French Alcatel Sues Cisco and Microsoft for Patent Infringement and Punitive Triple Damages : Philip Morris v. Williams : Constitutional Law

Revenge is a kind of wild justice, which the more man’s nature runs to, the more ought law to weed it out, for the first wrong, it doth offend the law, but the revenge of that wrong, putteth the law out of office. – Francis Bacon

That quotation appeared in Isaac Ray Corner : A history of justice: origins of law and psychiatry, a thoughtful April 1999 article by Walter A. Bordenn, MD, in the AAPL Newsletter, the newsletter of the American Academy of Psychiatry and Law, · Vol. 24, No. 2, pp. 12-14.

It has particular relevance to recent events in patents and torts and to Constitutional Law, especially in view of the upcoming US Supreme Court decision in Philip Morris v. Williams, which, as one can see from the discussion of the case at SCOTUSblog, may find the US Supreme Court ducking the hard issues in the case and sending it back on a technicality. As written by Peter Lattman at the Wall Street Journal Online Law Blog:

To the disappointment of those who wanted to see a grand debate over the constitutionality of large punitive damage awards, the Court seemed to focus more on the second question presented in the case: Whether due process permits a jury to punish a defendant for the effects of its conduct on people not parties to the lawsuit. Philip Morris contends that the jury improperly punished the company for conduct regarding other people who haven’t brought suit against it.

Lattmanspoke with Sheila Birnbaum, a Skadden Arps partner…[who] won the last punitive damages case before the Supremes, representing State Farm in 2003’s Campbell v. State Farm“, and who remarked that:

[I]t’s pretty clear that Campbell will remain the jurisprudential standard for this case.

As Lattman writes:

In State Farm, the Court suggested that, at most, punitive damages should not exceed nine times the amount of actual damages awarded to the plaintiff.

Andrew F. Susko and Edward M. Koch at White and Williams LLP go into greater detail on the holding in Campbell:

Prior to the Supreme Court’s recent decision in Campbell, the Court recognized that punitive damages awards posed an acute danger of arbitrary deprivation of property under the Due Process Clause of the Fourteenth Amendment. In light of these concerns, the Court, in the landmark case of [BMW v. Gore], 517 U.S. 559 (1996), outlined a three-part test to evaluate the constitutionality of such awards. This test looked to: (1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages awarded; and (3) the difference between the punitive damages awarded and the civil penalties authorized by statute or in comparable cases….

[T]he Court held that it was improper for the jury to consider State Farm’s national operations, reasoning “[a] defendant should be punished for the conduct that harmed the plaintiff, not for being an unsavory individual or business.” Second, the Court looked to the disparity between the compensatory and punitive damages awards – here, a 145:1 ratio. Although it expressly declined to impose a bright-line rule, it held that “few awards exceeding a single-digit ratio between punitive and compensatory damages . . . will satisfy due process.” Accordingly, the presumptive constitutional punitive damages award in Campbell was $9 million – some $136 million less than that awarded by the jury. In so ruling, however, the Court noted that greater ratios might be constitutional where “a particularly egregious act has resulted in only a small amount of economic damages.” In carving out this exception, the Court was careful to note that the wealth of a defendant — standing alone — could not justify an otherwise unconstitutional punitive damages award.

Note in all of these cases that the US Supreme Court is apparently not disturbed by the fact that awards of damages in civil cases can be accompanied by additional punitive punishment of the wrongdoer and that this punishment is inflicted upon the wrongdoer without many of the otherwise mandatory legal safeguards to which a criminal defendant has a right according to the US Constitution. To this observer, the infliction of punishments in civil cases is prima facie a violation of the Due Process Clause of the US Constitution since fewer rights of defense are available in civil cases than in criminal prosecutions. Culpability, for example, is not subject to the “guilty beyond a reasonable doubt” standard and punishments are open-ended.

Alcatel sues Cisco and Microsoft for Patent Infringement

As could be expected, European companies, like their American counterparts, are beginning to smell that money might be made in the United States by bringing patent infringement actions against successful and wealthy American corporations:

1) due to the favorable US laws permitting patent infringement claims on patents permitted for business methods and software, (see e.g. Patent Terrorism – Terror of the Intangibles by iPrex Intellectual Property Solutions, M. Qaiser, and P. Mohan Chandran); and,

2) because of the possibility of making gigantic windfall profits through the US laws permitting punitive damages (see e.g. Keith N. Hylton, Punitive damages and the economic theory of penalties, Georgetown Law Journal, November 1998).

As written at ars technica by Nate Anderson, the French company Alcatel, which is “in the process of merging with Lucent“, [link added by LawPundit] and which some months ago sued Cisco for patent infringement, has just sued Microsoft for patent infringement of digital video and communication network patents, asking for triple damages for what is claimed to be “wilful infringement” in seven cases. The claim for punitive triple damages goes hand in hand with weaknesses of the patent system discussed by Dar Haddix of UPI in a Science Daily article, not available at that site, as reproduced at IPBiz.

