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Federal Circuit Issues New Standards for Determining Willfulness

June 14, 2012

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Last Month at the Federal Circuit - July 2012

Judges: Newman (concurring-in-part and dissenting-in-part), Gajarsa (author), Linn

[Appealed from: D. Ariz., Judge Murguia]

In Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., No. 10-1510 (Fed. Cir. June 14, 2012), the Federal Circuit vacated portions of its previous decision in Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., 670 F.3d 1171 (Fed. Cir. 2012), relating to willfullness. The Court held that the threshold objective prong of the willfulness standard enunciated in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), is a question of law based on underlying mixed questions of law and fact, and is subject to de novo review. The Court remanded the issue of willfulness to the district court to reconsider its denial of JMOL of no willful infringement, with instructions that, if the court grants the JMOL, it should then reconsider its decisions on enhanced damages and attorneys’ fees.

The Federal Circuit previously held that the district court was correct in its judgment and affirmed all of the conclusions reached by the district court. W.L. Gore & Associates, Inc. (“Gore”) then filed a petition for rehearing and rehearing en banc, in which Gore again faulted the district court’s willfulness analysis. Separately, an amicus brief in support of Gore’s petition argued that the objective prong of willfulness should be considered a question of law subject to de novo review on appeal. The Federal Circuit granted the petition for rehearing en banc and asked the original panel to revisit the issue of willfulness and the applicable standard of review.

In revisiting the issue of willfulness, the Federal Circuit noted that Seagate established a two-pronged test for establishing willful infringement. First, “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.” Slip op. at 4 (quoting Seagate, 497 F.3d at 1371). 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.” Id. (alteration in original) (quoting Seagate, 497 F.3d at 1371). The Seagate court left it to future cases to further develop the application of this standard. Following Seagate, the Federal Circuit established the rule that, generally, the objective prong of Seagate is not met where an accused infringer relies on a reasonable defense to a charge of infringement. Thus, the question on appeal is often whether a defense or noninfringement theory is “reasonable.”

The ultimate question of willfulness has long been treated as a question of fact. The Federal Circuit, after reviewing its and the Supreme Court’s precedent in similar contexts, concluded that simply stating that willfulness is a question of fact oversimplifies the issue, however. The Court explained that, while the ultimate question of willfulness based on an assessment of the second prong of Seagate may be a question of fact, the threshold determination of objective recklessness 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 to entail questions of validity that are not necessarily dependent on the factual circumstances of the particular party accused of infringement.

The Court explained that 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.” Id. at 6 (quoting Miller v. Fenton, 474 U.S. 104, 114 (1985)). Applying this principle, the Federal Circuit decided that the Court is in the best position for making the determination of reasonableness. Accordingly, the Court held 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. The Federal Circuit instructed that, in considering the objective prong of Seagate, a judge may 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, 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, the Court concluded that remand was appropriate to permit the district court to apply the correct standard to the question of willfulness in the first instance. Gore asserted several defenses that it says were “reasonable”—inventorship, inadequate written description, obviousness, and anticipation. On remand, the Court directed the district court to determine 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. Judge Newman concurred with vacating the previous determination on willfulness, but dissented from the partial remand.

Judge Newman concluded that no remand was necessary because the record contained “a host of potentially relevant facts” that Gore could reasonably have believed would invalidate the patent-at-issue or support Gore’s right to continue to produce the accused products. Newman Dissent at 2.
Judge Newman believed that, if the Court insisted on a retrial of willfulness, the appealed issues of validity and inventorship should also be reviewed, as the question of infringement could evaporate, mooting any question of willfulness.

Summary authored by Joyce Craig, Esq.