The statutes of Alabama require the negotiability and character of bills of exchange, foreign and inland, and promissory notes, payable in bank, to be governed by the general commercial law.
If a partner draws notes in the name of the firm, payable to himself and then endorses them to a third party for a personal and not a partnership consideration, the first endorsee cannot maintain an action upon them against the firm if he knew that the notes were antedated.
But if the first endorsee passes them away to a second endorsee before the maturity of the notes in the due course of business, and the second endorsee has no knowledge of the circumstances of their execution and first endorsement, he may be entitled to recover against the firm although the partner who drew the notes committed a fraud by antedating them.
ordinary course of business, or under circumstances which authorize an inference that he had knowledge of the fraud in their execution or first endorsement, he cannot recover.
These things are matters of evidence for the jury.
Evidence is admissible to show that, in an account current between the first and second endorsee, no credit was given in it for the notes when they were passed from the first to the second endorsee.
So evidence of drawing and redrawing between the first and second endorsee, alluded to in the account current, is admissible.
The testimony of one of the partners, offered for the purpose of proving the fraud committed by the drawer of the notes, is not admissible. This Court again recognizes the rule upon this subject established in the case of Henderson v. Anderson, 3 How. 73.
The partner offered as a witness was a party upon the record, and thus also disqualified.
The facts in the case are stated in the commencement of the opinion of the Court, which the reader is requested to turn to and peruse before reading the argument of counsel.
P. Strader, James Perrine, E. Stevenson, and John H. Woodcock. The notes were assigned by Stevenson to Stinson & Campbell of New Orleans, and by them to the plaintiff. Stevenson died before the commencement of the suit, and the process was served only on Perrine and Woodcock. At the fall term of 1842, Woodcock pleaded a discharge under the bankrupt law and Perrine pleaded that the partnership of Strader, Perrine & Co. commenced in November, 1835, and that in December of the same year he withdrew from it. That at the time of leaving the firm he sold, for one thousand dollars, his interest to Stevenson, who, by Stinson & Campbell through one Primrose, paid him the above sum; and that they knew of his withdrawal. That the notes were antedated, and were not in possession of Stinson & Campbell or assigned to them till after 17 May, 1836.
Issues being joined on these pleas, the case was submitted to a jury, who found in favor of Perrine, and that Woodcock had been discharged under the bankrupt law.
The questions for decision arise on a bill of exceptions taken by the plaintiff.
The plaintiff proved by the deposition of Hood that Stevenson was a member of the firm of Strader, Perrine & Co., and that he executed the notes, and that they are dated before any public notice was given of the dissolution of the firm. That the firm of Stinson & Campbell was indebted to the plaintiff in a large sum in the summer of 1831, and that in part payment, the notes, before maturity, were assigned to him, for which a credit on their account was entered. And here the plaintiff's evidence closed.
"that he withdrew from the firm 6 December, 1835, but that there was no public advertisement giving notice of the dissolution of the firm until 23 April, 1836, although the fact was known to Stinson & Campbell at the time of Perrine's withdrawal."
The defendant also proved by John Test that in August, 1836, he saw in the hands of the plaintiff's agent an account current between him and the firm of Stinson & Campbell; that he made a copy of the same, which he produced, and from which it appeared that no credit had been entered for the notes sued on.
Campbell without the knowledge or consent of his partners, and that if the said Stinson & Campbell at the time of their receiving the notes, knew that, prior to that time, to-wit, on 6 December, 1835, Perrine had withdrawn from said firm and was not then a partner, and that if it was also proved to them that the said notes were passed to the said Stinson & Campbell by Stevenson for his individual benefit, and not for the interest and benefit of the said firm, and that this was known to the said Stinson & Campbell when they received the said notes, that then the jury must find for Perrine, the defendant."
To the above ruling and instruction exceptions were taken by the plaintiff.
"that the same remedy on bills of exchange, foreign and inland, and on promissory notes payable in bank, shall be governed by the law merchant, as to days of grace, protest, and notice,"
"assignable as heretofore, and the assignee may maintain such suit thereon as the obligee or payee could have done, whether it be debt, covenant, or assumpsit."
"that a note made negotiable and payable at bank is not subject to offset, in the hands of a bona fide endorsee, who has acquired it previous to maturity, although it has never been negotiated at the bank where it is made payable."
Also in Beal v. Bennett, 6 Ala. 156, the same principle is recognized.
"contract in the name of the firm, in order to bind the partnership, must not only be within the scope of the business of the partnership, but it must be made with a party who has no knowledge or notice that the partner is acting in violation of his obligations and duties to the firm or for purposes disapproved of by the firm, or in fraud of the firm."
Story on Partnership 193. This rule as well applies to the endorsement of negotiable instruments as to other contracts.
"forming a partnership, the partners declare themselves to the world satisfied with the good faith and integrity of each other and impliedly undertake to be responsible for what they will respectively do within the scope of the partnership concerns."
Story on Partnership 161. On this principle, the firm is bound for the frauds committed by one of its partners. Where one of two innocent persons must suffer by the act of a third person, the rule is just that he shall suffer who reposed the higher confidence and credit in such person.
But if the plaintiff received these notes after their maturity, he holds them subject to all the defenses which might have been set up against them in the hands of Stinson & Campbell. Or if he received them out of the ordinary course of business, without consideration, or under circumstances which authorize an inference that he had knowledge of the fraud in their execution or their first endorsement, he cannot recover. These are matters of evidence for the jury.
was rightfully admitted. He proved that in August, 1836, he saw in the hands of an agent of the plaintiff an account current between him and the firm of Stinson & Campbell. That he copied the account, which copy he exhibited and from which it did not appear that a credit had been entered for the notes in controversy. As this, compared with the evidence of the plaintiff, might conduce to disprove the consideration alleged to have been paid for the notes by the plaintiff, it was properly admitted. The relevancy of the deposition of Charles, which was also excepted to, is not very apparent. It shows that Stinson & Campbell in 1836, drew a large amount of drafts on the plaintiff, in part payment of drafts which he had previously drawn on them. This drawing and redrawing constituted no part of the account current spoken of by Test, but at the foot of the account a memorandum was made of these drafts. As this deposition conduced to show the nature of the accounts between the plaintiff and the firm of Stinson & Campbell, no very strong objection is perceived to its admission as evidence. It could not have misled the jury.
The deposition of Strader, which was also excepted to by the plaintiff, was not admissible under the decisions of this Court. He was one of the firm of Strader, Perrine & Co., and his testimony conduced to show the fraud of Stevenson in the execution of the notes. In the case of Bank of the United States v. Dunn, 6 Pet. 57, this Court said, "It is a well settled principle that no one who is a party to a negotiable note shall be permitted, by his own testimony, to invalidate it." The same principle was held in Bank of Metropolis v. Jones, 8 Pet. 12. This was decided in the case of Walton v. Shelley, 1 Term 296, and although that decision was overruled by the King's Bench in the case of Jordaine v. Lashbrooke, 7 Term 601, this Court, in the cases cited and in several subsequent cases, has established the rule as above stated. In the state courts, there is a great diversity of judgment on this point.
Strader was a party on the record, and that rendered him an incompetent witness. Scott v. Lloyd, 12 Pet. 149; Stein v. Bowman, 13 Pet. 219.
In this case, my opinion is founded on considerations that differ so much from those proceeded on in the principal opinion, that I am under the necessity of stating my own views, or of dissenting, which I am not prepared to do.
note was void on its face, or at least could have no legal effect; when negotiated, that is, when it was endorsed by Stevenson, and sold to Stinson & Campbell it could only become a binding instrument in their hands on Strader, Perrine & Co., as Stinson & Campbell could enforce payment. The time of negotiation, therefore, is the true date of the note.
It is in proof that the firm of Strader, Perrine & Co. was dissolved on 23 April, 1836, and that the usual advertisement was then made of the fact. This bound all persons who had not had previous dealings with the firm; nor is there any proof found in the record, showing that either Stinson & Campbell or Smyth, the plaintiff, had had any such dealings. If the note was negotiated, therefore, to Stinson & Campbell after the dissolution of the partnership, it was void, and does not bind Perrine, inasmuch as Stevenson had no power to bind him.
2. Perrine is proved to have withdrawn from the firm in December, 1835. But as no regular notice was given of this fact, it rests on him to bring home knowledge of it to the holder of the paper. If Stinson & Campbell had knowledge, when they took the note from Stevenson, then they could not have recovered from Perrine on it.
So again, if Stinson & Campbell took the note from Stevenson in discharge of the individual debt of the latter, they could not recover from Perrine, whether he was or was not a partner at the date of its negotiation. The proof of either of these events is imposed on the plaintiff. But having shown either of the two last circumstances, then the plaintiff is bound to prove "under what circumstances, or for what value, he became the holder." I need only refer to Chitty on Bills (9th ed) 648, for the established rule. If the plaintiff fails to show, in such case, that he came by the note in the due course of trade, and before it fell due, then the defendant is entitled to a verdict.
"that it is no objection to the competency of a witness, that he is also a party to the same bill or note, unless he be directly interested in the event of the suit, and he be called in support of such interest or unless the verdict, to obtain which his testimony is offered, would be admissible evidence in his favor in another suit."
