Divided Federal Circuit Affirms Finding of Willfulness in Long-Running Bard v. Gore Litigation

This morning the Federal Circuit published the latest installment in the ongoing saga of Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, available here.  The patent in suit, which "relates to prosthetic vascular grafts made of highly-expanded polytetrafluoroethylene ('ePTFE')," can be traced back to an application filed in 1974.  Along the way the parties have disputed who was entitled to the patent and whether Gore's employee Cooper should have been named as a coinventor, among other issues.  These issues ultimately were resolved in favor of Bard, and in 2003 Bard and inventor Goldfarb filed suit against Gore for infringement.  A jury returned a verdict for Bard, which was affirmed on appeal.  The jury also found that Gore willfully infringed, but in 2012 the Federal Circuit 

vacated the parts of its opinion discussing willfulness and allowing enhanced damages and attorneys’ fees. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003, 1005 (Fed. Cir. 2012) (“Bard II”). It held that as to the threshold determination of willfulness, “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 (p.3).

On remand, the district court again found "'that Defendant, as a "reasonable litigant," could not have "realistically expected" its defenses to succeed'” and entered a finding of willfulness.  A divided panel of the Federal Circuit has now affirmed.

Writing for the majority, Judge Prost notes that

under Bard II, we review de novo the district court’s determination whether Gore’s “position is susceptible to a reasonable conclusion of no infringement.” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1310 (Fed. Cir. 2011). Objective recklessness will not be found where the accused infringer has raised a “substantial question” as to the validity or noninfringement of the patent. Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed. Cir. 2010); DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1336 (Fed. Cir. 2009).

On remand, the district court evaluated several defenses raised by Gore and determined that none of them were objectively reasonable. On appeal, Gore appeals only its determination with respect to Gore’s inventorship defense. . . .  Gore’s argument is based on the fact that its employee, Peter Cooper, supplied the particular ePTFE tubing that Goldfarb used in making his successful vascular graft (the “2-73 RF” graft). In Gore’s view, Cooper furnished to Goldfarb “the embodiment of the invention before Goldfarb conceived the invention using that embodiment.” Bard III, at 7 (pp. 10-11).

Applying de novo review, the majority first "reject[s] Gore’s argument that the mere fact a member of the previous panel dissented on this issue indicates that its position was reasonable," asserting that "[o]therwise, we would be imposing a rule that any single judge’s dissent on the merits could preclude the determination of willful infringement" (p.11).  Judge Prost then reviews the record and concludes that "Gore’s position was not susceptible to a reasonable conclusion that the patent was invalid on inventorship grounds" (p.16).  The willfulness determination therefore is affirmed.  Moreover, since the district court in an earlier proceeding had awarded enhanced damages based on the jury's initial finding of willfulness and in Bard III  found it "unnecessary . . . to reconsider its rulings on enhanced damages and attorney's fees," 2013 WL 5670909, at *12, I assume that the award (doubling the damages from $185,589,871.02 to $371,179,742.04) stands.

Concurring in the judgment, Judge Hughes reiterated a point made by Judge O'Malley in the recent Halo v. Pulse case, namely that "the full court should review our willfulness jurisprudence in light of the Supreme Court’s recent decisions in Highmark Inc. v. Allcare Health Management Sys., Inc., 134  S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014)."  According to Judge Hughes, "[t]hose decisions call into question our two-part test for determining willfulness, In Re Seagate Tech., LLC, 497 F.3d 1360 (2007) (en banc), and our de novo standard for reviewing the district court’s willfulness determination, Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003, 1006–07 (Fed. Cir. 2012) (Bard II)."  Judge Hughes believes that, as is now the case with attorneys' fee awards, the correct standard requires some deference to the district court:

This case demonstrates why de novo review of willfulness is problematic. The panel is divided over the strength of Gore’s joint inventorship defense. Each side advances a sound argument about whether the evidence in this case raises a “substantial question” of joint inventorship. And the district court, likewise, provided a thorough and well-reasoned opinion. If one of these several reasonable opinions must ultimately govern, it should be the opinion of the district judge, whose assessment of litigation positions is informed by trial experience and who has “lived with the case over a prolonged period of time.” Highmark, 134 S. Ct. at 1748.

A more deferential standard of review would be consistent with the standards for reviewing mixed questions of law and fact in other contexts. See, e.g., Highmark, 134 S. Ct. at 1748–49 (holding abuse of discretion is the proper standard for reviewing award of attorney fees in patent cases, “[a]lthough questions of law may in some cases be relevant . . . .”); Pierce v. Underwood, 487 U.S. 552, 558 (1988) (holding abuse of discretion is the proper standard for reviewing determinations of whether a litigant’s position is “substantially justified” for purposes of fee-shifting under the Equal Access to Justice Act, although the determination frequently turns on a purely legal issue). It would also be consistent with the standard for reviewing a finding of willful copyright infringement. See Dolman v. Agee, 157 F.3d 708, 715 (9th Cir. 1998) . . . .

Dissenting, Judge Newman writes that 

Precedent establishes that the objective prong of willful infringement “tends not to be met where an accused infringer relies on a reasonable defense to a charge of infringement.” Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319–20 (Fed. Cir. 2010). When there is a “substantial question of invalidity or  unenforceability” of the patent, willful infringement cannot arise, as a matter of law. Seagate, 497 F.3d at 1371. The panel majority does not review the evidence and apply the law objectively; the court merely searches for and recites adverse evidence.

Judge Newman's lengthy review of the evidence leads her to conclude that Gore's position was reasonable and therefore that Gore did not willfully infringe.  

Judge Newman also forcefully dissents from the imposition of enhanced damages:

Even when willful infringement is found, it does not follow that punitive damages must be imposed, or that the damages must be doubled. The public benefit of Gore’s product cannot be ignored. Punitive damages are intended to discourage bad behavior, not life-saving medical devices. . . .

Extensive precedent supports judicial refusal to enhance damages when the case is close and the equities counsel moderation, not punishment. The award of punitive damages depends on both the infringer’s degree of culpability, and the injury that the infringement imposed on the patentee. Bard was awarded full recovery for its loss of business to the Gore product. The district court stated that “the Court is satisfied that a fair and full amount of compensatory money damages, when combined with a progressive compulsory license, will adequately compensate Plaintiffs’ injuries, such that the harsh and extraordinary remedy of injunction–with its potentially devastating public health consequences—can be avoided.” Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. 03-CV-0597, 2009 WL 920300, at *5 (D. Ariz. Mar. 31, 2009).

The district court’s recognition of the public’s interest and medical benefits imparted by Gore’s product, and the court’s refusal to enjoin its provision, cannot be reconciled with the punitive doubling of damages. There was no showing, or even a charge, of intentional harm, as required for severe punishment as here meted out. See Restatement (Second) of Torts § 500 (1965).

Thus, regardless of whether willfulness was a supportable ruling, the doubling of the damages award is untenable.

Given the force of the concurring and dissenting opinions, I don't think we've heard the last of the Bard v. Gore story.  On the law, I'm inclined to agree with Judge Hughes that after Highmark  and Octane Fitness, the Federal Circuit's current standards for evaluating willfulness are not easily supportable.  Perhaps Judge Newman is right, however, that even under those standards punitive damages should not be imposed here.  More generally, and as I have discussed elsewhere, I don't think that economic logic supports the awarding of enhanced damages at all other than in a few narrowly circumscribed circumstances such as where the defendant has actively concealed its infringement--though whether the Federal Circuit or the Supreme Court is ever willing to go that far may be hoping for too much.