Patent Watch: Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc.

Alerts / June 29, 2012

[T]he threshold objective prong of the willfulness standard enunciated in Seagate is a question of law based on underlying mixed questions of law and fact and is subject to de novo review.

On June 14, 2012, in Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., the U.S. Court of Appeals for the Federal Circuit (Newman, Gajarsa,* Linn) affirmed-in-part, vacated-in-part and remanded-in-part the district court's judgment that Gore willfully infringed U.S. Patent No. 6,436,135, which related to prosthetic vascular grafts fabricated from highly-expanded polytetrafluoroethylene (ePTFE), and that the '135 patent was not invalid for improper inventorship, anticipation, obviousness, or lack of written description. The Federal Circuit stated:

A finding of willful infringement allows an award of enhanced damages under 35 U.S.C. § 284. Because Supreme Court precedent requires a showing of recklessness before civil punitive damages are allowed, Seagate overruled this court's previous standard for willfulness, which was "more akin to negligence." Seagate established a two-pronged test for establishing the requisite recklessness. Thus, to establish willful infringement, "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." Once 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." The Seagate court "le[ft] it to future cases to further develop the application of this standard." Following 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."

The ultimate question of willfulness has long been treated as a question of fact. . . . The court has not been called upon, however, to clearly delineate the standard applicable to Seagate's objective test. Since Seagate, however, even in those cases that have continued to recite the general characterization that willfulness ultimately presents a question of fact, our opinions have begun to recognize that the issues are more complex. For example, while this case was on appeal this court in considering the objective prong clarified that "the answer to whether an accused infringer's reliance on a particular issue or defense is reasonable is a question for the court when the resolution of that particular issue or defense is a matter of law" but it "is properly considered by the jury" "[w]hen the resolution of a particular issue or defense is a factual matter."

After reviewing the Supreme Court's precedent in similar contexts, as well as our own, we conclude that simply stating that willfulness is a question of fact 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. In considering the standard applicable to the objective prong of Seagate, it can be appreciated that "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." When an "issue falls somewhere between a pristine legal standard and a simple historical fact, the fact/law distinction at times has turned on a determination that, as a matter of sound administration of justice, one judicial actor is better positioned than another to decide the issue in question." 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.

When a defense or noninfringement theory asserted by an infringer is purely legal (e.g., claim construction), the objective recklessness of such a theory is a purely legal question to be determined by the judge. When the objective prong turns on fact questions, as related, for example, to anticipation, or on legal questions dependent on the underlying facts, as related, for example, to questions of obviousness, the judge remains the final arbiter of whether the defense was reasonable, even when the underlying fact question is sent to a jury. Our holding is consistent with similar holdings in other parallel areas of law. Our precedent regarding objectively baseless claims, which allow courts to award enhanced damages and attorneys' fees under 35 U.S.C. § 285, and the Supreme Court's precedent on "sham" litigation are instructive. [A] suit will not be considered sham litigation unless the lawsuit is "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome," it is not objectively baseless. And like willfulness, there is a subjective requirement that must be addressed only after the objective requirement is satisfied.

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.

Having clarified the legal standard for Seagate's objective willfulness prong, we conclude that remand is appropriate so that the trial court may apply the correct standard to the question of willfulness in the first instance. In this case, Gore asserted several defenses that it says were "reasonable": inventorship, inadequate written description, obviousness, and anticipation. The trial court, which did an exemplary job presiding over this complex case, did not have the benefit of this court's clarification, and did not review those defenses under this standard. On remand, therefore, the court should determine, "based on the record ultimately made in the infringement proceedings," whether a "reasonable litigant could realistically expect" those defenses to succeed. If, 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.

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