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By Andrew Chung
NEW YORK (Reuters) - The U.S. Supreme Court on Monday said federal judges should have more discretion to boost penalties in patent infringement cases and ordered an appeals court to review whether Zimmer Biomet Holdings Inc (N:ZBH) willfully violated Stryker Corp (N:SYK) patents on a surgical cleaning wand.
In a unanimous opinion, the high court also ordered the appeals court in a separate case to review whether Pulse Electronics Corp willfully infringed Halo Electronics Inc's patents.
The justices said a test for determining willful infringement, which can allow judges to triple damages awarded to a patent owner, was too rigid and allowed some egregious infringers to escape liability. The test had been developed by the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., the nation's top patent court.
Industry groups were closely following the cases because lowering the bar for judges to award enhanced damages could hand patent owners a potent new weapon to file infringement cases and push for licenses.
Stryker, a medical device maker, and Halo, which makes circuit board transformers, were denied enhanced damages by the Federal Circuit after winning patent infringement lawsuits against competitors.
The appeals court has said that to be awarded enhanced damages, meant as punishment for deliberate and reckless copying, a patent owner must prove a defendant acted despite a high likelihood of infringement and had no reasonable explanation for doing so.
Halo and Stryker argued that the test allowed a willful infringer to escape punishment if it can muster any reasonable defense, even if it acted in bad faith.
Writing for the court, Chief Justice John Roberts agreed, saying the test wrongly insulates a "wanton and malicious pirate" who infringes to steal a patent owner's business from enhanced damages.
In court papers, some Silicon Valley companies that are frequent targets of patent suits, including Google Inc (O:GOOGL) and Cisco Systems Inc (O:CSCO), urged the Supreme Court to maintain the current system to discourage "meritless allegations of infringement."
Roberts said concerns that so-called patent trolls, who make money by suing over patents, would be emboldened by the ruling, do not justify the rigid test.
Stryker sued Zimmer in 2010 for infringing its patented surgical wand and was awarded more than $210 million for willful infringement, a finding overturned by the Federal Circuit in 2014.
Halo sued Pulse in 2007. The Federal Circuit similarly found that Pulse's infringement of several Halo patents was not willful.
The cases are Halo Electronics, Inc v. Pulse Electronics, Inc and Stryker Corp v. Zimmer, Inc, in the Supreme Court of the United States, Nos. 14-1513 and 14-1520.