Opinion ID: 386033
Heading Depth: 1
Heading Rank: 1

Heading: Interest On Increased Damages

Text: 5 The statutory authority to increase the patentee's damages is often used as a penalty to multiply damages when the court believes, as it did here, that the defendant has acted in bad faith. It is also clear that the enhancement of damages may serve a remedial purpose. It is clear that the (statutory) provision permits an increase in damages to cover the possibility that assessed damages are insufficient because of proof difficulties. D. Dobbs, Handbook on the Law of Remedies 440 (1973). Because it is often difficult in patent litigation to measure with mathematical precision a patentee's damages, the enhancement provision of the statute is designed to permit, inter alia, adequate compensation for an infringement where strict legal rules would not afford it. Beacon Folding Machine Co. v. Rotary Machine Co., 17 F.2d 934, 935 (D.Mass.1927), aff'd, 31 F.2d 646, 651 (1st Cir. 1929). Accord, Broadview Chemical Corp. v. Loctite Corp., 311 F.Supp. 447, 453 (D.Conn.1970); Activated Sludge, Inc. v. Sanitary District of Chicago, 64 F.Supp. 25 (N.D.Ill.), aff'd, 157 F.2d 517 (7th Cir. 1946), cert. denied, 330 U.S. 834, 67 S.Ct. 970, 91 L.Ed. 1281 (1947). 6 Where remedial damages measure the loss incurred by plaintiff as of the time of the infringement, the award of prejudgment interest further serves a remedial purpose by making the plaintiff whole for the intervening loss of use of the money he would have had at the date of infringement, but for the defendant's unlawful acts. Under some statutory damage-enhancement schemes, however, such as section 4 of the Clayton Act, 15 U.S.C. § 15, the award of multiple damages is designed to take the place of this interest loss, along with all other remedial and punitive factors necessary to vindicate the policies of the underlying substantive law. See Trans World Airlines, Inc. v. Hughes, 449 F.2d 51, 80 (2d Cir. 1971), rev'd on other grounds, 409 U.S. 363, 93 S.Ct. 647, 34 L.Ed.2d 577 (1973). For this reason prejudgment interest has been held to be impermissible as an element of damages in a suit under § 4 of the Clayton Act. See Cape Cod Food Products v. National Cranberry Association, 119 F.Supp. 900, 911 (D.Mass.1954); cf. Heatransfer Corp. v. Volkswagenwerk A.G., 553 F.2d 964, 986 n.20 (5th Cir. 1977), cert. denied, 434 U.S. 1087, 98 S.Ct. 1282, 55 L.Ed.2d 792 (1978); In re IBM Peripheral EDP Devices Antitrust Litigation, 459 F.Supp. 626, 630 (N.D.Cal.1978). 7 However, unlike § 4 of the Clayton Act, this case arises under a statute that allows both multiplication of primary damages and prejudgment interest from the date of infringement. Thus, a remedial enhancement of damages does not necessarily compensate the plaintiff for the lost time-value of his money. Rather, to the extent that a remedial enhancement of damages serves as an assurance that an award is adequate to compensate the plaintiff for the actual loss suffered at the time of infringement, prejudgment interest on the enhanced portion of damages may arguably serve the same function as prejudgment interest on the primary damages. Relying on a series of cases cited by it, 1 the defendant would disagree with this line of reasoning. It contends that even if the enhanced damages are deemed to be other than punitive in nature, any interest award is to be assessed only against the primary damages. After reviewing these cases, we believe the question is still open. However, it is clear that the rationale for awarding prejudgment interest on a remedially enhanced damage award, to the extent such a rationale exists, also implies that no prejudgment interest be awarded on a punitively enhanced portion of damages. Thus, we must first determine whether the enhanced damages in the present case were punitive. This question in turn may well depend, as in the imposition of judicial sanctions in contempt cases, on the characterization given the award by the court. 8 In the instant case, plaintiff urged that damages be trebled because of defendant's bad faith. The district court concluded that defendant's infringement, although willful, did not automatically command trebling of damages but that the multiplication of damages depends on the degree of bad faith exhibited by defendant throughout the case. After an analysis of defendant's willful infringement over eight years and other misconduct, but also recognizing that initially there may have been some margin for genuine doubt as to the validity of the patent, the district court concluded that defendant's behavior justified doubling the damages. Trio Process Corp. v. L. Goldstein's Sons, Inc., No. 38,166 (E.D.Pa. April 18, 1975). On appeal from that decision to this court, plaintiff argued that the damage multiplier should not have been reduced from three to two by the district court because of defendant's bad faith in its infringement of the patent. In Trio Process IV, we expressed our agreement with the district court that in this case the multiplication of damages depends on the degree of bad faith exhibited by the defendant. 612 F.2d at 1361. Thus, it is apparent that the damages were, as now urged by the defendant, enhanced because of defendant's bad faith. 9 We therefore must conclude that the enhancement of the damages in this case was punitive and we may not disturb the district court's method of computing interest only on the award of primary damages.