This was the principle on which the cases of Bent v. Baker and Jordaine v. Lashbrooke proceeded. By the statute of 3 and 4 Will. IV, ch. 42, § 26, for the amendment of the law, the rule was enlarged so as to let in parties to negotiable paper as witnesses for or against whom the verdict and judgment might be evidence, the statute providing that the record should not be evidence for or against them. And thus the law of evidence in this regard now stands in the courts of Great Britain. It is also settled, and had been long before 1832, when the decision in Bank of the United States v. Dunn was made, in a large majority of the states of this Union, in accordance with the principles laid down in Jordaine v. Lashbrooke and Bent v. Baker, and the question now is for this Court to determine how far the United States circuit courts, when acting in the states, shall enforce the doctrine laid down in Dunn's Case, and which was very properly applied in that of Jones. The decision is "That no man who is a party' to the note or bill shall, by his own evidence, invalidate it." But suppose he is no party to it, and that his name has been put on it, or to it, by forgery, and he is called on by another to establish that the defendant's name was forged as well as that of the witness, is he then competent? He gave no credit to the paper, and if the evidence of all those who could prove the defense is cut off by the mere name appearing, nothing more would be required to effectuate the fraud than to put on the names of all persons who could prove the fraud. In such an instance I feel sure the rule laid down by this Court does not apply. Nor can I, satisfactorily to my own mind, distinguish the case put from one where a fraudulent note is made in the name of a firm, by one of the original partners, after the dissolution of the partnership, when he had no authority to use the name of those he attempts to bind. Indeed it is difficult to say that Stevenson was not guilty of forgery, if he made the notes and passed them off to Stinson & Campbell after the dissolution of the partnership in discharge of his own debt and with the intention to defraud his former partners. In the cases that have heretofore come before this Court, the witnesses proved in advance that they gave credit to the paper by signing their names, and that they were, beyond dispute, parties to it as well as the defendant.
age and sanity can be a competent witness to depose in any cause where he is not directly interested in the event of the suit. To this rule there are exceptions, but they are almost uniformly favorable to the admission of the testimony, are of comparatively recent origin, founded on experience, and conducive to the due administration of justice in a high degree.
"The forms and modes of proceeding in suits, in the courts of the United States (in states admitted into the Union since 1789), in those of common law, shall be the same in each of those states respectively as are now used in the highest court of original and general jurisdiction of the same."
That the court below proceeded, in the admission of Strader as a witness, according to the modes of proceeding in the circuit courts of the State of Alabama, is not questioned. The method and manner of administering justice in the state courts is the mode referred to in the act of Congress, as I understand it, and I cannot resist the conclusion, that the modes prescribed by the act of Congress to the federal courts held in that state embrace the rules in regard to the competency of evidence; without evidence there can be no proceedings; rules for its admission are indispensable; these rules must be derived from some authority; from statutes they cannot be, and therefore Congress has said the state courts shall furnish them to the foreign tribunals administering, the laws there -- and this for the plain reason, that the measure of justice shall be the same in the foreign that it is in the domestic tribunals, and evidence is the measure of justice in great part.
There can be no objection to the competency of Strader because he was a party of record. The original writ issued against him and Perrine jointly, but Strader was not found, and a nolle prosequi was entered as to him, and Perrine was declared against alone.
I concur that the charge of the circuit court was erroneous insofar as it assumed that the instruments sued on were subject to the same equities in the hands of Smyth that they were when held by Stinson & Campbell. The courts of Alabama have construed the statutes of that state affecting negotiable paper, and held they did not apply to notes payable in bank; of which description are the ones sued on. The charge therefore violated the commercial rule that the innocent endorsee takes the paper discharged of a previous infirmity.


Respondents (collectively, Heinz) are retired participants in a multiemployer pension plan (hereinafter Plan) administered by petitioner. Heinz retired from the construction industry after accruing enough pension credits to qualify for early retirement payments under a "service only" pension scheme that pays him the same monthly benefit he would have received had he retired at the usual age. The Plan prohibits such beneficiaries from certain "disqualifying employment" after they retire, suspending monthly payments until they stop the forbidden work. When Heinz retired, the Plan defined "disqualifying employment" to include a job as a construction worker but not as a supervisor, the job Heinz took. In 1998, the Plan expanded its definition to include any construction industry job and stopped Heinz's payments when he did not leave his supervisor's job. Heinz sued to recover the suspended benefits, claiming that the suspension violated the "anti-cutback" rule of the Employee Retirement Income Security Act of 1974 (ERISA), which prohibits any pension plan amendment that would reduce a participant's "accrued benefit," ERISA §204(g), 29 U. S. C. §1054(g). The District Court granted the Plan judgment on the pleadings, but the Seventh Circuit reversed, holding that imposing new conditions on rights to benefits already accrued violates the anti-cutback rule.
Held: ERISA §204(g) prohibits a plan amendment expanding the categories of postretirement employment that triggers suspension of the payment of early retirement benefits already accrued. Pp. 3-11.
(a) The anti-cutback provision is crucial to ERISA's central object of protecting employees' justified expectations of receiving the benefits that they have been promised, see Lockheed Corp. v. Spink, 517 U. S. 882, 887. The provision prohibits plan amendments that have "the effect of ... eliminating or reducing an early retirement benefit." 29 U. S. C. §1054(g)(2). The question here is whether the Plan's amendment had such an effect. Although the statutory text is not as helpful as it might be, it is clear as a matter of common sense that a benefit has suffered under the amendment. Heinz accrued benefits under a plan allowing him to supplement his retirement income, and he reasonably relied on that plan's terms in planning his retirement. The 1998 amendment undercut that reliance, paying benefits only if he accepted a substantial curtailment of his opportunity to do the kind of work he knew. There is no way that, in any practical sense, this change of terms could not be viewed as shrinking the value of Heinz's pension rights and reducing his promised benefits. Pp. 3-5.
(b) The Plan's technical responses are rejected. To give the anti-cutback rule the constricted reading urged by the Plan--applying it only to amendments directly altering the monthly payment's nominal dollar amount and not to a suspension when the amount that would be paid is unaltered--would take textual force majeure, and certainly something closer to irresistible than language in 29 U. S. C. §1002(23)(A) to the effect that accrued benefits are ordinarily "expressed in the form of an annual benefit commencing at normal retirement age." And the Plan's argument that §204(g)'s "eliminat[e] or reduc[e]" language does not apply to mere suspensions misses the point. ERISA permits conditions that are elements of the benefit itself but the question here is whether a new condition may be imposed after a benefit has accrued. The right to receive certain money on a certain date may not be limited by a new condition narrowing that right. Pp. 5-6.
(c) This Court's conclusion is confirmed by an Internal Revenue Service regulation that adopts the reading of §204(g) approved here. Pp. 6-9.
(d) ERISA §203(a)(3)(B), 29 U. S. C. §1053(a)(3)(B)--which provides that the right to an accrued benefit "shall not be treated as forfeitable solely because the plan" suspends benefit payments when beneficiaries like respondents are employed in the same industry and the same geographic area covered by the plan--is irrelevant to the question here. Section 203(a) addresses the entirely distinct concept of benefit forfeitures. And read most simply and in context, §203(a)(3)(B) is a statement about the terms that can be offered to plan participants up front, not as an authorization to adopt retroactive amendments. Pp. 9-11.
303 F. 3d 802, affirmed.
Souter, J., delivered the opinion for a unanimous Court. Breyer, J., filed a concurring opinion, in which Rehnquist, C. J., and O'Connor and Ginsburg, JJ., joined.
CENTRAL LABORERS' PENSION FUND, PETITIONER v. THOMAS E. HEINZ et al.
With few exceptions, the "anti-cutback" rule of the Employee Retirement Income Security Act of 1974 (ERISA) prohibits any amendment of a pension plan that would reduce a participant's "accrued benefit." 88 Stat. 858, 29 U. S. C. §1054(g). The question is whether the rule prohibits an amendment expanding the categories of postretirement employment that triggers suspension of payment of early retirement benefits already accrued. We hold such an amendment prohibited.
Respondents Thomas Heinz and Richard Schmitt (collectively, Heinz) are retired participants in a multiemployer pension plan (hereinafter Plan) administered by petitioner Central Laborers' Pension Fund. Like most other participants in the Plan, Heinz worked in the construction industry in central Illinois before retiring, and by 1996, he had accrued enough pension credits to qualify for early retirement payments under a defined benefit "service only" pension. This scheme pays him the same monthly retirement benefit he would have received if he had retired at the usual age, and is thus a form of subsidized benefit, since monthly payments are not discounted even though they start earlier and are likely to continue longer than the average period.
Heinz's entitlement is subject to a condition on which this case focuses: the Plan prohibits beneficiaries of service only pensions from certain "disqualifying employment " after they retire. The Plan provides that if beneficiaries accept such employment their monthly payments will be suspended until they stop the forbidden work.1 When Heinz retired in 1996, the Plan defined "disqualifying employment " as any job as "a union or non-union construction worker." This condition did not cover employment in a supervisory capacity, however, and when Heinz took a job in central Illinois as a construction supervisor after retiring, the Plan continued to pay out his monthly benefit.
In 1998, the Plan's definition of disqualifying employment was expanded by amendment to include any job "in any capacity in the construction industry (either as a union or non-union construction worker)." The Plan took the amended definition to cover supervisory work and warned Heinz that if he continued on as a supervisor, his monthly pension payments would be suspended. Heinz kept working, and the Plan stopped paying.
Heinz sued to recover the suspended benefits on the ground that applying the amended definition of disqualifying employment so as to suspend payment of his accrued benefits violated ERISA's anti-cutback rule. On cross-motions for judgment on the pleadings under Federal Rule of Civil Procedure 12(c), the District Court granted judgment for the Plan, only to be reversed by a divided panel of the Seventh Circuit, which held that imposing new conditions on rights to benefits already accrued was a violation of the anti-cutback rule. 303 F. 3d 802 (CA7 2002). We granted certiorari in order to resolve the resulting Circuit split, see Spacek v. Maritime Assn., 134 F. 3d 283 (CA5 1998), and now affirm.
There is no doubt about the centrality of ERISA's object of protecting employees' justified expectations of receiving the benefits their employers promise them.
and if he has fulfilled whatever conditions are required to obtain a vested benefit--he actually will receive it.' " Lockheed Corp. v. Spink, 517 U. S. 882, 887 (1996) (quoting Nachman Corp. v. Pension Benefit Guaranty Corporation, 446 U. S. 359, 375 (1980) (citations omitted)).
