On June 14, 2012, the U.S. Court of Appeals for the Federal Circuit again raised the bar for patent holders looking to obtain enhanced damages—up to three times the actual damages—by proving “willful” patent infringement. Under the new standard, before willfulness can be presented to the jury, the trial judge first must determine whether the accused party’s asserted defenses were objectively reasonable. Only if the judge determines they were not objectively reasonable does the jury get to decide the ultimate question of willfulness.
This latest hurdle is the most recent in a line of cases elevating the standard for willful infringement.
In 2004, the Federal Circuit held in Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp. that an accused infringer’s failure to obtain or produce a favorable opinion of counsel does not create an adverse inference that an opinion of counsel may have been unfavorable or that the accused infringer behaved improperly, overruling several prior cases to the contrary.1
In 2007, the Federal Circuit in In re Seagate Technology, LLC heightened the standard for proving willful infringement, from what had been akin to negligence, to the more stringent requirement of showing at least “objective recklessness.”2 The court established a two-prong test under the new standard: an objective prong and a subjective prong. First, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its action constituted infringement of a valid patent.”3 Second, “[i]f this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by therecord developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.”4
The latest development was announced this month in a new opinion in a decades-old dispute between C.R. Bard, Inc. and W.L. Gore & Associates5 over prosthetic vascular grafts, which are used to bypass or replace blood vessels to ensure sufficient blood flow to various parts of the body. Notably, the patent-in-suit issued in 2002 after the application had been pending for 28 years at the U.S. Patent and Trademark Office—the delay due in part to a lengthy inventorship dispute. The litigation has been pending in federal court since 2003.
At the district court level in Arizona, Gore was found to willfully infringe Bard’s patent, and the jury awarded Bard $185.6 million for lost profits and unpaid royalties. District Court Judge (and now Ninth Circuit Judge) Mary Helen Murguia doubled the award to $371.2 million based on the finding of willful infringement.
In February 2012, the Federal Circuit first affirmed the district court’s findings, including the finding of willful infringement. It also ruled that the district court didn’t abuse its discretion in awarding enhanced damages, attorneys fees and costs, and an ongoing royalty. But, following a petition for rehearing and rehearing en banc filed by Gore and supported by an Amici Curiae brief for Verizon Communications Inc. and Intel Corp., the Federal Circuit agreed to a rehearing for the limited purpose of authorizing the original panel to revise the portion of its opinion addressing willfulness.
On rehearing before the same panel of Federal Circuit judges, the Court noted that “[f]ollowing Seagate, this court established the rule that generally the ‘objective’ prong of Seagate tends not to be met where an accused infringer relies on a reasonable defense to a charge of infringement. . . . Thus, the question on appeal often posed is whether a defense or noninfringement theory was ‘reasonable.’”6
The Court acknowledged that even after Seagate, willfulness has continued to be treated as a question of fact.7 The Court found, however, that “the objective determination of recklessness, even though predicated on underlying mixed questions of law and fact, is best decided by the judge as a question of law subject to de novo review.”8
“In considering the objective prong of Seagate, the judge may when the defense is a question of fact or a mixed question of law and fact allow the jury to determine the underlying facts relevant to the defense in the first instance, for example, the questions of anticipation or obviousness. But, consistent with this court’s holding today, the ultimate legal question of whether a reasonable person would have considered there to be a high likelihood of infringement of a valid patent should always be decided as a matter of law by the judge.”9
In a 2 to 1 majority, the Court vacated the willfulness finding and remanded the case for the district court to determine “whether a reasonable litigant could realistically expect [its] defenses to succeed. . . . [And, i]f, in view of the facts, the asserted defenses were not reasonable, only then can the jury’s subjective willfulness finding be reviewed for substantial evidence.”10
In a dissent, Judge Pauline Newman concurred on the decision to vacate the willfulness finding, but argued that remand was unnecessary to determine that Gore was not liable for willful infringement. “Gore’s actions involve a host of potentially relevant facts that Gore could reasonably have believed would invalidate the Goldfarb patent or support Gore’s right to continue to produce the Gore-Tex® grafts as it had for the 28 years of patent pendency. . . .”11
Looking ahead, it will be interesting to see how findings of willful infringement are impacted by the Bard decision, particularly whether the decision leads district court judges to be more willing to grant summary judgment of no willfulness before the case reaches the jury.
According to one study, determinations of willfulness are already down from 63.8% of the time the issue was decided from 1983-1999 (i.e., before the Knorr-Bremse decision), to 48.2% after Knorr-Bremse and before Seagate, and to 37.2% after Seagate.12
That same study indicates that post-Seagate, willfulness was found 61.9% of the time when a jury was the decision-maker, but when a judge decided (e.g., on JMOL), “willfulness was found much less often: less than one in five cases (19%).”13