledge to exercise its judgment and avoid the expense of an opinion letter, subject to the penalty of potential punitive damages if it turns out that an opinion would have been adverse. The Seagate approach also avoids a potentially difficult inquiry as to when obtaining a validity opinion would have been reasonable.
On the whole, there is a great deal to be said for the objective approach taken in Seagate. The difference between the Federal Circuit and the USSC on this issue may stem not so much from differing views as to what is morally blameworthy, as from the Federal Circuit’s greater familiarity with the realities of patent litigation and practice.
All the foregoing discussion of validity assumes that the infringer had actual knowledge of the patent. The FCA  also referred to a case where the infringer “did not know of the existence of the patent” as one where punitive damages should not normally be awarded. What about a case in which the infringer did not in fact know of the patent, but should reasonably have known? What does the Bell decision tell us about that scenario?
 Having considered the totality of the evidence, the Court finds that Bell’s assertion that it had no knowledge whatsoever of the ‘787 Patent prior to May 2008 is simply not plausible and contrary to the evidence. Mr. Lambert, Mr. Kohler and Mr. Gardner all testified that they had no personal knowledge of the ‘787 Patent, but the issue is whether there was corporate knowledge of same, and the answer is yes. Ignorance of the law is not a valid excuse, and there is no evidence supporting any genuinely held belief that Bell was the first to develop a sleigh type of landing gear having the features of claim 15 of the ‘787 Patent.
 When it designed its sleigh type of gear, Bell knew or should have known of the ‘787 Patent. It is implausible that between 2003 and May 2008, Bell was ignorant of Eurocopter’s intellectual property rights.
Martineau J noted that various Bell employees who would have known whether Bell had knowledge of the patent where not called to testify, and he concluded that “the Court is allowed to draw a negative inference from these various omissions” . This all indicates that Martineau J found that Bell actually knew of the patent as an inference drawn from the fact that Bell should have known, and no one testified to the contrary. On the other hand, Martineau J also said that in pursuing the project, despite concerns having been raised about the similarity, “Bell acted in a foolhardy manner (indeed their actions are contrary to their own policy manuals) and its conduct represented a marked departure from ordinary standards of decent behaviour” (FC Liability ), and also “For a large and sophisticated corporation such as Bell Helicopter, it was simply unacceptable that no one would verify intellectual property rights prior to embarking, as it did, on a research program directly involving the study of the landing gear of a leased EC120 helicopter. Such reckless behavior would otherwise amount to willful blindness” (FC Damages ). This all suggests that, contrary to the FCA’s statement, Bell may not actually have known of the patent, but was “reckless” in failing to discover it.
Overall, my impression is that Martineau J’s finding is summed up in : “Bell knew or should have known,” where the “should have” was based on a high standard of willful blindness, and not simple negligence. He made no explicit finding as to which it was, because, in his view, either was sufficient.
First consider the holding that Bell should have known of the 787 Patent, which means that in the circumstances, a patent clearance search was effectively required, in the sense that a failure to verify IP rights would be egregious behaviour warranting punitive damages (unless the rights were invalid). Again, the US experience is instructive. Actual notice is normally required for a finding of willfulness. Even under the approach set out in Underwater Devices 717 F.2d 1380, 1389 (Fed.Cir.1983), the high-water mark of willfulness in the Federal Circuit, an affirmative duty to exercise due care to determine whether or not it is infringing arises only when a potential infringer “has actual notice of another's patent rights.” This was a long-standing rule: see eg Milgo Electronic Corp 623 F.2d 645, 666 (10th Cir, 1980)), which has been maintained since Halo: see WBIP, LLC v. Kohler Co., 829 F.3d 1317, 3141 (Fed. Cir. 2016). Perhaps most typically, the issue of willful infringement arises after the infringer had been offered a licence and then declines. Indeed, one of the criticisms of the willfulness doctrine in US law is that it dissuades innovators from reading and learning from patents, out of concern for being found to be a willful infringer: see eg Chien, Recontextualizing Patent Disclosure, 69 Vand L Rev 1849, 1886 (2016). If there were an affirmative duty to search for potentially infringing patents, presumably this would not be a concern.
