Defendant patent holder appealed from a judgment of the Superior Court of Los Angeles County (California), which awarded plaintiff inventor compensatory and punitive damages after finding that the patent holder breached a patent agreement and the fiduciary duty it owed to the inventor concealing and failing to pay royalties that were due.
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Overview
While they were working for the inventor, two physicians invented a way to genetically engineer human proteins. The parties negotiated a deal, where the patent holder would pay when it used or licensed the ensuing patent. The patent holder, however, withheld royalties and actively concealed licenses in order to enrich itself. The court held that the jury reasonably found that the patent agreement required the patent holder to pay royalties on the product sales of licensees of the patents, even if those licensees did not practice the patents when manufacturing their products. The patent holder breached its fiduciary duty, and the jury reasonably found that it acted in bad faith. The patent holder could not profit from a legally tenable contract interpretation when it knew that the agreement had a wholly different meaning. The jury’s conduct amounted to fraud or malice and thus supported the jury’s finding that the patent holder was liable for punitive damages. The punitive damages award did not violate due process because the patent holder acted in a reprehensible manner. The award was not proportionally high but was only two-thirds of the compensatory damages award.
Outcome
The court affirmed the judgment and order.