Potential New Barrier to Verdicts of Willful Infringement?

A 30-Year Fight over Inventorship

Bard's patent, U.S. Patent No. 6,436,135 (the '135 Patent), covers an artificial vascular graft made from highly expanded polytetrafluoroethylene (“ePTFE”), a material similar to Gore-Tex'. In the 1970s, Peter Cooper was the manager of a Gore plant that manufactured Gore-Tex' ePTFE tubes. Cooper v. Goldfarb, 240 F.3d 1378, 1381 (Fed. Cir. 2001). Cooper began sending samples of ePTFE tubes to various independent researchers, and asked them to evaluate the tubes' suitability for vascular graft material. In February 1973, Cooper sent David Goldfarb, an independent researcher at an Arizona hospital, a set of ePTFE tubes for testing.

Goldfarb successfully designed a graft from Gore's material. However, both Goldfarb and Cooper filed separate patent applications and an interference proceeding was declared in 1983. The '135 Patent eventually issued to Goldfarb, who assigned his patent rights to Bard in 2002.

While the USPTO proceedings were pending, Gore was selling vascular grafts that practiced the claimed invention. In 2003, Bard sued Gore for patent infringement, beginning what the district court “deemed 'the most complicated case th[e district] court [ever] presided over.'” Bard I, 670 F.3d at 1178. In 2007, the jury found that Bard's patent was valid, infringed, and that such infringement was willful. The jury awarded Bard more than $185 million. Id. Then, based on the jury's finding of willful infringement, the court doubled the damage award to more than $371 million. Id. In February 2012, the Federal Circuit panel affirmed the jury's verdict, which resulted in Gore's request for an en banc rehearing, in particular, on the issue of willful infringement.

Seagate's Recklessness Standard

35 U.S.C. ' 284 permits the court to enhance a jury's damage award upon a finding of willful patent infringement. In re Seagate Technology, LLC, 497 F.3d 1360, 1368 (Fed. Cir. 2007) (en banc). Prior to Seagate, the test for finding willfulness had been more akin to the standard for negligence. The Seagate decision imposed a two-pronged test for willfulness that more closely resembled the test for recklessness. Id. To prove willful infringement under Seagate, the patentee must first prove that the defendant was objectively reckless: “a patentee must [first] show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Id. at 1371. Once the objective standard is satisfied, the patentee must next satisfy a subjective prong: if the “threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk ' was either known or so obvious that it should have been known to the accused infringer.” Id.

After Seagate, the Federal Circuit suggested that this “objective” prong is typically not satisfied where an accused infringer relies on a “reasonable defense.” Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed. Cir. 2010). Consequently, the question of whether the defense to infringement was “reasonable” became a common inquiry on appeal. See, e.g., Powell v. Home Depot U.S.A., Inc., 663 F.3d 1221, 1236 (Fed. Cir. 2011). While the ultimate question of willfulness had traditionally been treated as a question of fact decided by a jury, the Federal Circuit had not defined the appropriate protocol for deciding the objective prong under Seagate. Bard II, 682 F.3d at 1006.

En Banc Review of Objective Willfulness

The Federal Circuit granted Gore's petition for rehearing en banc to review trial court procedures for deciding the issue of willfulness. On June 14, 2012, the Federal Circuit held that the trial court had failed to properly address the objective prong of the Seagate willfulness test. The court observed that some patent infringement defenses involve questions of fact and that some involve pure questions of law. Bard II, 682 F.3d at 1006. In Powell, the Federal Circuit ruled that if a defense is resolved as a matter of fact, then the objective prong should be treated as a question of fact. Id. Similarly, the Powell court ruled that if the defense is resolved as a matter of law, determining whether reliance on the defense is reasonable is a question of law. Id. Ultimately, the Federal Circuit in Bard II concluded that this approach “oversimplifies the issue.”

While the ultimate question of willfulness based on an assessment of the second prong of Seagate may be a question of fact, Seagate also requires a threshold determination of objective recklessness. That determination entails an objective assessment of potential defenses based on the risk presented by the patent. Those defenses may include questions of infringement but also can be expected in almost every case to entail questions of validity that are not necessarily dependent on the factual circumstances of the particular party accused of infringement. Bard II, 682 F.3d at 1006.

The court further reasoned that some situations may arise where an issue falls between a purely legal standard and a purely factual standard, and that it may be better for a judge to always resolve the first Seagate prong instead of ever presenting them to a jury:

[T]he fact/law distinction at times has turned on a determination that, as a matter of sound administration of justice, [a judge] is better positioned than [a jury] to decide the issue in question. Id.

Relying on Markman v. Westview, 517 U.S. 370 (1996), to support the notion that there are other mixed questions of fact and law that are best resolved by a judge and reviewed de novo (like claim construction), the Federal Circuit stated that the trial judge is the most appropriate arbiter for resolving whether the defendant was objectively reckless under the first prong of the Seagate test. Thus, even where the objective prong turns on fact questions, “the judge remains the final arbiter of whether the defense was reasonable, even when the underlying fact question is sent to a jury.” Bard II, 682 F.3d at 1007.