See also J. Langbein & B. Wolk, Pension and Employee Benefit Law 121 (3d ed. 2000) (hereinafter Langbein & Wolk) ("The central problem to which ERISA is addressed is the loss of pension benefits previously promised").
ERISA's anti-cutback rule is crucial to this object, and (with two exceptions of no concern here 2) provides that "[t]he accrued benefit of a participant under a plan may not be decreased by an amendment of the plan ... ." 29 U. S. C. §1054(g)(1). After some initial question about whether the provision addressed early retirement benefits, see Langbein & Wolk 164, a 1984 amendment made it clear that it does. Retirement Equity Act of 1984, §301(a), (2), 98 Stat. 1451. Now §204(g) provides that "a plan amendment which has the effect of ... eliminating or reducing an early retirement benefit ... with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits." 29 U. S. C. §1054(g)(2).
Hence the question here: did the 1998 amendment to the Plan have the effect of "eliminating or reducing an early retirement benefit" that was earned by service before the amendment was passed? The statute, admittedly, is not as helpful as it might be in answering this question; it does not explicitly define "early retirement benefit," and it rather circularly defines "accrued benefit" as "the individual's accrued benefit determined under the plan ... ." §1002(23)(A). Still, it certainly looks as though a benefit has suffered under the amendment here, for we agree with the Seventh Circuit that, as a matter of common sense, "[a] participant's benefits cannot be understood without reference to the conditions imposed on receiving those benefits, and an amendment placing materially greater restrictions on the receipt of the benefit 'reduces' the benefit just as surely as a decrease in the size of the monthly benefit payment." 303 F. 3d, at 805. Heinz worked and accrued retirement benefits under a plan with terms allowing him to supplement retirement income by certain employment, and he was being reasonable if he relied on those terms in planning his retirement. The 1998 amendment undercut any such reliance, paying retirement income only if he accepted a substantial curtailment of his opportunity to do the kind of work he knew. We simply do not see how, in any practical sense, this change of terms could not be viewed as shrinking the value of Heinz's pension rights and reducing his promised benefits.
The Plan's responses are technical ones, beginning with the suggestion that the "benefit" that may not be devalued is actually nothing more than a "defined periodic benefit the plan is legally obliged to pay," Brief for Petitioner 28, so that §204(g) applies only to amendments directly altering the nominal dollar amount of a retiree's monthly pension payment. A retiree's benefit of $100 a month, say, is not reduced by a postaccrual plan amendment that suspends payments, so long as nothing affects the figure of $100 defining what he would be paid, if paid at all. Under the Plan's reading, §204(g) would have nothing to say about an amendment that resulted even in a permanent suspension of payments. But for us to give the anti-cutback rule a reading that constricted would take textual force majeure, and certainly something closer to irresistible than the provision quoted in the Plan's observation that accrued benefits are ordinarily "expressed in the form of an annual benefit commencing at normal retirement age," 29 U. S. C. §1002(23)(A).
The Plan also contends that, because §204(g) only prohibits amendments that "eliminat[e] or reduc[e] an early retirement benefit," the anti-cutback rule must not apply to mere suspensions of an early retirement benefit. This argument seems to rest on a distinction between "eliminat[e] or reduc[e]" on the one hand, and "suspend" on the other, but it just misses the point. No one denies that some conditions enforceable by suspending benefit payments are permissible under ERISA: conditions set before a benefit accrues can survive the anti-cutback rule, even though their sanction is a suspension of benefits. Because such conditions are elements of the benefit itself and are considered in valuing it at the moment it accrues, a later suspension of benefit payments according to the Plan's terms does not eliminate the benefit or reduce its value. The real question is whether a new condition may be imposed after a benefit has accrued; may the right to receive certain money on a certain date be limited by a new condition narrowing that right? In a given case, the new condition may or may not be invoked to justify an actual suspension of benefits, but at the moment the new condition is imposed, the accrued benefit becomes less valuable, irrespective of any actual suspension.
Our conclusion is confirmed by a regulation of the Internal Revenue Service (IRS) that adopts just this reading of §204(g). When Title I of ERISA was enacted to impose substantive legal requirements on employee pension plans (including the anti-cutback rule), Title II of ERISA amended the Internal Revenue Code to condition the eligibility of pension plans for preferential tax treatment on compliance with many of the Title I requirements. Employee Benefits Law 47, 171-173 (S. Sacher et al., eds. 2d ed. 2000). The result was a "curious duplicate structure" with nearly verbatim replication in the Internal Revenue Code of whole sections of text from Title I of ERISA. Langbein & Wolk 91, ¶ ;6. The anti-cutback rule of ERISA §204(g) is one such section, showing up in substantially identical form as 26 U. S. C. §411(d)(6).3 This duplication explains the provision of the Reorganization Plan No. 4 of 1978, §101, 43 Fed. Reg. 47713 (1978), 92 Stat. 3790, giving the Secretary of the Treasury the ultimate authority to interpret these overlapping anti-cutback provisions. See also Langbein & Wolk 92, ¶ ;7 ("The IRS has [regulatory] jurisdiction over ... benefit accrua[l] and vesting"). Although the pertinent regulations refer only to the Internal Revenue Code version of the anti-cutback rule, they apply with equal force to ERISA §204(g). See 53 Fed. Reg. 26050, 26053 (1988) ("The regulations under section 411 are also applicable to provisions of [ERISA] Title I").
A-6(a)(2). And employers are perfectly free to modify the deal they are offering their employees, as long as the change goes to the terms of compensation for continued, future employment: a plan "may be amended to eliminate or reduce section 411(d)(6) protected benefits with respect to benefits not yet accrued ... ." §1.411(d)-4, at A-2(a)(1). The IRS regulations treat such conditions very differently, however, when they turn up as part of an amendment adding new conditions to the receipt of benefits already accrued. The rule in that case is categorical: "[t]he addition of ... objective conditions with respect to a section 411(d)(6) protected benefit that has already accrued violates section 411(d)(6). Also, the addition of conditions (whether or not objective) or any change to existing conditions with respect to section 411(d)(6) protected benefits that results in any further restriction violates section 411(d)(6)." §1.41(d)-4, A-7. So far as the IRS regulations are concerned, then, the anti-cutback provision flatly prohibits plans from attaching new conditions to benefits that an employee has already earned.
"[a] right to an accrued benefit derived from employer contributions shall not be treated as forfeitable solely because the plan provides that the payment of benefits is suspended for such period as [beneficiaries like respondents are] employed . . . in the same industry, in the same trade or craft, and the same geographic area covered by the plan, as when such benefits commenced." 29 U. S. C. §1053(a)(3)(B).
is irrelevant to the question before us, for at least two reasons.
First, as a technical matter, §203(a) addresses the entirely different question of benefit forfeitures. This is a distinct concept: §204(g) belongs to the section of ERISA that sets forth requirements for benefit accrual (the rate at which an employee earns benefits to put in his pension account), see 29 U. S. C. §1054, whereas §203(a)(3)(b) is in the section that regulates vesting (the process by which an employee's already-accrued pension account becomes irrevocably his property), see 29 U. S. C. §1053. See generally Nachman Corp., 446 U. S., at 366, n. 10 ("Section 203(a) is a central provision in ERISA. It requires generally that a plan treat an employee's benefits, to the extent that they have vested by virtue of his having fulfilled age and length of service requirements no greater than those specified in §203(a)(2), as not subject to forfeiture"). To be sure, the concepts overlap in practical effect, and a single act by a plan might raise both vesting and accrual concerns. But it would be a non sequitur to conclude that, because an amendment does not constitute a prohibited forfeiture under §203, it must not be a prohibited reduction under §204. Just because §203(a)(3)(B) failed to forbid it would not mean that §204(g) allowed it.
The judgment of the Seventh Circuit is affirmed.
I join the opinion of the Court on the assumption that it does not foreclose a reading of the Employee Retirement Income Security Act of 1974 that allows the Secretary of Labor, or the Secretary of the Treasury, to issue regulations explicitly allowing plan amendments to enlarge the scope of disqualifying employment with respect to benefits attributable to already-performed services. Cf. Christensen v. Harris County, 529 U. S. 576, 589 (2000) (Souter, J., concurring).
This suspension provision was adopted on the authority of ERISA §203(a)(3)(B), 29 U. S. C. §1053(a)(3)(B). In authorizing such suspensions, Congress seems to have been motivated at least in part by a desire "to protect participants against their pension plan being used, in effect, to subsidize low-wage employers who hire plan retirees to compete with, and undercut the wages and working conditions of employees covered by the plan." 120 Cong. Rec. 29930 (1974) (statement of Sen. Williams regarding §203(a)(3)(B)). That explains why ERISA permits multiemployer plans to suspend a retiree's benefits only if he accepts work "in the same industry, in the same trade or craft, and the same geographic area covered by the plan." 29 U. S. C. §1053(a)(3)(B)(ii).
ERISA §204(g) allows the reduction of accrued benefits by amendment in cases where a plan faces "substantial business hardship," 29 U. S. C. §1082(c)(8), and in cases involving terminated multiemployer plans, §1441.
"A plan shall be treated as not satisfying the requirements of this section if the accrued benefit of a participant is decreased by an amendment of the plan, other than an amendment described in section 412(c)(8) [of this Code], or [29 U. S. C. §1441]." 26 U. S. C. §411(d)(6)(A); see also §411(d)(6)(B) (clarifying that the anti-cutback rule applies to early retirement benefits). Cf. n. 2, supra, and accompanying text (detailing ERISA §204(g)).
