[author: Marc S. Segal]

For patent holders, it just got a little harder to prove that an alleged infringer’s conduct was “willful” now that the Court of Appeals for the Federal Circuit has ruled that one of the key questions must be decided by the judge, not the jury.

In its June 14, 2012, decision in Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc., the Federal Circuit ruled that the threshold, objective prong of the willfulness inquiry—was defendant’s defense reasonable?—should “always be decided as a matter of law by the judge.”

This development likely will make it harder to prove willful infringement and could cost patentees millions of dollars because a showing of willful infringement is required for an award of enhanced damages.

At trial, a jury awarded Bard $185 million for willful infringement of its patent relating to blood vessel grafts. The trial judge, exercising her discretion, doubled the damages to $371 million.

On appeal, it seemed at first that the Federal Circuit was poised to uphold the verdict—and the enhancement for willfulness—but the court’s initial ruling in February was vacated when the full court instructed the three-judge panel to study the question again.

Now, the panel has declared that the trial judge made a fundamental error by allowing the jury to decide a question that the judge should have decided herself.

The ruling builds on the legacy of another Federal Circuit ruling, handed down in 2007, that revamped the standard for willful infringement by requiring a showing that the infringer was “objectively reckless.” Prior to the decision in In re Seagate Technology, patentees had an easier time proving willful infringement because accused infringers had “an affirmative duty” to determine whether or not they were infringing.

In Seagate, the Federal Circuit said patent owners must satisfy a two-prong test. The first, or “objective” prong, requires patent owners to show that the defendant acted despite there being an objectively high likelihood that its actions infringed the patent. The court noted that the objective prong typically turns on whether the infringer’s defenses were or were not reasonable. If the patent owner proves the first prong, the patent owner then must satisfy the “subjective prong” by showing that the infringer either knew or should have known of this objectively high risk.

Until now, trial judges were allowing juries to decide both the objective and subjective prongs, as well as the ultimate decision as to willful infringement.

But last week’s decision fundamentally changes the dynamics of the trial by reserving part of the willfulness decision for the trial judge.

In Bard, the Federal Circuit 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 … is best decided by the judge as a question of law subject to de novo review.” In essence, the Court felt that it was best for a judge, rather than a jury, to decide whether a patent infringement defense is reasonable.

By holding that the objective prong is decided by the judge, the Federal Circuit likely has made it harder for patentees to establish willful infringement. For example, trial judges can grant summary judgment on the issue—declaring that willfulness cannot be proven—particularly where the accused infringer’s defense of noninfringement is based on a reasonable claim construction position (a purely legal issue).

Even when a patentee survives summary judgment, it will have a harder time convincing a judge that the infringer’s defenses were unreasonable. Because of their legal training, judges are better than juries at ignoring facts that are irrelevant to the objective prong, such as knowledge of the patent and copying by the infringer. As a result, patentees can no longer rely on juries to ignore the objective prong and decide the issue of willful infringement solely on the basis of facts that are relevant only to the subjective prong. Finally, the Federal Circuit noted that by making this a legal issue, the Federal Circuit no longer will need to defer to a fact finder on this prong, thus enabling it to review the decision independently and “unify precedent.”

The attorneys in Ballard Spahr’s Intellectual Property Litigation Group are experienced in all phases of patent infringement litigation. For more information, contact Robert R. Baron, Jr., Vice Chair of the Intellectual Property Department, at 215.864.8335 or baron@ballardspahr.com; Marc S. Segal at 215.864.8843 or segalm@ballardspahr.com; or any of the other members of Ballard’s Intellectual Property Litigation Group.