Fed. Cir. Holds Judge Must Decide Seagate’s “Objective Recklessness” Prong
Intellectual Property Litigation Law Update 06/19/12 David R. Cross, Anthony A. Tomaselli, Patrick J. Murphy
Last Thursday, the Federal Circuit changed the law regarding willful infringement, arguably making it harder for patentees to prove willfulness and collect enhanced damages. In Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., a three-judge panel of the court announced that, going forward, judges - not juries - will determine whether the accused infringer's conduct was "objectively reckless" under the threshold prong of the Seagate two-prong analysis. Until now, most courts have treated "objective recklessness" as a question of fact to be tried to a jury, which is exactly what happened in Bard.
There, the jury found that Gore willfully infringed Bard's patent (relating to blood vessel grafts) and awarded Bard $185 million. Based on the jury's willfulness finding, the judge awarded enhanced damages, doubling the award to $371 million. Initially, a Federal Circuit panel affirmed these findings; however, Gore sought en banc review, challenging the deferential "substantial evidence" standard of review that the panel had applied to the jury's determination. The full Federal Circuit granted an en banc rehearing "for the limited purpose of authorizing the panel to revise the portion of its opinion addressing willfulness." The panel simultaneously issued its revised decision, vacating parts of its prior order and announcing the change in the law.
According to the revised decision, the "objective recklessness" standard presents mixed questions of law and fact best resolved by the judge as a question of law subject to de novo review. This is so regardless of the nature of the defenses to infringement, whether based on claim construction, non-infringement or invalidity. Because the judge is often the final arbiter of the reasonableness of the accused infringer's defenses in any event (e.g., on motions for summary judgment or judgment as a matter of law), the judge alone should determine the threshold question. Only if the judge decides that the accused infringer's conduct was objectively reckless, can the patentee present evidence to the jury of the accused infringer's subjective knowledge of the risk of infringement.
This is the second change in the law with respect to willful infringement in the last five years. In the 2007, the Federal Circuit abandoned the prior "affirmative duty of care standard," pursuant to which an accused infringer who knew of another's patent rights had "an affirmative duty to exercise due care to determine whether or not he [was] infringing." Finding this standard to be too low a bar - "more akin to negligence" than willfulness - the court adopted a heightened standard, incorporating a two-prong test for willfulness: First, the patentee must prove by clear and convincing evidence that the accused infringer "acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." Second, the patentee must prove that this "objectively-defined risk . . . was either known or so obvious that it should have been known to the accused infringer." In re Seagate Technology LLC , 497 F.3d 1360, 1371 (Fed. Cir. 2007).
By splitting who decides each of the Seagate prongs between judge (prong one) and jury (prong two), and subjecting the former determination to de novo review, the Bard decision sends a clear signal to judges to act as gatekeepers - to keep all but clear cases of objectively reckless conduct from the jury. This is confirmed by the Bard Court's explanation comparing the threshold "objectively reckless" determination to the "objectively baseless" standard used to determine whether claims asserted in litigation are a sham: Because the standards are the same, as long as the accused infringer's defenses are not a "sham" or "objectively baseless," the accused infringer's conduct in proceeding despite knowledge of another's patent rights is not "objectively reckless." Assuming the decision stands, the frequency of willfulness and enhanced damages awards are likely to decrease.
For more information on the Bard decision, please contact David Cross at (414) 277-5669 / [email protected], Anthony Tomaselli at (608) 283-2491 / [email protected], Patrick Murphy at (414) 277-5459 / [email protected] or your Quarles & Brady attorney.