CAFC Allows Willful Infringer to Continue Infringements for an “Ongoing Royalty” Due to “the Public’s Interest to Allow Competition in the Medical Device Arena”
Stephen Parker | February 16, 2012
Bard Peripheral Vascular, Inc., et al. v. W.L. Gore & Associates, Inc.
February 10, 2012
Panel: Gajarsa, Linn and Newman. Opinion by Gajarsa. Dissent by Newman.
This decision concludes a forty-year-long story that began in 1973 between two cooperating individuals that independently filed patent applications for vascular grafts in 1974. Those applications went to interference in 1983 and have been the subject of ongoing litigation since, concluding now in the current CAFC decision. The Arizona district court from which the present case was appealed expressed that this was “the most complicated case the district court has [ever] presided over.” In this case, the Gore inventor was the first to both 1) conceive of the invention and 2) file a patent application in 1974 (i.e., filing 6 months prior to the Bard inventor), but Gore lost in an interference before the Patent Office. Now, Gore is found to be willfully infringing the patent that was awarded to Bard, and is subjected to doubled damages (i.e., totaling $371 million) and attorney’s fees (i.e., totaling $19 million). However, despite these findings, the CAFC allows Gore to continue infringing, declining a permanent injunction and awarding reasonable royalties in the amount of between 12.5% to 20% for future infringements due to the weight of “the public interest to allow competition in the medical device arena.”
Cooper was a manager at Gore involved in the making polytetrafluoroethylene (“ePTFE”) tubes. He provided the tubes to various researchers, including Goldfarb, who evaluated their suitability for vascular grafts. Between February and April of 1973, Cooper sent Goldfarb a number of ePTFE tubes to use in Goldfarb’s own research. Although Cooper intended that Goldfarb use the tubes for vascular grafts, Cooper did not have any right of control over Goldfarb’s research, and Goldfarb was not required to use the tubes supplied by Cooper or to perform his experiments in any particular way.
After providing numerous samples to Goldfarb, Cooper discovered that material from ePTFE tubes with fibril lengths or internodal distances [of about 5 to 100 microns] was appropriate for use in vascular grafts. Similarly, after receiving the samples and testing the samples, Goldfarb also discovered that ePTFE tubes with similar fibril lengths were appropriate for use in vascular grafts. In addition, on June 13, 1973, Goldfarb also successfully implanted one of the grafts in a dog.
On April 2, 1974, Cooper filed Patent Application No. 05/457,711 claiming the use of ePTFE as a vascular graft. On October 24, 1974, Goldfarb filed Patent Application No. 05/517,415 also claiming the use of ePTFE as a vascular graft. And, later, on September 19, 1983, the Patent Office declared an interference between the two patent applications with Cooper as the senior party. However, the Board awarded priority of invention to Goldfarb because Goldfarb established that he had reduced the invention to practice before Cooper. Goldfarb eventually was awarded U.S. Patent No. 6,436,135 (the ’135 patent) twenty eight years after filing in 2002.
On March 28, 2003, Bard filed suit against Gore for infringement of the ’135 patent in Arizona district court. After a seventeen-day trial, on December 11, 2007, a jury found the ’135 patent valid and willfully infringed by Gore. The present case is an appeal from that decision.
In the prior interference, Cooper (i.e., the Gore inventor) and Goldfarb (i.e., the Bard inventor) had fought to be awarded the right to obtain a patent for the invention as independent inventors. Now, in this case, Cooper tries to assert that he is at least a joint inventor with Goldfarb because he had invited Goldfarb and provided the ePTFE materials to Goldfarb.
However, the court concluded that Cooper was not a joint inventor because at the time Cooper had provided the ePTFE materials to Goldfarb for testing, Cooper had not yet conceived of the invention. The court explained that “[a] person is “a joint inventor only if he contributes to the conception of the claimed invention” and that conception “requires that the inventor appreciate that which he has invented.” However, the court concluded that when he delivered the ePTFE material to Goldfarb, he was focusing on the porosity of the material at that time, not its fibril length and that he was completely unaware of what would make a successful graft – i.e., based on specific fibril lengths.
