Seagate Objective-Reckless Standard is Question of Law to be Decided by Judge and Subject to De Novo Review

Sadao Kinashi | June 28, 2012

Bard Peripheral v. W.L.Gore (on rehearing)

June 14, 2012

Panel:  Newman, Gajarsa, and Linn.  Opinion by Gajarsa. Dissent-in-Part by Newman.

Summary:

Enhanced damages on willful infringement can be awarded under 35 U.S.C. § 284.   For determining willful infringement, In re Seagate established a two-pronged test requiring showing that (1) the infringer acted despite an objectively high likelihood of infringement, and that (2) the infringer knew or should have known the risk.  CAFC established the rule that prong (1) tends not to be met where an infringer relies on a reasonable defense.  According to CAFC, while an assessment of prong (2) may be a question of fact, determination of prong (1) entails an objective assessment of potential defenses based on the risk, and in considering prong (1) of Seagate, the court is in the best position for making the determination of reasonableness.  Thus, CAFC ruled that the objective recklessness is best decided by the judge as a question of law subject to de novo review, even though there are underlying mixed questions of law and fact.

米国特許法284条により、判事は故意侵害に対して損害賠償額を増額することができる。Seagate判決は、故意侵害の立証として、 (1)客観的に侵害可能性が高いにも関らず侵害者が行動したこと、及び(2)侵害者がそのリスクを認識していたこと、を求める二要因基準を確立した。また、侵害者が合理的な抗弁に依存している場合は、要因(1)は通常満足されないことも確立してきている。要因(2) は事実問題であるが、要因(1)の判断は、侵害のリスクに関する、潜在的な抗弁の客観的な評価を含む。したがって、客観的無謀さは、法律と事実の混合した問題に基づくものではあるが、法律問題として、判事が判断するのが最善であり、控訴において全面的に見直されるものである。

For our discussion of the CAFC’s previous holding in this case, please click here.

Details:

Background

The patent involved prosthetic vascular grafts used to bypass or replace blood vessels to assure adequate and balanced blood flow to particular parts of the body. The Board awarded priority of invention to Bard’s inventor, who established reduction to practice before Gore’s inventor.

The jury awarded lost profits in the amount of $102 million and reasonable royalties in the amount of $83 million, and set a reasonable royalty rate of 10 percent.  The district court also doubled the damages to $371 million.  The district court decision discussed enhanced damages based on totality of the circumstances including factors in Read v. Portec (Fed. Cir 1992): (a) deliberate copying, (b) good-faith belief of non-infringement, (c) behavior as a party in litigation, (d) size and financial condition, (e) closeness of the case, (f) duration of misconduct, (g) remedial action, (h) motivation for harm, (i) attempt to conceal.  Seagate’s two-pronged test was merely mentioned in the jury instruction.

In the first panel decision, the CAFC affirmed all of the conclusions.  The CAFC also ruled that there was sufficient evidence for the jury to have found willful infringement by clear and convincing evidence, and there was sufficient basis for deeming the case exceptional under 35 U.S.C.S. § 285, warranting the award of attorney’s fees.

Gore filed a petition for rehearing and rehearing en banc.  Therein, Gore faulted the trial court’s willfulness analysis.  The CAFC granted the petition for rehearing en banc and an en banc order returned the case to the panel for review of the willfulness issue.

In the present decision, the CAFC vacated prior discussion of willfulness, and held that the trial court failed to address the Seagate objective prong of willfulness as a separate legal test.  Also, the CAFC ruled that the objective prong of Seagate is a question of law based on underlying mixed questions of law and fact and is subject to de novo review.

The CAFC remanded the issue of willfulness so that the trial court reconsiders its denial of JMOL of no willful infringement in view of the current holding.

Discussion

When willful infringement is found, enhanced damages can be awarded under 35 U.S.C. § 284.  The en banc decision in In re Seagate established a two-pronged test to establish willful infringement, a patentee must show by clear and convincing evidence that (1)“the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” and that (2) “this objectively-defined risk . . . was either known or so obvious that it should have been known to the accused infringer.” In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007) (en banc).  The CAFC noted that the objective prong of Seagate tends not to be met where an accused infringer relies on a reasonable defense to a charge of infringement.

The ultimate question of willfulness has long been treated as a question of fact.  The CAFC now holds that while an assessment of the second prong of Seagate may be a question of fact, a determination of objective recklessness entails an objective assessment of potential defenses based on the risk presented by the patent.  According to the CAFC, those defenses may include questions of infringement but also can entail questions of validity that are not necessarily dependent on the factual circumstances of the particular party accused of infringement.

For considering the objective prong of Seagate, the CAFC held that the court is in the best position for making the determination of reasonableness, and that even though there are underlying mixed questions of law and fact, the objective determination of recklessness is best decided by the judge as a question of law subject to de novo review.

According to the CAFC, when a defense by an infringer is purely legal (e.g., claim construction), the objective recklessness of such a theory is a purely legal question to be determined by the judge.  Also, when the objective prong turns on fact questions, for example, as related to anticipation, or on legal questions dependent on the underlying facts, for example, as related to obviousness, the judge remains the final arbiter of whether the defense was reasonable, even when the underlying fact question is sent to a jury.

Having clarified the legal standard for Seagate’s objective prong, the CAFC remanded the case so that the trial court can apply the correct standard to the question of willfulness in the first instance.  The CAFC noted that courts of appeals should be constantly alert to the trial judge’s first-hand knowledge of witnesses, testimony, and issues and that they should give due consideration to the first-instance decision maker’s feel for the overall case.

The CAFC also noted that although Gore asserted several defenses: inventorship, inadequate written description, obviousness, and anticipation, the trial court did not have the benefit of this court’s clarification, and did not review those defenses under this standard.

The CAFC directed that on remand, the district court should determine whether a “reasonable litigant could realistically expect” those defenses to succeed.  Also, the CAFC noted that if the asserted defenses were not reasonable, only then can the jury’s subjective willfulness finding be reviewed for substantial evidence.

Thus, the CAFC vacated the previous determination of willfulness and remanded for further proceedings consistent with the ruling.

Concurring and Dissenting Opinions

Judge Newman wrote her opinion concurring in the vacatur, and dissenting from the partial remand.  Judge Newman noted that it is not clear why a remand is necessary in light of the standard enunciated and that remand is unnecessary.

Judge Newman opined that the general standard for willful infringement accompanied by multiplication of damages is whether the accused infringer acted unreasonably and with knowledge that it was infringing a patent, and that the determination includes an estimation of the reasonableness of the infringer’s view of patent validity and infringement, in view of all facts that could reasonably be included in the evaluation.

As to whether Gore met the standard of willful wrongdoing, Judge Newman said that culpable action must be shown with sufficient definiteness to warrant the enhanced damages, and that Gore’s actions involve a host of potentially relevant facts that Gore could reasonably have believed would invalidate the Goldfarb patent.  Thus, Judge Newman concluded that willful infringement is not supportable.

Full Opinion

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