On June 14, 2012, the Federal Circuit issued its decision in Bard Peripheral Vascular Inc. v. W.L. Gore & Assoc’s. Inc., clarifying the standard for willful patent infringement. This clarification will give patent litigants greater certainty regarding the scope of potential damages, which in turn will help litigants decide whether to attempt to settle or go to trial.
If an accused patent infringer acted willfully, the court may enhance damages up to three times the damages award, as well as award the patent holder its attorneys’ fees and costs. 35 U.S.C. §§ 284-85. The Federal Circuit modified the test for willful infringement five years ago in In re Seagate Tech., 497 F.3d 1360 (Fed. Cir. 2007) (en banc). To prove willful infringement a patent holder must prove that (1) the accused infringer “acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” and (2) the "objectively defined risk . . . was either known or so obvious that it should have been known to the accused infringer.” Id. at 1371. The first prong of this test is objective, whereas the second prong is subjective and involves the accused infringer's actual state of mind.
The new Bard decision stems from a long-time dispute over a patent for prosthetic vascular grafts. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc’s., 670 F.3d 1171 (Fed. Cir. 2012). A jury found W.L. Gore guilty of willfully infringing Bard's patent and awarded damages to Bard. The district court enhanced those damages due to the willful nature of W.L. Gore’s infringement, and also ordered W.L. Gore to pay Bard’s attorneys’ fees and costs. Id. On appeal, the Federal Circuit initially upheld the determination of willfulness, finding that, despite several defenses offered by W.L. Gore, there was sufficient evidence to satisfy both prongs of the willful infringement test. Id. at 1175.
W.L. Gore petitioned for rehearing, again challenging the trial court's willfulness analysis. The Federal Circuit granted the petition "for the limited purpose of authorizing the panel to revise the portion of its opinion addressing willfulness." Order, No. 2010-1510.
On rehearing, a three judge panel of the Federal Circuit recognized that "[t]he ultimate question of willfulness has long been treated as a question of fact." However, "[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.'" Id. at 4-5. The panel further noted that it previously had not "clearly delineate[d] the standard applicable to Seagate's objective test." Id. at 5.
The Federal Circuit looked to Supreme Court precedent for guidance. The panel noted:
the decision to label an issue a ‘question of law,’ a ‘question of fact,’ or a ‘mixed question of law and fact’ is sometimes as much a matter of allocation as it is of analysis." Id. at 6. With regard to the objective prong of the willful infringement test, the Federal Circuit concluded: “We believe that the court is in the best position for making the determination of reasonableness. This court therefore holds 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.
Id. at 6-7. The Court further instructed:
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.
Id. at 9.
Because the objective prong must ultimately be decided by the judge, the Federal Circuit's clarification of the objective prong of willful infringement may encourage courts to more actively evaluate claims of willful infringement before trial. Since Seagate, some courts have granted summary judgment of no willful infringement under the objective prong, and this clarification may accelerate that trend. If claims for willfulness can be resolved early, it will help litigants evaluate the potential damages at stake, which will in turn help guide the litigation strategy before trial.