No Permanent Injunction Against Willful Infringer of Direct Competitor’s Medical Device Patent: Are “On-going Equitable Royalties” The New Normal?

February 11, 2012

Yesterday, February 10, 2012, in Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates, Inc., 2010-1510 (Fed. Cir. February 10, 2012)(majority opinion authored by Judge Gajarsa and joined by Judge Linn)(dissent by Judge Newman), the Federal Circuit majority opinion affirmed a lower court’s denial of a permanent injunction against a direct competitor of the patentee found to have willfully infringed a patent regarding surgical grafts (as well as other related medical devices where the parties were not in direct competition).  The dissent focused on liability and did not discuss in any detail remedies.  By the way, did I say this was a medical device case between direct competitors?

The majority agreed with the district court that  “it was in the public interest to allow competition in the medical device arena”  Bard Peripheral Vascular, Inc.  Majority Slip. op. at 37, citing, Bard Peripheral Vascular, Inc., and David Goldfarb, M.D., vs. W.L. Gore & Associates, Inc., No. CV-03-597-PHX-MHM, 2009 WL 920300, at *4–10 (D. Az. 2009).   The majority gave more analysis to affirming the on-going royalty in lieu of an injunction as an equitable remedy than to denial of the permanent injunction itself.  Bard Peripheral Vascular, Inc. Slip. op. at 37, citing, Bard Peripheral Vascular, Inc., and David Goldfarb, M.D., vs. W.L. Gore & Associates, Inc., No. CV-03-597-PHX-MHM (D. Az. Sept. 2010)(Slip op.).  The dissent focuses on liability and does not directly address remedies.

What is remarkable is that the refusal to grant the permanent injunction is made in light of two important facts:  First, the parties were direct competitors in the market for surgical grafts, and the medical need for these products trumped the patentee’s right to an injunction.  As the district court found, “Surgical graft products include those products on which Gore and Bard directly compete, including the surgical graft and patch products for which the jury awarded Bard lost profit damages. The Court has sometimes referred to Gore’s surgical graft products as its ‘Counterpart Products.’”  Lines 9-12, page 12, Bard Peripheral Vascular, Inc., and David Goldfarb, M.D., vs. W.L. Gore & Associates, Inc., No. CV-03-597-PHX-MHM (D. Az. Sept. 2010)(Slip op).  (For an analysis of the district court’s decision, and a detailed analysis of pricing and terms of how the on-going rights would be licensed per the district courts September 2010 order, see my colleagues’ blog at http://patent-damages.com/2010/12/detailed-opinion-on-ongoing-royalties-from-arizona-court/).

Second, the Federal Circuit majority agreed the public interest favored competition for the medical products in suit.  Would this be true in every medical device patent infringement case?  Would this also be true in cases over drugs, agricultural improvements, and safety devices, among other things?  Further, the premise of the Antitrust Laws, including the Sherman Act, the Clayton Act, and the Federal Trade Commission Act, is that competition is a good thing in every market:  Patent rights are an exception to this rule.

Like many people in this business, I understood that the Supreme Court’s decision in 2006 in eBay v. MercExchange, to be the end of “mandatory” injunctions in patent cases.  Although Section 283 of Title 35 had never been amended since the 1952 codification of the patent laws into the United States Code (http://uscode.house.gov/download/pls/35C29.txt), nonetheless 54 years after that law was passed, in 2006 the Supreme Court reversed decades of precedent requiring injunctions in patent cases (with very rare and extreme exceptions) based on the statute’s language referring to traditional rules of equity.  This 2006 change in the law left many patent owners with only damages as a remedy.

However, I clung to the notion that on-going equitable royalties were for cases that involved non-practicing entities, or entities that did not compete with each other directly, or sometimes even competing entities that had a history of, or a commitment to, license other competitors (whether through standards-setting activity or licensing programs, etc.).  A law review article studied the frequency of injunctions in the 2008-2009 timeframe, and found direct competition to be a strong predictor of an injunction post-eBay: Rachel M. Janutis, THE SUPREME COURT’S UNREMARKABLE DECISION IN EBAY INC. V. MERCEXCHANGE, L.L.C., LEWIS & CLARK LAW REVIEW Vol. 14:2, pp. 605-607 (April 2010)(http://www.lclark.edu/live/files/4810).

Yet now, with little comment from the majority or dissent, a Federal Circuit opinion affirms denial of a permanent injunction and approves an ongoing equitable royalty where a direct competitor in the medical device field was found to be a willful infringer of the patent-in-suit — due in large part to public health or interest concerns.  Is this confirmation of the dwindling right to injunctions and the increasing use of the on-going equitable royalties as the “new normal”?  Is this a good thing or a bad thing? Are eBay and its progeny judicial activism at work, or common sense application of the factors for injunctive relief in equity referred to in the text of Section 283 as codified in 1952?

Your comments please?

Filed under: antitrust,damages and remedies,Federal Circuit,license,standard-setting