Punitive Damages in Torts

When I was at Stanford Law School as a student, I worked on a project on punitive damages in torts for Professor of Law Robert A. Girard, a Harvard Law School grad, who saw punitive damages as an extremely important issue in tort law. At that time, I was of the opinion that punitive damages for civil wrongs looked like an ill-conceived mesh of the civil and criminal law, a hybrid form of law which violated the basic tenet that punishment and retribution were state powers to be exercised through the medium of the criminal law.

It is now nearly four decades later and my opinion is unchanged. It is extremely difficult as a matter of logical legal theory to reconcile civil punitive damages of any kind with modern systems of law in the Western world, whose objective is to take the elements of revenge and retribution out of private hands and to reserve the sanction of “punishment” to the criminal law as a power of the state, rather than as a private right of one individual against another.

As written by Aaron Xavier Fellmeth in Civil and Criminal Sanctions in the Constitution and Courts, Georgetown Law Journal, November 2005:

There are few distinctions in Anglo-American jurisprudence more fundamental and consequential than that between the civil law and the criminal law.

This distinction is a fundamental pillar of the modern rule of law, which seeks to replace ancient remnants of private revenge and private retribution – which still afflict primitive nations in our world today – with a system of sanctions governed by due process and modern jurisprudence.

Instructive here is the following article 28 from the Instructions for the Government of Armies of the United States in the Field (Lieber Code), 24 April 1863, which is nearly 150 years ago:

Art. 28. Retaliation will, therefore, never be resorted to as a measure of mere revenge, but only as a means of protective retribution, and moreover, cautiously and unavoidably; that is to say, retaliation shall only be resorted to after careful inquiry into the real occurrence, and the character of the misdeeds that may demand retribution.

Unjust or inconsiderate retaliation removes the belligerents farther and farther from the mitigating rules of regular war, and by rapid steps leads them nearer to the internecine wars of savages. ” [we added the emphasis]

There is no difference in principle here between war and the principles of the rule of law, which demand that we move away from the methods by which savages resolve conflicts, whether those of war or of law.

The idea that legal persons under the civil laws should be permitted to make a punitive profit from the wrongs of their fellows, rather than merely obtaining just compensation by means of monetary damages, is completely contrary to the democratic ideas which are at the root of American government, but is justified by its proponents under the rationale that the threat of punitive damages deters unwanted tort behavior. But this of course is an absurd argumentation for awarding a pound of flesh to private persons for private wrongs inflicted when the state is absolutely free to legislate effective criminal laws as deterrents if the state so desires. So why does it not do so?

Fellmeth writes:

It is commonly observed that all three branches of government have taken numerous steps in the past half-century to blur the distinction between civil and criminal law. These measures include the increased use of the qui tam action and sharing of penalties with law enforcers, the increased prevalence of punitive damages in civil cases to vindicate various public policies, the now common use of statutory civil penalties, and the expanding notion of “civil fines” for violations of federal and state regulations. This blurring has thrown into doubt the circumstances under which important constitutional procedural protections apply. Much of the Bill of Rights, for example, explicitly guarantees, or has been interpreted to guarantee, certain procedural protections in criminal cases only. The Fifth Amendment Double Jeopardy Clause, for example, has been interpreted to apply only to criminal punishments, as have the Sixth Amendment Confrontation Clause, the Eighth Amendment guarantee against excessive fines, and the Article I, Section 9 prohibition on ex post facto laws. Even in cases in which a plaintiff or prosecutor seeks civil sanctions that are primarily or entirely punitive in nature, such as civil exemplary damages awards or civil fines, these protections usually do not apply, and, where they do apply, they tend to suffer diminution in scope.” [link added by LawPundit]

Moreover, as a matter of law, it is absolutely intolerable to this observer as a matter of justice and due process that private legal persons can be subjected to punitive civil punishments whose scope and nature are not known in advance but depend on the vagaries of decisions made by juries having minimal knowledge of the legal and economic system.

Perhaps the specter of giant amounts of money flowing out of the coffers of American companies into the coffers of foreign companies will wake up the American legal system to the foolishness of the prevailing law in this field.

Although it is not the issue before the court in Philip Morris v. Williams, and although the issue is seen as the question of whether there are “limits” on punitive damages (see Linda Greenhouse, Justices Weigh Limits on Punitive Damages, New York Times), we nevertheless ask: does the Constitution of the United States permit civil courts and juries to PUNISH civil defendants arbitrarily and without the protections granted to the criminal accused.

We think the answer is no.

As Greenhouse writes, in the instant case:

The jury had awarded [the widow] compensatory damages of $821,000, meaning that the ratio of punitive to compensatory damages was 97 to 1.” [The jury awarded $79.5 million in punitive damages]

In our view, that is not law. That is simply madness. It is a legal system which has run completely out of control, and it is so viewed here in Europe in the legal community, where people just shake their heads disbelievingly when they read about the jury awards handed out in the United States in civil cases.

Besides, as a practical matter, the glut of cases in this field and the fact that punitive damage cases are increasing rather than decreasing in number proves without a shadow of a doubt that punitive damages have next to ZERO deterrent effect and that the purpose for which civil punishments are inflicted is thus largely a fata morgana having little empirical foundation.

See the following links for more materials:

Tobacco Products Liability Project
Supreme Court Times Blog
Elizabeth S. Campbell, Supreme Court to Revisit Constitutionality of Punitive Damages Awards