In light of its holding, the Federal Circuit remanded the issue of willfulness to the trial court so that it could apply the proper standard for the objective prong of the Seagate test. The court specifically instructed the trial court, in its resolution of the post trial motions, to determine “based on the record ultimately made in the infringement proceedings” whether “a reasonable litigant could realistically expect” those defenses to succeed. Id. at 1008.

Implementing the Bard II Ruling

Bard II would seem to add an additional layer of trial court review to an award of enhanced damages in a patent infringement case. In future cases, where the trial has not already occurred, as it had in Bard II, courts may interpret Bard II in different ways: 1) reserving a willfulness charge and verdict question until the judge decides whether the objective prong has been satisfied; 2) withholding willfulness evidence altogether from the jury until the court decides the objective prong; or 3) addressing the objective prong in post trial motions after the jury has decided issues such as infringement, validity and the subjective prong to willfulness.

While the third procedure will have the least impact on how cases are tried, it reverses Seagate's sequence of deciding the objective prong first. The first procedure would create a time gap between the close of evidence and when the case is sent to the jury. The second procedure would be the most disruptive. Only time will reveal Bard II 's impact on the way patent infringement cases are tried and the way willful infringement is decided.

Matthew W. Siegal is a partner and B. Clayton McCraw is an associate in the Intellectual Property Practice Group in the New York office of Stroock & Stroock & Lavan LLP. Siegal is a member of this newsletter's Board of Editors. The opinions expressed are their own and not necessarily of any of their clients

The question of whether a defendant had willfully infringed a patent has typically been decided by a jury. However, under Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc. , 682 F.3d 1003 (Fed. Cir. 2012) (“Bard II “), a judge may now have the exclusive role of determining whether a jury is entitled to decide this question.

A finding of willful patent infringement can lead to an enhancement of damages, within the court's discretion. A successful claim of willful infringement requires proof of both: a) the infringer's objectively reckless infringement (an objective prong) as well as b) that the objectively defined risk was either known or should have been known by the infringer (a subjective prong). See In re Seagate Technology, LLC, 497 F.3d 1360, 1368 (Fed. Cir. 2007) (en banc). On June 14, 2012, the Federal Circuit ruled that the objective prong of the Seagate willfulness test, although admittedly potentially predicated on factual issues, is best decided by a judge, as a question of law, as opposed to a common practice of treating the entire question as one for the jury. Bard II.

Bard II is a complex case stretching back to 1974. It involves a 28-year patent examination and multiple prior Federal Circuit opinions relating to, inter alia, inventorship and patent ownership. In February 2012, the Federal Circuit affirmed the District of Arizona's finding that W.L. Gore willfully infringed Bard's patent and its award of enhanced damages in the amount of $371 million. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc. Inc. , 670 F.3d 1171, 1178 (Fed. Cir. 2012) (“Bard I “). Gore sought rehearing of the trial court's willfulness analysis, which the Federal Circuit granted en banc, reconsidering the roles of
judge and jury in finding willfulness.

A 30-Year Fight over Inventorship

Bard's patent, U.S. Patent No. 6,436,135 (the '135 Patent), covers an artificial vascular graft made from highly expanded polytetrafluoroethylene (“ePTFE”), a material similar to Gore-Tex'. In the 1970s, Peter Cooper was the manager of a Gore plant that manufactured Gore-Tex' ePTFE tubes. Cooper v. Goldfarb , 240 F.3d 1378, 1381 (Fed. Cir. 2001). Cooper began sending samples of ePTFE tubes to various independent researchers, and asked them to evaluate the tubes' suitability for vascular graft material. In February 1973, Cooper sent David Goldfarb, an independent researcher at an Arizona hospital, a set of ePTFE tubes for testing.

Goldfarb successfully designed a graft from Gore's material. However, both Goldfarb and Cooper filed separate patent applications and an interference proceeding was declared in 1983. The '135 Patent eventually issued to Goldfarb, who assigned his patent rights to Bard in 2002.

While the USPTO proceedings were pending, Gore was selling vascular grafts that practiced the claimed invention. In 2003, Bard sued Gore for patent infringement, beginning what the district court “deemed 'the most complicated case th[e district] court [ever] presided over.'” Bard I, 670 F.3d at 1178. In 2007, the jury found that Bard's patent was valid, infringed, and that such infringement was willful. The jury awarded Bard more than $185 million. Id. Then, based on the jury's finding of willful infringement, the court doubled the damage award to more than $371 million. Id. In February 2012, the Federal Circuit panel affirmed the jury's verdict, which resulted in Gore's request for an en banc rehearing, in particular, on the issue of willful infringement.

