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US punitive damages – A fairer hearing following the decision in Bard v Gore?


26th Jun 2012

In “Bard Peripheral Vascular v W.L Gore & Associates“, the US Court of Appeal of the Federal Circuit (CAFC) ruled that the award of punitive damages in patent infringement actions was essentially a matter for the judge not the jury. This ruling clarifies the law relating to damages and changes the existing practice in which juries are able to award enhanced damages in infringement cases if they found that a defendant had “wilfully infringed” another’s patent. Wilful infringement has previously been for the jury to determine “as a question of fact”, with the judge only being called upon to set the final amount of the enhanced award.

Under the new law, “wilful infringement” will now turn also on the judge’s legal view of the ‘reasonableness’ of the defence and on whether the defendant’s behaviour meets the definition set out under the ‘objective prong’ of the “objective recklessness” test established in the CAFC’s Seagate Technology LLC decision.

US practitioners expect this requirement to filter out many allegations of wilful infringement before they reach the jury and to provide greater consistency for future in the award of damages.

Discussion

US patent law allows a court to increase the damages awarded by up to three times the amount sustained by the claimant (section 35 USC 284 – Damages: Patent Laws). Although the statute does not define the circumstances under which it is appropriate to increase damages, US courts have historically interpreted this to require the claimant to demonstrate by clear and convincing evidence that the defendant wilfully or deliberately acted to infringe.

Since 2007, in the en banc decision of the CAFC, Seagate Technology LLC, wilful infringement has been assessed based on the “objective recklessness” test. The objective recklessness test has two prongs requiring consideration. The first or ‘objective’ prong requires that “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”. If this prong of the test is met, and the “threshold objective standard is satisfied” then the second prong comes into play, and the patentee must demonstrate that the objectively-defined risk “was either known or so obvious that it should have been known to the accused infringer.”

Following Seagate, further cases of the Federal Court established that “the ‘objective’ prong tends not to be met where an accused infringer relies on a reasonable defence to a charge of infringement”. However, it was still necessary for the jury to assess whether a defence or counsel’s view of non-infringement was “reasonable” in order to determine ‘as question of fact’ whether wilful infringement had taken place. In the Bard case, the jury had found ‘wilful infringement’ even though Gore as defendant had relied on several defences that it said were “reasonable”, including inventorship, inadequate written description, obviousness, and anticipation.

In Bard v Gore, the Federal Court has confirmed that, like the interpretation of the meaning of a claim, the question of whether a defence is ‘reasonable’ is a legal question better left to the judge than to a jury to decide. US practitioners expect this development to clarify, for both claimants and defendants alike, the circumstances where an award of enhanced damages is appropriate.

This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking before any action in reliance on it.

Author
Nick Reeve
Partner
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