 [I]t simply defies belief that a large and sophisticated corporation such as Bell Helicopter would not verify intellectual property rights prior to embarking, as it did, on a research program directly involving the study of the landing gear of a leased EC120 helicopter. At the very least, this would be willful blindness.
So, suppose the infringer was a small cash-strapped startup, without the budget for an IP department, and with a staff and management composed of legally unsophisticated engineers, which copied important technology from a competitor, never checking to see if it was patented. This question will be an important one for small companies, given that opinion letters can cost tens of thousands of dollars per patent: see Justice Breyer's concurrence in Halo, 1936. Bell would certainly be distinguishable, though whether a future court would nonetheless find that the small startup should reasonably check to see if the technology was patented is not clear.
In Bell the technology at issue was important, and Bell’s own engineers had struggled to solve the problem. While this did not play an explicit role in Martineau J’s decision, I suggest a future case would be legitimately distinguishable the technology was minor, and had been copied by an engineer who never thought to clear it with the IP department because she thought it so trivial, even if the infringer was sophisticated and had an IP department. Again, while that would be a legitimate distinction, it is not clear whether a court would actually accept it, and hold that it would not be egregious to fail to do a patent check in such circumstances.
Bell copied the infringing technology directly from the patentee, Eurocopter (FC Liability ), and this factor also figured explicitly, though perhaps not as prominently, in Martineau J’s reasons. In particular, note the statement in FCA Liability , FC Damages , that it was outrageous not to verify intellectual property rights prior to embarking on a “study” of the Eurocopter landing gear. This is an important issue, because empirically it appears that outside of pharmaceuticals, most infringers are independent inventors:“[c]opying in patent law seems to be very much the exception, not the rule, except in the pharmaceutical industry:” Cotropia & Lemley, Copying in Patent Law, 87 N.C. L. Rev. 1421. Would it be outrageous to fail to do a preclearance search before independently developing important new technology? As noted, there does not appear to be a general duty to undertaken preclearance in US law.
Overall, Bell implies that a patent clearance search is required when a large and sophisticated company copies important technology. On the other hand, I would suggest that for a small unsophisticated company which independently invented a technology that is minor to the project at issue, a failure to conduct a patent clearance search would probably not be held to be egregious. In between, I’m not sure. Apart from the question of what Bell held, there is a question of whether a patent clearance search should be required. In a recent paper Karshtedt argues that actual knowledge should not be required, and punitive damages should be available on a recklessness standard: The Modern Pirate: Toward a New Standard for Enhanced Damages in Patent Law (UC Davis L Rev, forthcoming). That is broadly consistent with Martineau J’s reference to Bell’s “reckless behavior” (FC Damages ). While this seems reasonable in principle, I suggest there will be serious practical problems in determining exactly when a failure to conduct such a search would be reasonable. In my view, any such rule would have to be sufficiently determinate that parties can determine with confidence and prior to any litigation, whether a search would be required. Otherwise the rule would risk inducing wasteful patent searches, as parties sought to shield themselves from exposure to punitive damages. Even if the rule is that small companies need not undertake clearance searches, a company needs to be able to tell when it will be considered “small,” or even companies that are small, will undertake clearance searches to be safe. In any event, my point is not to try to resolve this question, but rather to point out that Martineau J’s holding is a departure from US law, and it raises difficult questions if counsel are to be able to provide reliable advice.
Now consider the possibility that Bell actually knew, which, after all, seems to have been the FCA’s view of the evidence. The difficulty is that the only evidence that Bell actually knew was a “negative inference.” Contrast this with a typical US willfulness case in which knowledge is established by the patentee approaching the infringer to demand a licence. As discussed above, drawing a conclusion that the infringer believed the patent was valid based on an adverse inference is no longer permitted in US law. It may be that permitting an adverse inference that the patentee knew of the patent would raise the same kinds of problems. The US experience is not directly instructive on that point, as actual knowledge is required, and, so far as I can tell, a conclusion that the infringer knew of the patent based on adverse inferences has never been permitted, or at least it is rarely used. As with the adverse inference regarding the infringer’s belief in validity of the patent, the question is not whether the inference is proper on evidentiary principles, but whether it might have unintended consequences.
