A ruling Friday in a clash over windshield wipers may lead to more bifurcated trials in intellectual property cases—and it could spell trouble for patent plaintiffs. But the decision by the U.S. Court of Appeals for the Federal Circuit is good news for blade maker Pylon Manufacturing, which won a chance to challenge a jury's patent infringement finding before heading to trial on damages.
In an en banc ruling, the Federal Circuit concluded that Pylon can appeal its 2010 trial loss without waiting for a new jury to determine whether its infringement was willful and to award damages. The decision, written by Judge Sharon Prost and joined by judges Randall Rader, Pauline Newman, Alan Lourie, and Timothy Dyk, is a setback for plaintiff Robert Bosch LLC, which accuses Pylon of ripping off its windshield wiper blade technology. Judges Kimberly Moore and Jimmie Reyna concurred and dissented in part in separate opinions, while Judges Kathleen O’Malley and Evan Wallach dissented.
"We think the court made the right decision and we're happy with the result," said Garrett Leach, a partner at Kirkland & Ellis who argued for Pylon at the Federal Circuit."We think more courts and more litigants will now use this decision to appeal liability before issues of damages and willfulness are tried."
Bosch sued Pylon in 2008 over a patent relating to windshield wiper parts. U.S. District Judge Sue Robinson in Wilmington, Del., bifurcated the case on the issues of liability and damages. After the jury found that Pylon had infringed Bosch's patents, the company appealed. Bosch moved to dismiss, saying the Federal Circuit did not have jurisdiction to hear the case.
The Federal Circuit disagreed Friday, noting that it has authority to hear an appeal "from a judgment in a civil action for patent infringement which would otherwise be appealable to the United States Court of Appeals for the Federal Circuit and is final except for an accounting." At issue was the meaning of "accounting," and whether a trial on damages and willfulness can be considered an accounting under the law. The court held 7-2 that an accounting includes the determination of damages and ruled 5-4 that it includes a determination of willfulness.
"We obviously disagree with the majority opinion, but the important thing is we are one step closer to a jury trial on the willfulness infringement and damages issues," said Kenyon & Kenyon partner Mark Hannemann, who argued for Bosch.
The decision could have a broad impact on patent litigation by prompting more judges to split infringement lawsuits into liability and damages phases. District courts have long had the power to bifurcate, although only some have exercised that discretion. The Federal Circuit emphasized in the Bosch ruling that district courts "may bifurcate willfulness and damages issues from liability issues in any given case [and] have the authority to try these issues together or separately."
The conventional wisdom, attorneys say, is that such bifurcation is more efficient and potentially saves time and money. "It can save litigants the cost of discovery for damages and willfulness," said Bruce Wieder, a partner at Dow Lohnes and an adjunct professor at the Georgetown University Law Center who was not involved in the case. Defendants in particular are likely to benefit from bifurcation, since they can avoid the time and expense of litigating willfulness and damages issues if no liability is found.
Bifurcating cases, however, may put patent owners at a disadvantage by inviting more and earlier appeals. And even if a case results in a finding of liability, the parties may be encouraged to settle rather than hold a second trial for damages and willfulness, Wieder said.
The issue may eventually wind up before the U.S. Supreme Court. Judge O'Malley wrote in her dissent that the majority had stretched the statutory provision afforded the court "beyond reasonable bounds," adding that the majority "once again concludes that matters before this court may be treated differently than civil litigation before every other court of appeals in the federal system." Most notably, O'Malley wrote that the decision raises serious constitutional issues.
"A bifurcation order which requires that two different juries visit the interwoven issues and overlapping facts involving infringement and validity on the one hand and willfulness on the other hand would violate the defendant's Seventh Amendment right to a jury trial," O'Malley wrote.
Patent and Trademark Office Solicitor Raymond T. Chen filed an amicus brief on behalf of the U.S. government in support of Pylon's position. The American Intellectual Property Law Association and the Intellectual Property Owners Association, which also filed amicus briefs, argued against treating willfulness as part of the accounting.
With the jurisdictional question settled for the time being, Pylon's appeal of the infringement verdict will now move forward at the Federal Circuit.
This article originally appeared in The Am Law Litigation Daily.
