Summary of a Recent
Judicial Development in
Biotechnology

Court Sets Proper Amount of Punitive Damages for
Patent Infringement of Seedless Grapes

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Sun Pacific Farming Cooperative v. Sun World International, Inc., No. 1:01-cv-6102 OWW CCC, 2009 WL 900751 (E.D. Cal. Mar. 31, 2009), the United States District Court for the Eastern District of California reduced a punitive damages award arising from the patent infringement of a variety of seedless grapes from $250,000 to $40,000 after weighing the relevant factors and determining that the reprehensibility of the defendant's conduct only warranted an approximate 5-to-1 ratio of punitive to compensatory damages.

Background

A trial court found the defendants liable for patent infringement and awarded compensatory damages in the sum of $8,064, costs in the amount of $27,684, and punitive damages of $250,000. Id. at *1. The appellate court held that the "[r]oughly 31-to-1 ratio between the punitive damages award and compensatory damages award exceed[ed] the outer limits that the Supreme Court has indicated would comport with due process," and remanded to the district court for reconsideration and recalculation of the amount of the punitive damages award. Id.

Analysis and Holdings

The court explained that "[i]ntentional and willful patent infringement gives rise to a claim for treble damages," and that "[i]n calculating punitive damages, the nature and extent of damages awarded is considered, as is the ratio between actual potential harm and the punitive damage award, and the net worth and net income of the party against whom punitive damages are to be awarded." Id. at *4-5. The court found that the situation did not entail "an egregious course of conduct done with vile intentions," and that the facts did not justify exceeding a single digit damage ratio of compensatory damages to actual damages. Id. at *5. The court rejected the plaintiff's contention that future harm should be considered, because the actual damages had been less than $10,000 and because the defendant itself had presented the matter to the plaintiff and to the court for consideration, thus reducing the potential for future harm. Id. Furthermore, the court explained that the Ninth Circuit considers the following five factors in determining the degree of reprehensibility of a defendant's conduct: "(1) type of harm-physical versus economic; (2) reckless disregard for health and safety of others; (3) financially vulnerable target; (4) repeated actions; and (5) intentional malice or mere accident." Id. at *6. After analyzing those factors, the court noted that patent infringement results only in economic harm and is totally redressable under patent law. Id. at *7. The second and third factors did not apply in this situation, and there had only been one commercial sale from which the defendant had profited, rather than "repeated actions." Id. However, the defendant's conduct was intentional and fraudulent, so the court determined that an approximately 5-to-1 ratio of $40,000 was a reasonable punitive damages award and would accomplish the purposes of the law to punish and set an example. Id.

The case was decided on March 31, 2009.