Seagate's Recklessness Standard

35 U.S.C. ' 284 permits the court to enhance a jury's damage award upon a finding of willful patent infringement. In re Seagate Technology, LLC, 497 F.3d 1360, 1368 (Fed. Cir. 2007) (en banc). Prior to Seagate, the test for finding willfulness had been more akin to the standard for negligence. The Seagate decision imposed a two-pronged test for willfulness that more closely resembled the test for recklessness. Id. To prove willful infringement under Seagate, the patentee must first prove that the defendant was objectively reckless: “a patentee must [first] show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Id. at 1371. Once the objective standard is satisfied, the patentee must next satisfy a subjective prong: if the “threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk ' was either known or so obvious that it should have been known to the accused infringer.” Id.

After Seagate , the Federal Circuit suggested that this “objective” prong is typically not satisfied where an accused infringer relies on a “reasonable defense.” Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc. , 620 F.3d 1305, 1319 (Fed. Cir. 2010). Consequently, the question of whether the defense to infringement was “reasonable” became a common inquiry on appeal. See, e.g., Powell v. Home Depot U.S.A., Inc. , 663 F.3d 1221, 1236 (Fed. Cir. 2011). While the ultimate question of willfulness had traditionally been treated as a question of fact decided by a jury, the Federal Circuit had not defined the appropriate protocol for deciding the objective prong under Seagate. Bard II, 682 F.3d at 1006.

En Banc Review of Objective Willfulness

The Federal Circuit granted Gore's petition for rehearing en banc to review trial court procedures for deciding the issue of willfulness. On June 14, 2012, the Federal Circuit held that the trial court had failed to properly address the objective prong of the Seagate willfulness test. The court observed that some patent infringement defenses involve questions of fact and that some involve pure questions of law. Bard II, 682 F.3d at 1006. In Powell, the Federal Circuit ruled that if a defense is resolved as a matter of fact, then the objective prong should be treated as a question of fact. Id. Similarly, the Powell court ruled that if the defense is resolved as a matter of law, determining whether reliance on the defense is reasonable is a question of law. Id. Ultimately, the Federal Circuit in Bard II concluded that this approach “oversimplifies the issue.”

While the ultimate question of willfulness based on an assessment of the second prong of Seagate may be a question of fact, Seagate also requires a threshold determination of objective recklessness. That determination entails an objective assessment of potential defenses based on the risk presented by the patent. Those defenses may include questions of infringement but also can be expected in almost every case to entail questions of validity that are not necessarily dependent on the factual circumstances of the particular party accused of infringement. Bard II, 682 F.3d at 1006.

The court further reasoned that some situations may arise where an issue falls between a purely legal standard and a purely factual standard, and that it may be better for a judge to always resolve the first Seagate prong instead of ever presenting them to a jury:

[T]he fact/law distinction at times has turned on a determination that, as a matter of sound administration of justice, [a judge] is better positioned than [a jury] to decide the issue in question. Id.

Relying on Markman v. Westview , 517 U.S. 370 (1996), to support the notion that there are other mixed questions of fact and law that are best resolved by a judge and reviewed de novo (like claim construction), the Federal Circuit stated that the trial judge is the most appropriate arbiter for resolving whether the defendant was objectively reckless under the first prong of the Seagate test. Thus, even where the objective prong turns on fact questions, “the judge remains the final arbiter of whether the defense was reasonable, even when the underlying fact question is sent to a jury.” Bard II, 682 F.3d at 1007.

In light of its holding, the Federal Circuit remanded the issue of willfulness to the trial court so that it could apply the proper standard for the objective prong of the Seagate test. The court specifically instructed the trial court, in its resolution of the post trial motions, to determine “based on the record ultimately made in the infringement proceedings” whether “a reasonable litigant could realistically expect” those defenses to succeed. Id. at 1008.

Implementing the Bard II Ruling

Bard II would seem to add an additional layer of trial court review to an award of enhanced damages in a patent infringement case. In future cases, where the trial has not already occurred, as it had in Bard II, courts may interpret Bard II in different ways: 1) reserving a willfulness charge and verdict question until the judge decides whether the objective prong has been satisfied; 2) withholding willfulness evidence altogether from the jury until the court decides the objective prong; or 3) addressing the objective prong in post trial motions after the jury has decided issues such as infringement, validity and the subjective prong to willfulness.

While the third procedure will have the least impact on how cases are tried, it reverses Seagate's sequence of deciding the objective prong first. The first procedure would create a time gap between the close of evidence and when the case is sent to the jury. The second procedure would be the most disruptive. Only time will reveal Bard II 's impact on the way patent infringement cases are tried and the way willful infringement is decided.

Matthew W. Siegal is a partner and B. Clayton McCraw is an associate in the Intellectual Property Practice Group in the New York office of Stroock & Stroock & Lavan LLP. Siegal is a member of this newsletter's Board of Editors. The opinions expressed are their own and not necessarily of any of their clients