Patent Watch: Edwards Lifesciences AG v. Medtronic, Inc.

Alerts / November 13, 2012

[There exists a] variety of equitable considerations, and responsive equitable remedy in patent cases; for example, the grant of a royalty-bearing license instead of imposing an injunction in situations where the patentee would experience no competitive injury, [or] where there is an overriding public interest in continued provision of the infringing product.

On November 13, 2012, in Edwards Lifesciences AG v. Medtronic, Inc., the U.S. Court of Appeals for the Federal Circuit (Rader, Newman,* Prost) affirmed-in-part and remanded-in-part the district court's entry of judgment on the jury verdict that Medtronic CoreValve willfully infringed U.S. Patent No. 5,411,552, which related to a transcatheter heart valve, and the damages award of $72,645,555 in lost profits and $1,284,861 as a reasonable royalty. The district court declined to enhance damages for the willful infringement and to issue an injunction against future infringement, apparently on CoreValve's representation that, if enjoined, it would move its manufacturing operations to Mexico. The Federal Circuit stated:

CoreValve argues that the criteria for award of lost profits were not met, stating that it "could have manufactured its device overseas by March 2007," and thus would have avoided all liability for infringement, by avoiding infringement. CoreValve argues that this eliminates liability for damages based on its manufacture in the United States, or that at most it should be liable for only a modest royalty. Neither the jury nor the district court was persuaded by this argument. Nor are we. Whether or not CoreValve could have avoided infringement, it did not do so, although it was notified as early as 2005 of Edwards' position, and the record showed CoreValve's familiarity with the patents and the inventors.

We affirm the district court's ruling sustaining the jury's damages award. With respect to the verdict of willful infringement, although this finding was sustained by the district court, the court declined to enhance damages or award attorney fees, stating that the issues were "sufficiently close" and the defenses not frivolous. We do not discern abuse of discretion in the court's decision not to enhance damages.

Edwards requested entry of an injunction against future infringement, and cited several equitable considerations, including the importance of establishing customer relationships now that FDA approval has been obtained, and the fact that Medtronic, as a large medical device manufacture, could overwhelm the much smaller Edwards.

A patentee's right to exclude is a fundamental tenet of patent law. The innovation incentive of the patent is grounded on the market exclusivity whereby the inventor profits from his invention. Absent adverse equitable considerations, the winner of a judgment of validity and infringement may normally expect to regain the exclusivity that was lost with the infringement. Edwards argues that the Court's ruling in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) supports its position, for the willfulness of the infringement and other equitable aspects weigh in favor of restoration of the exclusive patent right.

The Court in eBay did not hold that there is a presumption against exclusivity on successful infringement litigation. The Court did not cancel 35 U.S.C. §154 . . . . The Court held that equitable aspects should always be considered, stating: "We hold only that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards."

Statutory and historical as well as commercial considerations impinge on every equitable determination. Precedent illustrates the variety of equitable considerations, and responsive equitable remedy in patent cases; for example, the grant of a royalty-bearing license instead of imposing an injunction in situations where the patentee would experience no competitive injury, [or] where there is an overriding public interest in continued provision of the infringing product.

[T] the district court declined to impose the requested injunction. First, the district court responded to Edwards' argument that without exclusivity it would lose first-mover advantage and market share and reputation, by stating that these had already been lost - although Edwards states that this is incorrect, for sales in the United States had not yet been authorized by the FDA, as to either the Edwards or the CoreValve/Medtronic product. The district court also stated that Edwards had given up exclusivity by licensing the '552 patent to another competitor. CoreValve does not dispute that the district court erred in its view of that transaction, and that no such license exists.

The district court's explanation of why it was withholding an injunction placed significant weight on CoreValve's statements that it was immediately moving this manufacturing operation to Mexico, and thus that infringement would terminate. The district court stated that if CoreValve should renew its infringing manufacture in the United States, then "[a]s it did in this case, Edwards can bring suit against CoreValve and seek damages if CoreValve continues its infringing manufacturing operations in spite of the judgment of infringement." Edwards states on this appeal, and CoreValve does not deny, that CoreValve never stopped its infringing manufacture in California. Whether or not that representation was known to be false when made, the situation before us reflects, at least, changed circumstances. . . . Recognizing that the circumstances have not been fully explored in the record before us, we vacate the denial of the injunction, and remand to the district court for consideration in light of ensuing events and any other relevant factors.

If you have questions about the material presented above, please contact Dr. Lawrence M. Sung (lsung@bakerlaw.com or 202.861.1537) or any member of our Intellectual Property Team.

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