According to the Federal Circuit, $173 million was the right damages award for almost three years of patent infringement resulting from Baxalta’s sale of its biologic product Adynovate^® (Antihemophilic Factor (Recombinant), PEGylated).  In Bayer Healthcare LLC v. Baxalta Inc., et al., Nos. 2019-2418, 2020-1017 (Fed. Cir. 2021), the circuit court upheld an award to Bayer HealthCare LLC of $155 million in royalties and $18 million in pre-verdict supplemental damages, without enhancement, for infringement of U.S. Patent No. 9,364,520 (the “’520 Patent”), which is directed to recombinant forms of human factor VIII.

In its decision, the Federal Circuit addressed the District of Delaware’s findings on infringement, enablement, damages, and willfulness.  Slip op. at 2.  In the district court, the jury had “found the asserted claims were enabled and infringed, and that Bayer was entitled to reasonable-royalty damages,” but did not consider the question of willfulness because the district court held “as a matter of law that Baxalta’s conduct did not meet the requirements.”  Id.  Baxalta then appealed the denial of its JMOL motions on liability and damages, while Bayer cross-appealed for a new trial on willfulness. The Federal Circuit has affirmed.

At issue were “recombinant forms of human factor VIII . . . a protein that is produced, and released into the bloodstream, by the liver” and “is useful in the treatment of hemophilia A.”  Slip op. at 2.  The ’520 Patent is directed to use of a specific method of “PEGylation” that increases “the in vivo half-life of a protein,” creating “an improved [factor VIII] variant that possesses greater duration of action in vivo . . . while retaining functional activity” and is produced consistently.  Id. at 2-4.  Adynovate “is a recombinant PEGylated FVIII product used to treat hemophilia A.”  Id. at 5.  It “is made by PEGylating [] amino acids in FVIII that have amine groups, including the amino acid lysine.”  Id. 

On appeal, the Federal Circuit considered and rejected several challenges from Baxalta to the district court’s claim constructions and to the jury’s verdict that the asserted claims are not invalid for lack of enablement. See slip op. at 8-19, 22-26.

The Court also addressed Baxalta’s damages arguments.  Baxalta argued that Bayer’s use of a “50-50 split royalty rate” was improper, and that the district court erred when it “permitted Bayer to rely on a flawed and speculative methodology.”  Slip op. at 27.  The Federal Circuit disagreed, and found that the “district court properly exercised its discretion in allowing Bayer to ask the jury to select a rate between the range presented.”  Id.  The Court further found that “substantial evidence supports the jury’s 17.78% royalty rate, which was within the range encompassed by the record as a whole.”  Id. at 29.

The Federal Circuit separately addressed Baxalta’s challenge to the pre-verdict supplemental damages award.  Slip op. at 30-31.  Baxalta argued that the award violated its Seventh Amendment right to a jury trial.  The Federal Circuit disagreed, finding that “[c]alculating pre-verdict supplemental damages in this case merely required applying the jury’s royalty rate to the undisputed actual infringing sales base.”  Id. at 32.  Because the district court used the royalty rate determined by the jury, the Federal Circuit found that the “district court did not abuse its discretion in awarding pre-verdict supplemental damages.”  Id. at 34.

Finally, the Federal Circuit addressed Bayer’s appeal of the district court’s finding of no willfulness.  See slip op. at 34.  The district court found that Bayer did not provide “sufficient evidence of the state of mind necessary for a finding of willfulness.”  Id.  The court explained that while “there was no dispute that Baxalta was aware of the ’520 patent . . . . Bayer merely assumed that Baxalta knew Adynovate infringed because it involved pegylation at the B-domain of factor VIII.”  Id.  The Federal Circuit concluded “that the record is insufficient to establish that Baxalta’s conduct rose to the level of wanton, malicious, and bad-faith behavior required for willful infringement.”  Id. at 35-36.  “Knowledge of the asserted patent and evidence of infringement is necessary, but not sufficient, for a finding of willfulness.  Rather, willfulness requires deliberate or intentional infringement.”  Id. at 36.

Any request for rehearing is due on March 31, 2021.