Nothing we hold today requires the IRS to revisit the tax-exempt status in past years of plans that were amended in reliance on the agency's representations in its manual by expanding the categories of work that would trigger suspension of benefit payments as to already-accrued benefits. The Internal Revenue Code gives the Commissioner discretion to decline to apply decisions of this Court retroactively. 26 U. S. C. §7805(b)(8) ("The Secretary may prescribe the extent, if any, to which any ruling (including any judicial decision or any administrative determination other than by regulation) relating to the internal revenue laws shall be applied without retroactive effect"). This would doubtless be an appropriate occasion for exercise of that discretion.
This is not to say that §203(a)(3)(B) does not authorize some amendments. Plans are free to add new suspension provisions under §203(a)(3)(B), so long as the new provisions apply only to the benefits that will be associated with future employment. The point is that this section regulates the contents of the bargain that can be struck between employer and employees as part of the complete benefits package for future employment.
For analogous reasons, the Plan's reliance on 26 CFR §1.411(c)-1(f) (2003) is unavailing. That section provides that, for the purpose of allocating accrued benefits between employer and employee contributions, "[n]o adjustment to an accrued benefit is required on account of any suspension of benefits if such suspension is permitted under section 203(a)(3)(B)." We read this provision as simply establishing that the actual suspension of benefit payments pursuant to an existing suspension provision does not affect the actuarial value of a beneficiary's total benefits package for the purpose of allocation calculations, since the suspension provision has already been accounted for in the initial valuation. Cf. n. 3, supra. Far from helping the Plan, this regulation tends to support our larger proposition that it is the addition of a suspension condition, not the actual suspension of a benefit, that reduces an employee's accrued benefit.


Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Federal Circuit › 2015 › Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc.
The application from which the 135 patent issued (28 years later) was filed in 1974. The patent relates to prosthetic vascular grafts made of highly-expanded polytetrafluoroethylene (ePTFE), consisting of solid nodes of PTFE connected by thin PTFE fibrils. The graft formed by ePFTE is homogeneously porous: a structure that allows uniform cell regrowth to establish a firm integration of the graft into the body. The different claims of the patent are directed to grafts made of ePTFE with varying intermodal distances, which are also called fibril lengths. It is sold by Gore under as “Gore-Tex.” In 2003, BPV and Dr. Goldfarb sued Gore for infringement. A jury found the patent valid and that Gore willfully infringed. The Federal Circuit affirmed in 2012, but granted rehearing and vacated for the limited purpose of addressing willfulness, enhanced damages and attorneys’ fees. On remand, the district court again found that Gore, as a “reasonable litigant,” could not have realistically expected its defenses to succeed. The Federal Circuit affirmed, rejecting a claim that neither BPV nor Goldfarb had standing to sue for infringement and holding that Gore’s position was not susceptible to a reasonable conclusion that the patent was invalid on inventorship grounds.
The court issued a subsequent related opinion or order on January 26, 2015.
United States Court of Appeals for the Federal Circuit ______________________ BARD PERIPHERAL VASCULAR, INC., AND DAVID GOLDFARB, M.D., Plaintiffs-Appellees, AND C.R. BARD, INC., Counterclaim Defendant-Appellee, v. W.L. GORE & ASSOCIATES, INC., Defendant-Appellant. ______________________ 2014-1114 ______________________ Appeal from the United States District Court for the District of Arizona in No. 2:03-CV-00597-MHM, Judge Mary H. Murguia. ______________________ Decided: January 13, 2015 ______________________ MICHAEL W. MCCONNELL, Kirkland & Ellis LLP, of Washington, DC, argued for plaintiffs-appellees and counterclaim defendant-appellee. With him on the brief were JOHN C. O'QUINN, WILLIAM H. BURGESS, DENNIS J. ABDELNOUR and LIAM P. HARDY; STEVEN C. CHERNY, of 2 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES New York, New York; and JOHN L. STRAND, Wolf, Greenfield & Sacks, P.C., of Boston, Massachusetts. JAMES W. PORADEK, Faegre Baker Daniels LLP, of Minneapolis, Minnesota, argued for defendant-appellant. With him on the brief were TIMOTHY E. GRIMSRUD; JARED B. BRIANT and LESLIE B. PRILL, of Denver, Colorado; and MICHAEL E. FLOREY and DEANNA REICHEL, Fish & Richardson P.C., of Minneapolis, Minnesota. ______________________ Before PROST, Chief Judge, NEWMAN and HUGHES, Circuit Judges. Opinion for the court filed by Chief Judge PROST. Concurring opinion filed by Circuit Judge HUGHES. Dissenting opinion filed by Circuit Judge NEWMAN. PROST, Chief Judge. W.L. Gore & Associates, Inc. (“Gore”) appeals from the judgment of the United States District Court for the District of Arizona of willfulness in the infringement of U.S. Patent No. 6,436,135 (“’135 patent”). For the reasons stated below, we affirm. I This dispute began with the filing of the 1974 patent application from which the ’135 patent eventually issued—twenty-eight years later. The technology and patent claims that have been at issue are thoroughly discussed in this court’s previous decisions involving the ’135 patent and underlying application. See Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 670 F.3d 1171 (Fed. Cir. 2012) (“Bard I”); Cooper v. Goldfarb, 240 F.3d 1378 (Fed. Cir. 2001) (“Cooper II”); Cooper v. Goldfarb, 154 F.3d 1321 (Fed. Cir. 1998) (“Cooper I”). BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 3 Briefly, the ’135 patent relates to prosthetic vascular grafts made of highly-expanded polytetrafluoroethylene (“ePTFE”). The ePTFE material is made of solid nodes of PTFE connected by thin PTFE fibrils. It is sold by Gore under the brand name “Gore-Tex.” The patent generally covers a vascular graft formed by ePFTE that is thus homogeneously porous—a structure that allows uniform cell regrowth to establish a firm integration of the graft into the body. The different claims of the patent are directed to grafts made of ePTFE with varying internodal distances, which are also called fibril lengths. In 2003, Bard Peripheral Vascular, Inc. (“BPV”) and Dr. David Goldfarb filed suit against Gore for infringement of the ’135 patent. A jury found the ’135 patent valid and that Gore willfully infringed, and, in December 2010, the district court denied Gore’s motions for judgment as a matter of law (“JMOL”) reversing the verdict. Gore appealed, and, in February 2012, the panel affirmed. Bard I, 670 F.3d at 1193. The en banc court denied review but granted rehearing “for the limited purpose of authorizing the panel to revise the portion of its opinion addressing willfulness.” Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 476 F. App’x 747 (Fed. Cir. June 14, 2012) (en banc). The panel accordingly vacated the parts of its opinion discussing willfulness and allowing enhanced damages and attorneys’ fees. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003, 1005 (Fed. Cir. 2012) (“Bard II”). It held that as to the threshold determination of willfulness, “the objective determination of recklessness, even though predicated on underlying mixed questions of law and fact, is best decided by the judge as a question of law subject to de novo review.” Id. at 1007. The panel remanded “so that the 4 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES trial court may apply the correct standard to the question of willfulness in the first instance.” Id. at 1008. 1 On remand, the district court again found that, in view of Bard II, it was “clear to this Court, just as it was to the jury, that Defendant, as a ‘reasonable litigant,’ could not have ‘realistically expected’ its defenses to succeed.” Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. 03-0597, 2013 WL 5670909, at *12 (D. Ariz. Oct. 17, 2013) (order denying JMOL on willful infringement) (“Bard III”). Gore appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(1). II Gore argues that at the time of suit, neither BPV nor Goldfarb had standing to sue for infringement of the ’135 patent. Gore thus seeks to vacate the district court’s judgment in its entirety and to have the case dismissed for lack of jurisdiction. The crux of Gore’s argument is that at the time the suit was filed, only C.R. Bard, Inc. (“Bard Inc.”) could have possessed standing to sue. We reject that argument. In 1980, Goldfarb—who was the inventor and original assignee of the ’135 patent’s application—entered into a license agreement with Bard Inc. involving the application and any patents that might issue. Gore argues that in that agreement, Goldfarb granted all substantial rights to the patent—thereby resulting in a virtual assignment to Bard Inc. In 1996, Bard Inc. acquired IMPRA, which later became a wholly owned subsidiary, BPV, and in September, Bard Inc. transferred its interest in the 1980 agreement to BPV. Gore argues that because there is no Gore sought to appeal the question of inventorship under 35 U.S.C. § 116 to the Supreme Court, which denied its petition for certiorari. W.L. Gore & Assocs., Inc. v. C.R. Bard, Inc., 133 S. Ct. 932 (2013). 1 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 5 evidence of a written instrument effecting the transfer of the interest to BPV, BPV did not in fact acquire standing to sue for infringement. In sum, Gore contends that both plaintiffs lacked standing: Goldfarb, because he had virtually assigned his rights to Bard Inc., and BPV, because Bard Inc. had not properly transferred its rights. Gore raised this argument on standing twice before at the district court—prior to its first appeal in this case. Gore first filed a pre-trial JMOL motion on standing, which the district court denied. Gore again raised the issue as a post-trial JMOL motion, which the district court again denied. The district court’s discussion of the standing issue and denial of Gore’s motion was contained in the same March 31, 2009 opinion and order denying Gore’s various other JMOL motions that Gore appealed to this court. In that appeal, although the issue was not raised in briefing, the panel confirmed that the district court had jurisdiction under 28 U.S.C. § 1338(a). Bard I, 670 F.3d at 1178. Gore does not claim that there exists any material difference between the argument it raised before the district court then and that it now raises on this appeal. Indeed, in its first appeal, Gore conceded that the district court had jurisdiction. Brief for Appellant at 1, Bard I, 670 F.3d 1171 (Fed. Cir. 2012) (No. 10-1542), 2010 WL 4853331. Instead, Gore contends that we are not bound by the prior panel’s determination on standing, based on the fundamental principle that “[t]he question of standing is not subject to waiver” because “[t]he federal courts are under an independent obligation to examine their own jurisdiction.” See United States v. Hays, 515 U.S. 737, 742 (1995). The “party invoking federal jurisdiction bears the burden of establishing” standing at any stage of the litigation. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). In this case, Gore challenged the plaintiffs’ 6 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES standing at the district court. The district court determined that the plaintiffs met their burden and had established standing. On appeal, this court again confirmed that the plaintiffs had standing. Gore argues that because it did not brief the issue on appeal, and the prior panel did not discuss the issue of standing, the standing issue has yet to be resolved with finality. As an initial matter, however, we have no reason to assume that the prior panel did not weigh standing. This was not a case in which a standing issue remained dormant in facts buried deep in the record, or which was not recognized by either party or the trial court. While Gore’s briefs in that appeal did not raise the standing issue, the district court’s opinion discussing Gore’s standing challenge were attached to the opening brief as required pursuant to Federal Circuit Rule 28(a)(12). Had the prior panel seen merit in Gore’s standing challenge, it could have asked for additional briefing, as this court has done in other cases. See, e.g., Consumer Watchdog v. Wis. Alumni Research Found., No. 13-1377 (Fed. Cir. Nov. 14, 2013) (order requesting supplemental briefing on the issue of appellant’s standing) ECF No. 29. We are bound, therefore, by the prior panel’s determination that the plaintiffs had standing and that the district court had jurisdiction. See Gould, Inc. v. United States, 67 F.3d 925, 930 (Fed. Cir. 1995) (“The law of the case is a judicially created doctrine, the purposes of which are to prevent the relitigation of issues that have been decided and to ensure that trial courts follow the decisions of appellate courts.”). To be sure, there are exceptional circumstances in which a panel may not adhere to the decision in a prior appeal in the same case, when “(1) the evidence in a subsequent trial is substantially different; (2) controlling authority has since made a contrary decision of the law applicable to the issues; or (3) the earlier ruling was clearly erroneous and would work a manifest injustice.” Id. This is not such a case. Gore raises no new facts in BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 7 this appeal and seeks only to relitigate the same standing theory that the district court rejected before. Gore does not point to any change in the relevant law. This is also not a case in which the district court made findings on remand that “undermine” the prior appellate affirmance of standing. Pub. Interest Research Grp. of N.J., Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 117 (3d Cir. 1997). And, we see no clear error in the previous decision on standing that would warrant an extraordinary review at this stage. Indeed, on the merits, this is an easy question. We review de novo the district court’s determination of a party’s standing, while reviewing any factual findings relevant to that determination for clear error. SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1377 (Fed. Cir. 2007). Gore’s argument hinges on the absence of a written instrument transferring to BPV what it contends was the virtual assignment from Goldfarb to Bard Inc. See Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1250 (Fed. Cir. 2000) (holding that a written instrument was needed to document the “transfer of proprietary rights” to support standing to sue for patent infringement); 35 U.S.C. § 261 (“Applications for patent, patents, or any interest therein, shall be assignable by law in an instrument in writing.”) (emphases added). However, BPV has never claimed that in 2003 it had all substantial rights to the ’135 patent. 2 BPV’s position is only that it was an exclusive licensee with the right to sue In 2007, Goldfarb assigned his remaining interests in the ’135 patent to BPV. Gore argues that this assignment was illusory since Goldfarb had already granted all substantial rights to Bard Inc. in 1980. We note that at most this transfer corroborates BPV’s position that the parties clearly understood that BPV was Goldfarb’s licensee at the time the suit was filed. 2 8 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES for infringement. It is well established that the grant of a license does not need to be in writing. See Waymark Corp. v. Porta Sys. Corp., 334 F.3d 1358, 1364 (Fed. Cir. 2003) (“Only assignments need be in writing under 35 U.S.C. § 261. Licenses may be oral.”); Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1552 (Fed. Cir. 1995) (en banc) (holding that to be an exclusive licensee a party may rely on either an express or implied promise of exclusivity). In any event, in 1997 there was a memorialized transfer of the exclusive license from Goldfarb and Bard Inc. to BPV’s predecessor. We agree with the district court that this 1997 agreement between the parties settles BPV’s right to sue at the time of the complaint as Goldfarb’s exclusive licensee. Bard III, at 19-20. BPV and Goldfarb thus readily meet their burden to establish standing. For Gore to prevail, it would have to establish each of the following propositions: (1) the 1980 agreement that was styled as an “exclusive license” between Goldfarb and Bard Inc. was in fact a virtual assignment, and (2) Bard Inc.’s transfer of its rights to BPV under the agreement failed because it was not in writing. We see no error in the district court’s wellreasoned analysis on the first point—inter alia, Goldfarb retained significant reversionary rights, there was a field of use restriction, and Goldfarb retained the right to share in damages. See id. at 15. There was no basis, therefore, to conclude that Goldfarb had transferred “all substantial rights” to Bard. See Abbott Labs. v. Diamedix Corp., 47 F.3d 1128, 1132 (Fed. Cir. 1995) (finding that even limited rights retained by the patentee made it a necessary party in any subsequent infringement suit). But even if Gore could get past those first shoals, it would founder at the second. Gore argues that since Bard represents that it transferred its entire interest in the 1980 agreement to BPV, if that interest were a virtual assignment, then the transfer would fail without a written agreement. But, there is no question that in 1997, there was a written BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 9 agreement between the parties affirming Bard’s transfer of its rights to BPV. Gore argues that our case law prevents such a retroactive agreement—but for support of this proposition, all Gore cites is precedent in which we considered agreements that were executed after the suit was filed, such as Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359 (Fed. Cir. 2008). Here, by contrast, the 1997 memorialization occurred years before the suit was filed. The 1997 agreement was not a nunc pro tunc written agreement that occurred after the complaint. Compare, e.g., Abraxis Bioscience, Inc. v. Navinta LLC, 625 F.3d 1359, 1366-67 (Fed. Cir. 2010); Enzo APA & Son, Inc. v. Geapag A.G., 134 F.3d 1090, 1093 (Fed. Cir. 1998). Accordingly, the plaintiffs had standing at the time of the complaint, and the district court had jurisdiction pursuant § 1338(a). We turn, then, to Gore’s appeal on the merits. III To establish willful infringement, the patentee has the burden of showing “by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc) cert denied 552 U.S. 1230 (2008). “The state of mind of the accused infringer is not relevant to this objective inquiry.” Id. Only if the patentee establishes this “threshold objective standard” does the inquiry then move on to whether “this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” Id. While this second prong of Seagate may be an issue of fact, the threshold determination of objective recklessness requires “objective assessment” of the accused infringer’s defenses. Bard II, 682 F.3d at 1006. In Bard II we held that objective recklessness, even though “predicated on underlying mixed questions of law and fact, is best decid- 10 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES ed by the judge as a question of law subject to de novo review.” Id. at 1007. 3 Even when underlying factual issues were sent to the jury in the first instance—such as in this case—“the judge remains the final arbiter of whether the defense was reasonable.” Id. at 1008 (emphasis added). Accordingly, under Bard II, we review de novo the district court’s determination whether Gore’s “position is susceptible to a reasonable conclusion of no infringement.” Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1310 (Fed. Cir. 2011). Objective recklessness will not be found where the accused infringer has raised a “substantial question” as to the validity or noninfringement of the patent. Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319 (Fed. Cir. 2010); DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc., 567 F.3d 1314, 1336 (Fed. Cir. 2009). On remand, the district court evaluated several defenses raised by Gore and determined that none of them were objectively reasonable. On appeal, Gore appeals only its determination with respect to Gore’s inventorship defense. This defense arises from the decades-long recThe district court’s opinion suggests that it rejected Gore’s argument because “substantial evidence” was contrary to a finding that Gore had a reasonable expectation of success in its defense. Bard III, at 11. Gore argues that this suggests that the district court inappropriately relied on findings of fact in determining the objective reasonableness of its defense. Gore’s position overstates the significance of the district court’s reference to “substantial evidence.” Rather, the district court correctly followed Bard II, reviewing the facts in the record produced in the litigation and evaluating whether, on the basis of those facts, Gore had raised a reasonable defense. See id. at 19. 3 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 11 ord, which includes parallel examination of Gore’s and Goldfarb’s patent applications on vascular grafts made of ePTFE, an interference declared in 1983 between the applications, which we reviewed in Cooper I and Cooper II, as well as the infringement proceedings in this case that were finally resolved—except as to the issue of willfulness—in Bard I. Gore’s argument is based on the fact that its employee, Peter Cooper, supplied the particular ePTFE tubing that Goldfarb used in making his successful vascular graft (the “2-73 RF” graft). In Gore’s view, Cooper furnished to Goldfarb “the embodiment of the invention before Goldfarb conceived the invention using that embodiment.” Bard III, at 7. As an initial matter, we reject Gore’s argument that the mere fact a member of the previous panel dissented on this issue indicates that its position was reasonable. Gore does not point to any previous case in which we followed this principle. To the contrary, in Paper Converting Machine Co. v. Magna-Graphics Corp., 785 F.2d 1013, 1016 (Fed. Cir. 1986), for example, we noted that despite the existence of a dissenting opinion in a prior opinion affirming infringement, the same panel could still affirm willfulness in a later appeal. Otherwise, we would be imposing a rule that any single judge’s dissent on the merits could preclude the determination of willful infringement. Turning to the merits, Gore claimed that its employee, Peter Cooper, was a joint inventor of the ’135 patent. Therefore, Gore argued that the patent is invalid for nonjoinder of Cooper as a co-inventor. Gore now argues that even though it did not prevail, its argument was still reasonable in light of the facts in the record and the law of joint inventorship. Issued patents are presumed to correctly name the inventors; therefore, “[t]he burden of showing misjoinder or nonjoinder of inventors is a heavy one and must be 12 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES proved by clear and convincing evidence.” Hess v. Advanced Cardiovascular Sys., Inc., 106 F.3d 976, 980 (Fed. Cir. 1997) (quoting Garrett Corp. v. United States, 190 Ct. Cl. 858, 870 (1970)). By statute, [i]nventors may apply for a patent jointly even though (1) they did not physically work together or at the same time, (2) each did not make the same type or amount of contribution, or (3) each did not make a contribution to the subject matter of every claim of the patent. 