In addition, the court indicated that while Goldfarb was not previously familiar with ePTFE, Cooper’s inviting Goldfarb to test ePTFE for making successful vascular grafts did not amount to contributing to the conception because the general concept of employing ePTFE was known. The CAFC explained that a joint inventor must (1) contribute in some significant manner to the conception or reduction to practice of the invention, (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention, and (3) do more than merely explain to the real inventors known art.
2. Relief and Damages
In addition to awarding the patentable right to Goldfarb, the CAFC affirmed that Gore willfully infringed Goldfarb’s patent. “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. For a finding of willfulness, 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.” Here, the CAFC explained that Gore was very aware of the patent after the eighteen-year Interference, in which Goldfarb was awarded priority of the invention. In addition, the court explained that the opinion of counsel that Gore relied upon was not credible because 1) it relied upon the same two references that were considered extensively by the Patent Office during prosecution and 2) the opinion contradicted arguments made by Gore’s counsel against those references before the Patent Office during efforts to obtain Gore’s own patent. The court further noted that with the same law firm representing Gore both before and after the ‘135 patent was issued, the objectivity of the opinion [was] questionable.
Enhanced Damages and Attorney Fees
Under the circumstances, the CAFC affirmed the award of doubled damages and attorney fees. Specifically, the court affirmed that the present circumstances involved “an exceptional case” in which awards of increased damages and attorney fees were appropriate. Among other things, the CAFC noted that the evidence supported that the case was “exceptional case” sufficient for attorney’s fees based on, e.g., the “extensive litigation history” in which Gore repeatedly lost, but yet continued to infringe. In addition, the CAFC explained that the litigation history also supported these damages as Gore argued contradictory positions on infringement throughout the litigation and relied on testimony that was not credible.
Ongoing Damages (Permitting of Ongoing Infringement)
Although the CAFC found that the defendant willfully infringed and required the defendant to pay increased damages and attorney fees and costs totally about $390 million, the court allowed the defendant to continue to infringe and denied Bard’s request for a permanent injunction to prevent Gore’s future infringements.
The court explained that in some cases, a court may deny a permanent injunction “if the public interest would be disserved” by the injunction. Here, the CAFC determined that the district court reasonably “denied Bard’s request for a permanent injunction finding that it was in the public interest to allow competition in the medical device arena.” However, as compensation for these ongoing infringements, the court granted an ongoing royalty to compensate for Gore’s future infringement.
Notably, the court determined that the ongoing royalty should be higher than the normal “reasonable royalty” rate used in the normal calculation of damages. In this case, for the calculation of damages, the jury had awarded a reasonable royalty rate of 10%. So, the court ordered higher royalty rates of 12.5% and 20%. Specifically, the court applied a higher royalty rate in relation to products in which Gore directly competed with Bard.
This case highlights how during development conception of an invention is often achieved independently by different persons (e.g., the “eureka” or appreciation of an invention may occur at different times for different persons), and that under the AIA it will be increasingly important to file earlier when there are multiple persons or entities involved in various aspects of development.
This case also highlights the importance of how to handle communications with contractors, suppliers, researchers, etc., during development of one’s invention. First, if Cooper and Goldfarb had an agreement detailing the scope of their arrangement, much of this litigation could have been avoided. Second, this case demonstrates that in the absence of any agreement, it is important to keep crucial information secretive and not to share important information with other persons (which can be difficult when plural persons are involved in development).
Companies interested to make or sell medical device product sales or other products having high public interests can perhaps do so with reduced risks from potential patent infringement due to the court’s allowing of continued infringements with court-determined “ongoing royalty” rates due to weighing of “the public interest” such as, e.g., “to allow competition in the medical device arena.”
This case should also be helpful for potential infringers during license negotiations in medical device and other public interest technologies, as potential infringers have increased chances of receiving court ordered compulsory-like licenses anyway – e.g., even regardless of the wrongful conduct of the defendant.