IP Law Daily Reasonable patent invalidity defense precluded finding of willful infringement
Monday, April 11, 2016

Reasonable patent invalidity defense precluded finding of willful infringement

By Jody Coultas, J.D.

Trans Ova Genetics, LC has been granted dismissal by the federal district court in Denver of a jury verdict finding that it willfully infringed patents held by XY, LLC (XY, LLC v. Trans Ova Genetics, LC, April 8, 2016, Martinez, W.). The court denied XY attorney fees, but granted royalties and interest.

The case stemmed from a dispute over a License Agreement which permitted Trans Ova to use XY’s patented technology. A jury found that Trans Ova willfully infringed all claims of the ten patents, and that Trans Ova had not proven that any of the patent claims was invalid or unenforceable. The jury also found that XY had unclean hands, barring claims for unjust enrichment and injunctive relief. Finally, the jury found breaches of contract by both parties and assessed damages against each party.

Willful infringement. The court vacated the jury’s finding that Trans Ova’s infringement was willful, finding that Trans Ova’s invalidity defense was objectively reasonable. Willful infringement requires evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement and that objectively high likelihood of infringement “was either known or so obvious that it should have been known to the accused infringer.” Here, Trans Ova’s evidence of invalidity as to all ten of the patents presented a substantial question of whether the patents were enforceable. At trial, the court found that Trans Ova had presented sufficient evidence for a reasonable jury to find in its favor on its claim that each of the patents was invalid as obvious. Although the jury found Trans Ova’s invalidity arguments unpersuasive, they were supported by expert testimony. XY’s arguments to the contrary failed to persuade the court that Trans Ova was objectively reckless in relying on its invalidity defense.

Breach of contract. There was no clear error or fatal inconsistency in the jury verdict finding that both parties had breached the license agreement, according to the court.

Motion for a new trial. Trans Ova was unable to show a new trial was warranted on the issues of relevant market and patent invalidity, according to the court. In support of its motion for a new trial, Trans Ova challenged the jury’s finding that the sperm sorting technology market was not a relevant market, and the jury’s rejection of Trans Ova’s invalidity defense as to all of the claims of each of the patents. Both parties presented competing evidence on invalidity and the relevant market, and Trans Ova has failed to show that the evidence that favored XY was “clearly, decidedly, or overwhelmingly” outweighed by the evidence that favored Trans Ova.

Attorney fees. XY was denied attorney fees by the court because the case was not exceptional. Trans Ova’s invalidity and unenforceability defenses were not unreasonable, nor was the believe that Trans Ova continued to have a valid license.

Damages. A punitive increase in damages would be inappropriate on these facts, even if the jury’s willful infringement finding remained intact, according to the court. Therefore, XY’s motion for treble damages was denied.

Royalties. XY’s motion for royalties was granted in part by the court. Where future use of the patents is contemplated, a reasonable ongoing royalty may be awarded. A reasonable ongoing royalty of the average of the reasonable rates assessed by the jury as damages for infringement and the rates XY agreed to in the parties’ initial agreement, was proper.

Interest. The court granted, in part, XY’s Interest Motion as to its infringement damages of $4,585,000, and applied a prejudgment interest rate of 3.25% compounded annually. Patent infringement damages should be adequate to compensate the patent holder for infringement “together with interest and costs as fixed by the court.” Prejudgment interest should be awarded in order to secure full compensation for infringement. The court found that a fully compensatory award of damages for infringement should include an award of prejudgment interest.

The case is No. 1:13-cv-00876-WJM-NYW.

Attorneys: Daniel Lynn Moffett (Akin, Gump, Strauss, Hauer & Feld, LLP) for XY LLC. Donald E. Lake, III (Lewis Brisbois Bisgaard & Smith, LLP) for Trans Ova Genetics, LC.

Companies: XY, LLC; Trans Ova Genetics, LC

MainStory: TopStory Patent ColoradoNews

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