35 U.S.C. § 116(a). “Because conception is the touchstone of inventorship, each joint inventor must generally contribute to the conception of the invention.” Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998). Conception is precisely defined as existing “when a definite and permanent idea of an operative invention, including every feature of the subject matter sought to be patented, is known.” Sewall v. Walters, 21 F.3d 411, 415 (Fed. Cir. 1994). In other words, conception is only complete when the “idea is so clearly defined in the inventor’s mind that only ordinary skill would be necessary to reduce the invention to practice, without extensive research or experimentation.” Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1228 (Fed. Cir. 1994). As to the required degree of contribution to conception, we have recognized that “[t]he determination of whether a person is a joint inventor is fact specific, and no bright-line standard will suffice in every case.” Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1473 (Fed. Cir. 1997). The underlying principle from our case law is that a joint inventor’s contribution must be “not insignificant in quality, when that contribution is measured against the dimension of the full invention.” Id. Of particular relevance to this case, we have held that if an individual supplies a component essential to an invention, that is an insufficiently significant contribution if the component BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 13 and the principles of its use were known in the prior art. Hess, 106 F.3d at 981; see also Pannu v. Iolab Corp., 155 F.3d 1344, 1351 (Fed. Cir. 1998) (explaining that a joint inventor is required to “do more than merely explain to the real inventors well-known concepts and/or the current state of the art”). Moreover, while joint inventors need not “physically” work together under § 116, “the statutory word ‘jointly’ is not mere surplusage.” Kimberly-Clark Corp. v. Procter & Gamble Distrib. Co., Inc., 973 F.2d 911, 917 (Fed. Cir. 1992). We require that “inventors have some open line of communication during or in temporal proximity to their inventive efforts.” Eli Lilly & Co. v. Aradigm Corp., 376 F.3d 1352, 1359 (Fed. Cir. 2004). Critically, “each inventor must contribute to the joint arrival at a definite and permanent idea of the invention as it will be used in practice.” Burroughs, 40 F.3d at 1229 (emphasis added); see also Vanderbilt Univ. v. ICOS Corp., 601 F.3d 1297, 1308 (Fed. Cir. 2010) (“[C]oinventors must collaborate and work together to collectively have a definite and permanent idea of the complete invention.”). In sum, the two questions for objectively assessing Gore’s defense are (1) what constitutes the “definite and permanent idea” of the invention at issue and (2) whether Cooper and Goldfarb acted in concert to jointly arrive at that idea. With respect to these questions, the factual record and inferences from the record were raised in the interference proceeding that preceded the issuance of the ’135 patent and this litigation—and were reviewed by this court in Cooper I and Cooper II. As to the first, we note that the invention at issue was not merely the use of ePTFE in vascular grafts. Rather, each claim of the ’135 patent includes, as its key limitation, specified dimensions of fibril length that are essential for a successful graft. See Cooper II, 240 F.3d at 1380 (noting that the invention “relates to the fibril length of certain material used for vascular grafts”). While Cooper 14 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES identified ePTFE as a promising material for vascular grafts, many grafts that were made of ePTFE failed. Cooper I, 154 F.3d at 1325. Prior to the invention, Cooper and others in the art believed that pore size was the key parameter for success. Id. at 1324. We affirmed the Board’s finding that prior to Cooper’s providing the lot of ePTFE tubes that ultimately led to the successful 2-73 RF graft, “he had not yet recognized the importance of the fibril length required by the interference, i.e., he had not yet conceived the invention, and he was not aware of the fibril lengths of the material he was sending to Goldfarb.” Cooper II, 240 F.3d at 1381. What Cooper told Goldfarb was, more generally, that “he expected the material to be suitable as a vascular graft.” Id. at 1384. In other words, Cooper “had not conceived the fibril length limitation before he sent the material to Goldfarb.” Id. at 1385. To be sure, in those prior appeals we held that Cooper “had conceived of the invention, including the fibril length limitation” before Goldfarb evaluated the 2-73 RF graft and reduced the invention to practice. Id. at 1384-85 (citing Cooper I, 154 F.3d at 1326). However, we agree with the district court that the record—established in proceedings prior to the litigation—shows that Cooper had “minimal contact” with Goldfarb on the subject of the fibril length limitation: Indeed, Cooper admits that, even after he conceived the importance of fibril length, he did not convey that information to Goldfarb. He also admits that he did not ask Goldfarb to use grafts with fibril lengths required by the interference count, or to determine the fibril lengths of successful grafts. While Cooper was not required to communicate his conception to Goldfarb, Cooper I, 154 F.3d at 1332, 47 USPQ2d at 1905, his failure to convey any information or requests regarding fibril length prevents Goldfarb’s determination of BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 15 the fibril lengths of the material from inuring to his benefit. Bard III, at 9 (quoting Cooper II, 240 F.3d at 1385). Based on the record established in Cooper I and II—that we reviewed—Cooper and Goldfarb independently conceived of the fibril length limitation. While Cooper I and II concerned inurement in the context of interference, they established that—barring Gore’s introduction of new evidence or theories—Cooper and Goldfarb did not collaborate, communicate, nor in any way jointly arrive at the recognition that fibril length was significant for graft success. Even if Cooper had achieved conception prior to Goldfarb, Cooper II definitively held that Goldfarb arrived at conception on his own, and, thus, his reduction to practice did not inure to Cooper. 240 F.3d at 1386. This is an unusual case. Forty years have passed since Goldfarb filed for the patent at issue in this case. Gore tried to get a patent on the subject matter of the patent on which it was sued. The subsequent decades of prior proceedings shaped what defenses Gore could raise once it was sued for infringement. Once it failed and the ’135 patent issued, Gore was left with an exceptionally circumscribed scope of reasonable defense. In the current proceedings, Gore relied on those facts which showed that the invention was based on a material that Gore invented and that Cooper may have conceived of the invention prior to Goldfarb (though Goldfarb won the patent because he was the first to reduce it to practice). But even if it could have persuaded a jury—which it did not—Gore could not have evaded the legal requirements of joint inventorship. Ultimately, to have stood a reasonable chance of prevailing on this issue, Gore needed to raise new evidence or theories that were not considered in Cooper I and II. However, as the prior panel noted, “Gore’s argument remains unchanged and there is still no evidence that Cooper either recognized or appreciated the 16 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES critical nature of the internodal distance and communicated that key requirement to Goldfarb before Goldfarb reduced the invention to practice.” Bard I, 670 F.3d at 1182. 4 Within the backdrop of the extensive proceedings prior to this litigation, therefore, we agree with the district court that Gore’s position was not susceptible to a reasonable conclusion that the patent was invalid on inventorship grounds. IV For the aforementioned reasons, we affirm the district court’s determination that the plaintiffs established standing and that the ’135 patent was willfully infringed. AFFIRMED Indeed, if anything, the evidence presented in the litigation further bolstered the plaintiffs’ position. For example, as the district court noted, shortly after Goldfarb filed his patent application in October 1974, Cooper admitted to entering Goldfarb’s laboratory without permission and took his histological slides. Bard III, at 10. Other evidence suggested that Cooper did so because Cooper still did not understand what parameters mattered for successful grafts. Id. at 10-11. 4 United States Court of Appeals for the Federal Circuit ______________________ BARD PERIPHERAL VASCULAR, INC., AND DAVID GOLDFARB, M.D., Plaintiffs-Appellees, AND C.R. BARD, INC., Counterclaim Defendant-Appellee, v. W.L. GORE & ASSOCIATES, INC., Defendant-Appellant. ______________________ 2014-1114 ______________________ Appeal from the United States District Court for the District of Arizona in No. 2:03-CV-00597-MHM, Judge Mary H. Murguia. ______________________ HUGHES, Circuit Judge, concurring. I agree that when reviewed de novo, the evidence in this case shows that Gore’s defenses were not objectively reasonable. I write separately to reiterate my belief that the full court should review our willfulness jurisprudence in light of the Supreme Court’s recent decisions in Highmark Inc. v. Allcare Health Management Sys., Inc., 134 2 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES S. Ct. 1744 (2014) and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014). Those decisions call into question our two-part test for determining willfulness, In Re Seagate Tech., LLC, 497 F.3d 1360 (2007) (en banc), and our de novo standard for reviewing the district court’s willfulness determination, Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003, 1006–07 (Fed. Cir. 2012) (Bard II). See Halo Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371, 1383 (Fed. Cir. 2014) (O’Malley, J., concurring). This case demonstrates why de novo review of willfulness is problematic. The panel is divided over the strength of Gore’s joint inventorship defense. Each side advances a sound argument about whether the evidence in this case raises a “substantial question” of joint inventorship. And the district court, likewise, provided a thorough and well-reasoned opinion. If one of these several reasonable opinions must ultimately govern, it should be the opinion of the district judge, whose assessment of litigation positions is informed by trial experience and who has “lived with the case over a prolonged period of time.” Highmark, 134 S. Ct. at 1748. A more deferential standard of review would be consistent with the standards for reviewing mixed questions of law and fact in other contexts. See, e.g., Highmark, 134 S. Ct. at 1748–49 (holding abuse of discretion is the proper standard for reviewing award of attorney fees in patent cases, “[a]lthough questions of law may in some cases be relevant . . . .”); Pierce v. Underwood, 487 U.S. 552, 558 (1988) (holding abuse of discretion is the proper standard for reviewing determinations of whether a litigant’s position is “substantially justified” for purposes of fee-shifting under the Equal Access to Justice Act, although the determination frequently turns on a purely legal issue). It would also be consistent with the standard for reviewing a finding of willful copyright infringement. See Dolman v. Agee, 157 F.3d 708, 715 (9th Cir. 1998) BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 3 (“The district court’s finding of willful [copyright] infringement is reviewed for clear error.”). United States Court of Appeals for the Federal Circuit ______________________ BARD PERIPHERAL VASCULAR, INC., AND DAVID GOLDFARB, M.D., Plaintiffs-Appellees, AND C.R. BARD, INC., Counterclaim Defendant-Appellee, v. W.L. GORE & ASSOCIATES, INC., Defendant-Appellant. ______________________ 2014-1114 ______________________ Appeal from the United States District Court for the District of Arizona in No. 2:03-cv-00597-MHM, Judge Mary H. Murguia. ______________________ NEWMAN, Circuit Judge, dissenting. This case returns to the Federal Circuit on appeal of a district court decision on remand from an en banc decision of this court. The issue is willful infringement and its consequences, which this en banc court remanded for de novo determination as a matter of law, vacating the judgment entered on the jury verdict. 