I have just discussed copying in the context of whether the infringer knew of the patent. There is a separate question as to whether copying of the technology is necessary to a finding that the infringement was egregious. That is, suppose Bell had independently invented the technology itself, and subsequently discovered the patent, perhaps, as is commonly the case in US willfulness cases, because the patentee had notified it. On having actual knowledge of the patent, Bell realized that its technology infringed, decided the patent was probably valid, and went ahead nonetheless. Is knowing infringement of a patent which the infringer believes to be valid outrageous in itself, or is copying necessary to trigger outrage?
Martineau J’s outrage seemed to be driven by intentional infringement of the patentee’s property right (see eg FC Damages ), and this is understandable given that independent creation is not a defence to patent infringement. While copying was explicitly a factor in Martineau J’s decision, it is consistent with this decision, and with that of the FCA, to suppose that copying was relevant primarily because the fact that Bell copied made it implausible that they infringed without knowledge of the patent. On that view, intentional infringement of a valid property right is outrageous in itself, whether or not the invention was copied. As I understand it, in US law copying is relevant to establishing that the disregard of the patentee’s rights was intentional, rather than merely accidental or negligent (see eg Milgo Electronic Corp 623 F.2d 645, 666 (10th Cir, 1980)), and it may also be directly relevant to establishing whether the infringer acted in such bad faith as to warrant enhanced damages (see Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992) (factor (1)), but copying is not a requirement if willfulness is otherwise established (see eg Convolve, Inc. v. Compaq Computer Corp. 224 F.R.D. 98 (S.D. New York, 2004), for a case in which infringement was found to be willful even though there is no suggestion that the infringer copied the technology).
An accused infringer that copies from the patent or the patented product should probably be liable for willful infringement, at least in the absence of evidence of a good faith belief that it was not infringing or that the patent was invalid. By contrast, an accused infringer who independently develops the invention, or even one who copies in good faith, doesn't seem particularly culpable merely because it later obtains a copy of the patent or discovers that the legal advice it obtained was faulty.
As they point out, citing the historical review by Powers & Carlson, The Evolution and Impact of the Doctrine of Willful Patent Infringement, 51 Syracuse L. Rev. 53, 55-79 (2001), this was apparently the standard in US law prior to the creation of the Federal Circuit.
In my view, if we are to retain punitive damages for intentional infringement, limiting it to cases of copying makes good sense, for the reasons discussed by Lemley & Tangri. Such a proposal is not inconsistent with the Bell decision, in which, on the facts, the infringer clearly did copy directly from the patentee. I acknowledge that Martineau J’s outrage seems to have been driven by intentional infringement, and the issue of copying seems to have been secondary, but there is no clear statement to that effect, and it is speculative to consider what he would have held on different facts. A principled distinction could legitimately be drawn on the basis of whether the infringer copied.
Finally, another factor that explicitly figured in Martineau J’s decision to award punitive damages was Bell’s litigation strategy: “Denying that there was infringement, Bell took a vindictive position throughout the proceeding, pleading that it could avail itself of the regulatory or experimental exception and that it was simply practising prior art” FC Liability . In other words, the fact that Bell chose to advance some arguments that were ultimately unsuccessful was part of the reason for awarding punitive damages.
While the purpose of costs is partly to deter abusive behaviour in litigation, the purpose of punitive damages is to punish and discourage malicious, oppressive, high-handed or offensive behaviour which lead to the lawsuit, and Eurocopter submitted no authorities that suggest that there is a link between these two purpose..
I note that in Dimplex 2006 FC 586, Mosley J stated that punitive damages “have been awarded in connection with litigation misconduct, but in the two patent cases he discussed (Lubrizol and Apotex v Merck) the misconduct was knowing disregard of an injunction. In Profekta (1997), 75 CPR(3d) 369 (FCA), a copyright case, the infringer had previously be held criminally liable for the same conduct, and continued to infringe. In SOCAN v 728859 Alberta Ltd. (2000), 6 CPR(4th) 354 (FCTD), the court was concerned that the infringer was playing a game of “catch-me-if-you-can” , and the infringer had entirely ignored the legal proceedings . All of this is very different, in my view, from pleading a weak argument.
