Compensatory vs. Punitive Damage Award Standards

Compensatory damage ordered by a court of law during a civil trial: Plaintiff receives from the defendant payment for actual monetary damages or replace what was lost. The defendant is liable to pay compensatory damages for actual losses or damage incurred by the plaintiff. Compensatory damage is equivalent to restitution to a crime victim. "The idea behind awarding compensatory damages is to restore the plaintiff' to the state or position they were in before the injury or property damage occurred." Insurance companies refer to compensatory damages as 'special damages'.

Payment for compensatory damages includes loss of income, expenses incurred, property damage (destroyed) and personal injury including hospital bills (current and future). Furthermore, compensatory damages encompass: Financial loss, Cost of home medical care (including medical equipment), physical rehabilitation costs, pain and suffering, disfigurement, mental anguish, and loss wages (current and future). Occasionally a judicial court will include legal fees for bringing the case to trial (cost of the lawyer, court reporter fees, expert witnesses, filing fees, and other fees for legal expenses) incurred by the plaintiff, part of compensatory damages.

Reference to a patent, compensatory compensation to the plaintiff from the defendant: Amount of money paid for royalty of the patent, during the infringement period of time (Owner of the patent must prove a believable forecast of sales from the patent). Also, the plaintiff (owner) of the patent may collect both prejudgment and post- judgment interest on an infringement award. A judicial court does not consider or take into account the probability or likely-hood that prospective purchasers may purchase a competing or alternative product instead the patent product.

Besides compensatory damages awarded by the court, punitive damages (exemplary damages) may be added above the actual monetary damages, not exceeding three times actual costs (35 U.S.C. S 284). "Punitive damages are the civil law equivalent of a criminal fine." According to the Supreme Court (August 2008) federal maritime common law applies (maximum) ratio 1:1 between punitive and compensatory damages. The award of punitive damages ascertained by a judge or jury during a civil lawsuit. Circumstances justifying the recognition of punitive damages based upon the defendant acting intentionally, maliciously, or without regard to the rights of the plaintiff and interests of the claimant. Punitive damages first established in England in 1763. Civil law in the United States recognized punitive damages in 1850. "According to the U.S. Supreme Court, three factors guide a decision to award enhanced damages (punitive damages)": The action of the defendant was willful or deliberate, "whether the infringer had a good faith belief that the patent was invalid", and litigants conduct during the litigation. A jury verdict to impose an amount of punitive damages may be over-turned by the trial judge, if the award is considered to be excessive or inadequate. "A fundamental goal of a punitive damage award is to punish but not bankrupt the wrongdoer." Five States do not recognize or award punitive damages in any civil action and some States have passed legislation limiting punitive damage awards.

Most personal injury cases, the plaintiff is seeking both compensatory and punitive damages.

Certain circumstances or incident may not validate a punitive damage award. In 2007, Supreme Court ruled not to appeal a lower court ruling, did not award compensatory or punitive damages to Muslim immigrant from Afghanistan, subjected to offensive and hostile work environment. The Supreme Court acknowledged the plaintiff did not suffer any 'compensable harm' despite the jury finding the plaintiff suffered religious, racial or ethnic harassment at his former employer (Violation of the Civil Rights Act of 1964). Another example: "... if a grocery sold canned goods that later turned out to be tainted, and the store did not know of the problem before selling the canned goods, it would be liable for compensatory damages to the victims who ate the food but would not be liable for punitive damages." Since, the grocery store did not intentionally intend to sell tainted goods.

Compensatory damage award for personal physical injury or sickness is not taxable, other award payment is taxable.

References:

1.) Compensatory Damages & Actual Awards - http://www.personal-injury-info.net/compensatory-damages.htm

2.) Compensatory damages - http://www.answers.com/topic/compensatory-damages-1

3.) Compensatory Damages - http://www.lectlaw.com/def/d004.htm

4.) Damage Relief for Patent infringement - http://www.invention-
protection.com/ip/publications/docs/Damage_Relief_for_Patent_Infringement.html

5.) Punitive damages - http://legal-dictionary.thefreedictionary.com/punitive+damages

6.) Punitive Damages - http://www.forthepeople.com/punitive_damages.htm

7.) compensatory damages - Answers.com - http://www.answers.com/topic/compensatory-damages-1

8.) Court won't review compensatory damage appeal - http://www.businessinsurance.com/apps/pbcs.dll/article?AID=999920009797

9.) General Practice, Solo & Small Firm Division - http://www.abanet.org/genpractice/magazine/1998/sep/barkley.html

10.) LITIGATION NEWS ONLINE - http://www.abanet.org/litigation/litigationnews/2008/august/article_punitive.html

11.) Senate Committee Rejects Limits on Punitive Damages - http://www.calchamber.com/headlines/pages/01162008ts.aspx

12.) Damages - http://www.whatistortreform.com/2005/01/damages.html