General Motors Corp. v. Devex Corp.

1983-05-24

Headline: Patent ruling affirms that courts should ordinarily award prejudgment interest under the federal patent law, making it easier for patent owners to receive interest on royalties and rejecting the old common-law no-interest limit.

Holding: The Court held that the federal patent law (Section 284) requires courts to ordinarily award prejudgment interest to fully compensate patent owners, withholding it only for justified reasons such as undue delay.

Real World Impact:

Makes it easier for patent owners to get prejudgment interest on royalties.
Limits defense tactic of avoiding interest by arguing damages were not fixed.
Leaves trial judges discretion to deny interest for plaintiffs’ undue delay.

Topics: patent damages, prejudgment interest, royalty payments, trial judge discretion

Summary

Background

A car-parts patent owner (Devex) sued an automaker (General Motors) claiming infringement of a lubricating process used in metal forming. After many trials and appeals, a special master and the trial court calculated reasonable royalties and the court awarded royalties plus large prejudgment interest, a result the appeals court affirmed.

Reasoning

The central question was what standard the federal patent law (Section 284) uses for awarding prejudgment interest. The Court rejected the older common-law rule that prejudgment interest is available only for fixed, “liquidated” damages or in exceptional cases. Instead, the Court held that Section 284 aims to give patent owners full compensation, so courts should ordinarily award prejudgment interest to make up for the money a patent owner lost before judgment. The Court also said trial judges keep discretion to deny or limit interest for good reasons, like undue delay by the patent owner.

Real world impact

Going forward, patent owners are more likely to recover interest on royalties that courts determine, because interest is part of full compensation under Section 284. Defendants may face higher overall awards, but judges still can refuse interest when a plaintiff has unreasonably delayed or other justifications exist. The decision affirms the appeals court judgment in this long-running dispute.

Dissents or concurrances

Justice Stevens concurred, emphasizing that the 1946 law created a presumption favoring interest, but agreed trial courts may deny interest when a defendant had a reasonable basis to challenge the patent. He highlighted the public value of allowing fair challenges to doubtful patents.