Consequently, in my view the merits of Bell’s litigation strategy should not be a factor justifying punitive damages. (The error is even more palpable because he picked two failed arguments out of an action in which Bell enjoyed “indisputable partial success” .) As noted, the fact that two of Bell’s invalidity arguments failed was explicitly a factor considered by Martineau J, but my strong sense is that it was not determinative in any event. I hope it is safe to say that this aspect of Martineau J’s reasons will not be followed in future cases.
Also of interest is a factor not mentioned by Martineau J, namely the strength of Bell’s substantive defence. In US law, a showing that the accused infringer had a “substantial,” “legitimate,” or “credible” “is the single best way to defeat a willfulness claim” Seaman, 97 Iowa L. Rev. 417, 455-56 (2012). (Though it is not clear whether this will remain true post-Halo.) As noted above, Bell’s position was strong enough that Martineau J reduced Eurocopter’s cost award by 50%. I can’t say how it would have fared under the US test, but the argument that Bell had a “substantial” defence can’t be dismissed out of hand. I expect that this was not mentioned by Martineau J because it was not argued before him. Given the importance of this factor in US law, it might be developed in future cases.
Another factor that explicitly added to Martineau J’s outrage is that Bell promoted its infringing landing gear as its own invention, knowing that to be untrue (FC Liability [272-273] (reviewing evidence), FC Liability [439-441] (stating this was a factor in determining whether Bell’s conduct was “truly outrageous); and see FC Damages , noting this was a factor.) This factor was also specifically mentioned by the FCA at , and in the summary at  (“and markets it as his own knowing this to be untrue”). My sense is that this was only the icing on the cake so far as Martineau J was concerned, but that is purely speculative. It is entirely clear that this was a factor that was explicitly taken into account, and it could therefore legitimately serve as a distinguishing feature — if future courts are so inclined.
In summary, according to the FCA punitive damages should not normally be awarded, even for intentional infringement, when the infringer reasonably believes the patent to be invalid, though I have suggested that there are important concerns as to how that belief may be established. I have suggested that punitive damages should not be awarded unless the infringer copied the invention from the patentee; that is, independent invention should preclude punitive damages, even if the infringer knew of the patent and believed it to be valid. On this view, copying is substantively important, and not only as allowing an inference that the infringer knew of the patent. More generally, US experience shows that the courts should take seriously concerns about the burden of patent searches and opinion letters as the law of punitive damages develops. For that reason, there is a principled reason for considering the importance of the invention as a significant factor.
I should emphasize that I am not suggesting that punitive damages should be awarded when the infringer intentionally infringed a patent which it believed to be valid, covering technology it had copied from the patentee, subject only to the limitations I have just mentioned. Rather, I am suggesting that if we are moving in that direction, rightly or wrongly, we should consider implementing some of these limitations.
I am very wary of punitive damages, for a few related reasons. One is the chilling effect on legitimate activity. This concern is straightforward: the very purpose of punitive damages is to have a chilling effect, so it is important to make sure that only activity that is indeed socially harmful is targeted. One concern, discussed in my previous post, is that attacks on patents that are probably valid may often be socially desirable. Similarly, as discussed in this post, we don’t want to mandate patent searches simply for the sake of ensuring that patents are not infringed, if the net result is to discourage innovation by placing an undue burden on innovators. While it is important to get the law right, it is also important that the law be certain. Because punitive damages are, well, punitive, the chilling effect can extend well beyond acts that would ultimately be found to warrant punitive damages if litigated to judgment. If the penalty for speeding were death, we wouldn’t see everyone driving 109 kph in a 110 zone, but more like 70 or 80. Consequently, parties need to be able to predict with confidence whether their activity will attract punitive damages. That concern with certainty is captured in the classic critique of punitive damages set out in the remarks by Lord Reid, quoted above, and for an excellent academic discussion of the problem, see David G. Owen, Civil Punishment and the Public Good, 56 S. Cal. L. Rev. 103 (1982). That is why I have spent so much time in this post trying to assess when punitive damages will be awarded. The typical approach, exemplified in this case, and, admittedly, sanctioned by the SCC, of saying “taking all of these multiple factors into account, this conduct was outrageous,” is not calculated to provide certainty.
I’d like to thank Professors Tom Cotter, Dmitry Karshtedt, and Chris Seaman for comments on earlier drafts of this post. All opinions – and errors – are mine.
Thank you for the informative post and for the reference to my paper!

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