2 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES The en banc court changed the standard and procedure for determination of willful infringement and its consequences in order to bring reasonable national uniformity to application of this penalty. The court held that the objective reasonableness of a defense to infringement is a legal question to be determined by the judge, and is decided de novo on appeal. The court held that willful infringement is not a jury question, and vacated the judgment of willful infringement and punitive damages that the district court had entered on the jury verdict. On remand, the district court re-entered its prior judgment in its entirety, reciting the evidence that in its view supported the judgment. Again here on appeal, my colleagues on this panel repeat the district court’s exercise, do not apply de novo standards of review, and do not apply the clear precedent which requires determination of whether Gore acted with “objective recklessness” In re Seagate Techs., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc). Nor do my colleagues attempt to meet the court’s responsibility to impart reasonable consistency and objective standards to the penalty aspect of “willful” activity, although this was the reason why the en banc court established a system of de novo determination of this question of law applied to the facts of the particular case. Precedent establishes that the objective prong of willful infringement “tends not to be met where an accused infringer relies on a reasonable defense to a charge of infringement.” Spine Solutions, Inc. v. Medtronic Sofamor Danek USA, Inc., 620 F.3d 1305, 1319–20 (Fed. Cir. 2010). When there is a “substantial question of invalidity or unenforceability” of the patent, willful infringement cannot arise, as a matter of law. Seagate, 497 F.3d at 1371. The panel majority does not review the evidence and apply the law objectively; the court merely searches for and recites adverse evidence. BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 3 The majority ignores that Gore’s employee Cooper was the first to conceive of the invention – by final ruling of the patent interference tribunal and this court; the majority ignores that the ’135 patent was pending for twenty-eight years, while Gore developed this Gore-Tex® prosthetic product; the majority ignores that the district court refused to enjoin Gore’s provision of these prosthetic products after this litigation, citing the “potentially devastating public health consequences” 1; the court does not mention the inequitable conduct that pervades Dr. Goldfarb’s actions in obtaining the patent, including confessed perjury of a key witness; the court does not mention the action for misappropriation of Gore’s trade secrets by Gore ex-employees who now testify against Gore; the court does not mention the solid support for the theory that there is at least joint invention. I start with the history of this conflict, for it is relevant to both willful infringement and the award of punitive damages. I. The Interference The saga of Bard versus Gore started forty-one years ago, when Gore’s employee Peter Cooper, manager of the Gore plant in Flagstaff, Arizona, invited Dr. David Goldfarb at the Arizona Heart Institute to participate in an ongoing study of Gore’s product, expanded polytetrafluoroethylene (“ePTFE”), for use as a vascular prosthesis, i.e., as a graft to repair and replace blood vessels. Gore’s ePTFE polymer, (brand name Gore-Tex®), has unique properties based on its microporous and fibrous structure, as well as the adaptability of that structure to various uses. Gore employees sought to develop new Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. 03-CV-0579-PHX-MHM, 2009 WL 920300, at *5 (D. Ariz. March 31, 2009). 1 4 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES applications for ePTFE, and continued to modify its structure in studying new uses. Beginning around 1970, Peter Cooper led the development of ePTFE vascular prosthetic grafts. Cooper and other Gore employees collaborated with vascular surgeons in the United States and Japan, who surgically inserted Gore’s ePTFE vascular tubes of varying porous and fibrous structure into the arteries of dogs and sheep. Compatibility of ePTFE with human tissue and its effectiveness as mammalian grafts were demonstrated. In addition to scientific publications and the PTO interference record, details of this history may be found in this court’s opinions in the interference appeals, reported at Cooper v. Goldfarb, 154 F.3d 1321 (Fed. Cir. 1998) (“Cooper I”) and Cooper v. Goldfarb, 240 F.3d 1378 (Fed. Cir. 2001) (“Cooper II”). In 1973 Cooper, along with Gore employee Richard Mendenhall, contacted Dr. Goldfarb, who had recently arrived at the Arizona Heart Institute, and invited him to participate in the ePTFE vascular study. Cooper gave Dr. Goldfarb the reports of surgeons who had previously evaluated ePTFE tubes as vascular grafts, and gave him samples of the most effective ePTFE tubes based on the prior evaluations. A letter from Cooper to Dr. Goldfarb accompanying these samples stated that they “represent the latest attempt to achieve satisfactory patency rates in small artery prosthetics.” Cooper II, 240 F.3d at 1384. Dr. Goldfarb tested the Gore samples by inserting them in blood vessels of dogs and inspecting their structure by microscope. On October 24, 1974 Dr. Goldfarb filed a patent application on the structure of the most effective of the samples he tested. Cooper had previously filed a patent application covering the same structure, and the PTO declared an interference between the Cooper and Goldfarb applications. BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 5 In its interference decision, the PTO held that Cooper was the first to conceive the subject matter of the interference count, ruling that Cooper “had conceived all the limitations of the count” and “had established conception as of June 5, 1973.” Cooper I, 154 F.3d at 1328. However, the PTO also held that Goldfarb was the first to reduce the count to practice, declining to credit Cooper with the prior reductions to practice by the surgeons to whom Cooper had previously provided ePTFE tubes and grafts for testing and evaluation. Although the record contains extensive evidence of these tests, reports, and continued collaboration, the PTO tribunal also did not permit Cooper to show diligence to his filing date, on the ground that diligence had not been pleaded in the interference. Thus the PTO awarded priority to Goldfarb. On appeal, this court affirmed the PTO ruling that Cooper was the first to conceive the subject matter of the count. This court found error in the PTO’s refusal to consider whether Goldfarb’s work “inured” to Cooper’s benefit. The PTO had stated that the issue of inurement had not been raised at final hearing, but this court found that inurement had been raised “in several places in the final hearing brief,” Cooper I, 154 F.3d at 1332, and remanded to the PTO to consider inurement. On remand the PTO held that Goldfarb’s work did not inure to Cooper’s benefit, relying on affidavits of a Gore employee, Dan Detton, who later admitted to perjury. 2 Cooper II, 240 F.3d at 1380–81. Counsel: Is your testimony there knowingly false or truthful? Mr. Detton: No, that was inaccurate testimony. Counsel: Was it knowingly false? Mr. Detton: Yes, it was. Counsel: Perjury? Mr. Detton: Yes, it was. 2 6 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES The PTO awarded the patent to Dr. Goldfarb, and U.S. Patent No. 6,436,135 (“the ’135 patent”) issued on August 20, 2002. Meanwhile, during the twenty-eight years of patent pendency, Gore developed ePTFE grafts for a variety of prosthetic uses, and achieved medical and commercial success. II. The Infringement Litigation On March 28, 2003, Dr. Goldfarb and exclusive licensee Bard sued Gore for infringement of the ’135 patent. Although Gore attempted to raise several defenses of invalidity and enforceability, at trial and by motion, the district court and the jury were told repeatedly that the Federal Circuit had finally adjudged that Dr. Goldfarb was entitled to the patent. The jury rendered a verdict of willful infringement, and assessed damages measured as Bard’s lost profits on Gore’s products for which Bard had a competing product. The jury also awarded a royalty to Bard at rates ranging from 10% to 18%, for Gore sales of ePTFE products for which there was no competing Bard product. These damages totaled $185,589,871.02. Then, based on the jury’s finding of willful infringement, the district court doubled the damages, and awarded Goldfarb and Bard their attorneys’ fees and costs. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 586 F. Supp. 2d 1083 (D. Ariz. 2010) (“Bard I”). A split panel of the court affirmed. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 670 F.3d 1171 (Fed. Cir. 2012) (“Bard II”). Gore requested rehearing. Trans. 1915:5–15, Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. 03-CV-0579-PHX-MHM, (D. Ariz. Nov. 27, 2007), ECF No. 787. BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 7 III. Rehearing en banc The Federal Circuit granted rehearing en banc on the issue of willful infringement and the award of punitive damages and attorneys’ fees. The en banc court vacated these district court rulings, stating that “the opinion of the court accompanying the judgment is modified, in accordance with the panel opinion accompanying this order.” Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 476 Fed. App’x 747, 748 (Fed. Cir. 2012) (en banc) (“Bard III”). The court cited the need for consistency and reasonable predictability in resolving the pervasive issue of willful infringement, and ruled that willful infringement is “a question of law based on underlying mixed questions of law and fact and is subject to de novo review,” Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 682 F.3d 1003, 1005 (Fed. Cir. 2012) (“Bard IV”). The court remanded for de novo determination of willful infringement. The court explained that willful infringement contains objective and subjective components, and that the objective component requires proof of objective recklessness in the face of a high likelihood of infringing a patent known to be valid. Bard IV, 682 F.3d at 1006. This objective component receives de novo review, as a matter of law. The objective prong of willful infringement is not met when there is a reasonable defense to the charge of infringement. Spine Solutions, 620 F.3d at 1120; see also Halo Elecs., Inc. v. Pulse Elecs., Inc., 769 F.3d 1371, 1382 (Fed. Cir. 2014); Advanced Fiber Techs. (AFT) Trust v. J & L Fiber Servs., Inc., 674 F.3d 1365, 1377 (Fed. Cir. 2012). Then, if a district court holds the objective defenses to be objectively unreasonable, the jury’s subjective findings can be reviewed. Bard IV, 682 F.3d at 1008. After clarifying the legal principles, this court remanded to the district court for redetermination of willful 8 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES infringement. The district court reviewed the issues and reinstated its prior judgment of willful infringement, double damages, and attorneys’ fees. The district court stated that the evidence supported the prior judgment. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. 03-0597, 2013 WL 5670909 (D. Ariz. Oct. 17, 2013) (“Bard V”). Today’s majority now affirms. IV. This Appeal The panel majority, while mentioning that willful infringement is now a matter of law, does not undertake the required de novo review. Determination of a matter of law requires consideration of the positions of both sides, with due attention to the burdens and standards of proof. As stated in Seagate Techs., a ruling of willful infringement requires objective recklessness in the face of a high likelihood of infringing a patent known to be valid and enforceable. The question for the reviewing court is not whether the district court’s decision of law can be found supported by substantial evidence. The question of willful infringement is whether the accused infringer raised a substantial question of invalidity or unenforceability regarding the ’135 patent. In re Seagate, 497 F.3d at 1371. Willful infringement cannot lie “when a reasonable defense is raised,” Advanced Fiber, 674 F.3d at 1377, “[although] the record contains substantial evidence to support the jury's implicit finding” of validity and enforceability. Spine Solutions, 620 F.3d at 1319. The required showing of objective recklessness is not met, as a matter of law, when the patent is reasonably subject to challenge. It cannot be disputed that Gore raised several substantial questions challenging the validity and enforceability of the ’135 patent. I have previously outlined some of the grounds on which the ’135 patent was vulnerable: BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 9 (1) the ruling of the Patent and Trademark Office, affirmed by the Federal Circuit, that Gore's employee Cooper was the first to conceive of the invention that was patented by Goldfarb; (2) the fact that Cooper provided Goldfarb with the Gore– Tex® tubes that Goldfarb patented; (3) the fact that Goldfarb tested the tubes in dogs at Cooper's request; (4) the fact that others had previously tested the Gore–Tex® tubes in dogs and sheep, and had reported and published the same results that Goldfarb later patented; (5) the fact that the Goldfarb application was pending for 28 years, leaving doubt as to the outcome in the Patent Office. It is not irrelevant that the eventual allowance of the Goldfarb application included the admitted perjured affidavit of Detton, an affidavit that Detton asked Goldfarb to withdraw, and was refused. Bard III, 682 F.3d at 1009 (Newman, J., dissenting in part). These are all substantial questions of validity and enforceability of the ’135 patent, weighing against reckless disregard. Gore also presented by motion seven grounds of unenforceability of the ’135 patent, quoted by the district court as follows: 1. Plaintiffs and their attorneys failed to advise the Patent Office of Dr. Volder’s connections with Impra in his 1976 affidavit in which he expressed his opinion on the issue of obviousness as a presumably impartial person skilled in the art. 2. Plaintiffs and their attorneys failed to advise the Patent Office at any time prior to withdrawal of the rejection of Claims 1 to 10 of the Goldfarb patent application, that in 1978 Lenox Baker, M.D., withdrew and repudiated paragraph 6 of his 1976 affidavit filed with the Patent Office. 10 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 3. The filing of and reliance on two 1976 affidavits from D. Dan Detton, notwithstanding Mr. Detton’s repudiation of those affidavits before they were filed, and Plaintiffs’ subsequent failure to advise the Patent Office of Mr. Detton’s 1978 repudiation of his 1976 affidavits. 4. Plaintiffs’ reliance on an error that the Patent Office made in connection with the Matsumoto publication in Surgery, in which the Patent Office Examiner mistakenly interpreted the wall thickness in that publication to be 1 millimeter (“mm”) rather than 0.5 mm. 5. Plaintiffs and their attorneys failed to provide information to the Patent Office about Dr. Volder’s work and his possible role as an inventor or co-inventor, including the failure to disclose the existence of and the subsequent destruction of the Volder notebook. 6. Plaintiffs and their attorneys failed to comply with the Patent Office order requiring production of material information from the Goldfarb v. Impra litigation. 7. Plaintiffs and their attorneys failed to advise the Patent Office Examiner of the existence of the Gore shipping log, which contained information about prior art vascular graft wall thicknesses that was inconsistent with the 1976 affidavits of Harold Green and Mr. Detton, and inconsistent with the argument made by Dr. Goldfarb and Mr. Sutton in persuading the Patent Office Examiner to withdraw the November 1975 rejection of Claims 1 to 10. Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 573 F. Supp. 2d 1170, 1173–74 (D. Ariz. 2008). BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 11 Each asserted ground of inequitable conduct was summarily dismissed by the district court, which stated that, even if Dr. Goldfarb misrepresented or intentionally withheld information from the PTO and despite the admitted perjury, the false information was “not material to the prosecution of the ’135 patent.” Id. at 1215. That reasoning cannot be sustained. In addition, Gore’s argument of incorrect inventorship, or at least joint invention, is quite viable, and raises a substantial question of validity, which requires correct inventorship. Given the PTO’s findings that Cooper was the first to conceive the invention, and this court’s prior affirmance that Cooper conceived of the invention including the fibril length limitation before Goldfarb evaluated the 2-73 RF graft, see Cooper II, 240 F.3d at 1384–85 (citing Cooper I, 154 F.3d at 1326), Goldfarb’s reduction to practice of the material that Cooper made and presented for patenting, at least raises a substantial question of “joint inventorship.” The statute is clear, and surely presents enough of a question that joint invention could be reasonably raised in defense: Joint Inventors -- . . . Inventors may apply for a patent jointly even though (1) they did not physically work together or at the same time, (2) each did not make the same type or amount of contribution, or (3) each did not make a contribution to the subject matter of every claim of the patent. 35 U.S.C. §116(a) (2012). The panel majority rules that Gore’s joint invention defense fails because Gore cannot show “collaboration” between Cooper and Goldfarb as to every limitation in the claims. Joint invention does not require collaboration as to every limitation, as the statute makes clear. Moreover, when the PTO’s interference procedures are removed from the deferential review status they enjoyed in Cooper I and 12 BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES Cooper II, the correctness of these rulings can reasonably be challenged in the infringement context. In all events, the question as it relates to willfulness is whether the defense of invalidity could reasonably be raised, not whether it eventually succeeded. The flaws in the Goldfarb patent and the way it was obtained provided sufficiently reasonable defenses to both validity and enforceability. On the entirety of the premises and applying the correct legal standards, the judgment of willful infringement cannot stand. V. Damages Even when willful infringement is found, it does not follow that punitive damages must be imposed, or that the damages must be doubled. The public benefit of Gore’s product cannot be ignored. Punitive damages are intended to discourage bad behavior, not life-saving medical devices. This en banc court specifically asked for review of the damages award as related to the willfulness determination. Such review gets short shrift from my colleagues, who simply ignore the en banc court’s admonition that the premises and consequences of “willful” action receive objective, nationally consistent, implementation. “Precedent holds that a finding of willfulness authorizes, but does not require, enhanced damages.” Laitram Corp. v. NEC Corp, 115 F.3d 947, 955 (Fed. Cir. 1997)); Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1582 (Fed. Cir. 1992) (refusal to enhance damages despite the jury’s verdict of willful infringement); Modine Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990) (same); Delta–X v. Baker Hughes Prod. Tools, Inc., 410, 413 (Fed. Cir. 1993) (considering whether the defendant made a substantial challenge to infringement). Extensive precedent supports judicial refusal to enhance damages when the case is close and the equities counsel moderation, not punishment. The award of BARD PERIPHERAL VASCULAR v. W.L. GORE & ASSOCIATES 13 punitive damages depends on both the infringer’s degree of culpability, and the injury that the infringement imposed on the patentee. Bard was awarded full recovery for its loss of business to the Gore product. The district court stated that “the Court is satisfied that a fair and full amount of compensatory money damages, when combined with a progressive compulsory license, will adequately compensate Plaintiffs’ injuries, such that the harsh and extraordinary remedy of injunction–with its potentially devastating public health consequences—can be avoided.” Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., No. 03-CV-0597, 2009 WL 920300, at *5 (D. Ariz. Mar. 31, 2009). The district court’s recognition of the public’s interest and medical benefits imparted by Gore’s product, and the court’s refusal to enjoin its provision, cannot be reconciled with the punitive doubling of damages. There was no showing, or even a charge, of intentional harm, as required for severe punishment as here meted out. See Restatement (Second) of Torts §500 (1965). Thus, regardless of whether willfulness was a supportable ruling, the doubling of the damages award is untenable. From my colleagues’ contrary ruling, I respectfully dissent.


§ 12-1 Grant of control over parks and playgrounds.
§ 12-2 Authorization to adopt rules and regulations; display.
§ 12-3 Violations of rules and regulations.
§ 12-4 Establishment; composition; general powers and duties.
§ 12-5 Appointment of members.
§ 12-6 Term of members.
§ 12-8 Organization; rules and regulations.
§ 12-9 Officers and employees.
§ 12-10 Budget; financial affairs.
§ 12-12 Membership; terms of office; removal of members.
§ 12-13 Powers and duties.
§ 12-14 Acquisition of property.
§ 12-15 Review of environmental impact statements.
§ 12-16 Records to be maintained; reports.
§ 12-20 Membership; terms; liaison; filling of vacancies.
§ 12-21 Relation to Borough.
Salaries and compensation — See Ch. 62.
Board of Health ordinances — Part III of this Code.