Free Motion for Miscellaneous Relief - District Court of Arizona - Arizona

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FENNEMORE CRAIG P.C. 3003 NORTH CENTRAL AVENUE, SUITE 2600 PHOENIX, ARIZONA 85012-2913 PHONE (602) 916-5000 ANDREW M. FEDERHAR (#006567) LATHAM & WATKINS LLP 885 THIRD AVENUE NEW YORK, NEW YORK 10022 STEVEN C. CHERNY 555 ELEVENTH STREET, N.W. WASHINGTON, DC 20004 MAXIMILIAN A. GRANT Attorneys for Plaintiffs/Counterdefendants Bard Peripheral Vascular, Inc. and David Goldfarb, M.D. and Counterdefendant C.R. Bard, Inc.

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) No. CV-03-0597-PHX-MHM ) Plaintiffs, ) ) v. ) ) W.L. Gore & Associates, Inc., ) ) PLAINTIFFS' MOTION Defendant. ) FOR PREJUDGMENT INTEREST _____________________________________) UNDER 35 U.S.C. § 284 ) W.L. Gore & Associates, Inc., ) ) (Assigned to the Hon. Mary H. Murguia) Counterclaimant, ) ) v. ) ) Bard Peripheral Vascular, Inc., ) David Goldfarb, M.D., and ) C.R. Bard, Inc. ) ) Counterdefendants. ) ) ) Bard Peripheral Vascular, Inc., and David Goldfarb, M.D.,

Case 2:03-cv-00597-MHM

Document 852

Filed 08/12/2008

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Plaintiffs David Goldfarb, M.D. and Bard Peripheral Vascular, Inc. ("BPV"), and Counter-Defendant C.R. Bard, Inc., (collectively, "Bard"), hereby move the Court to pursuant to Fed. R. Civ. P. 59(e) and 35 U.S.C. § 284 to amend the judgment of July 30, 2008 and award prejudgment interest on the compensatory damages awarded by the jury in response to W. L. Gore & Associates, Inc.'s ("Gore") willful infringement of the Goldfarb Patent and any attorney fees awarded by the Court. Prejudgment interest is ordinarily awarded to the prevailing plaintiff in a patent infringement suit. See, e.g., Stickle v. Heublein, Inc., 716 F.2d 1550, 1564 (Fed. Cir. 1983); Gen. Motors Corp. v. Devex Corp., 461 U.S. 648, 656 (1983). The Supreme Court explained that the denial of prejudgment interest simply creates an incentive to prolong litigation, and that prejudgment interest in patent cases is withheld only under exceptional circumstances. Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1574 (Fed. Cir. 1996) (emphasis added). Failure to award prejudgment interest provides an unwarranted windfall to infringers by permitting free use of a compensatory award (including any award of attorneys fees) during the time from the date of first infringement until entry of final judgment. The law recognizes that the "time value" of that money belongs to the patent holder ­ not the infringer. Here, the date of first infringement is the Goldfarb Patent's issuance date.1 There is no legitimate dispute that Bard is entitled to an award of prejudgment interest. Gore's own testifying economic expert, Dr. Teece, conceded that the award of prejudgment interest was necessary to make Plaintiffs whole for any infringement. (See 11/29/07 Tr. at 2498-99 ("[I]f money is owed, it will be paid. And that will include prejudgment interest.").) The only real questions before the Court therefore are: (1) the appropriate interest rate; (2) how that interest rate is compounded; and (3) whether the prejudgment interest awarded by the Court should be applied to any potential award of attorney fees. Each issue is committed to the Court's discretion.
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The August 20, 2002 issuance date is the first date that damages began accruing. Gore, during the 28-year period during the prosecution, Interference, and Gore's subsequent Federal Circuit appeals, practiced Dr. Goldfarb's invention for free.

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The Federal Circuit's holdings and those of patent cases arising in the Ninth Circuit establish a strong preference for using Arizona's statutory interest rate of ten percent. The law and facts here further indicate that the Court should compound interest on the same quarterly basis on which C.R. Bard (from 1980 to 1996) and BPV (from 1996 to 2007) made payments to Dr. Goldfarb. Finally, given the factual background of this litigation, Bard should receive prejudgment interest on any recovery of its reasonable attorney fees awarded by the Court. During the six years from the issuance of the Goldfarb Patent on August 20, 2002 to entry of judgment on July 30, 2008, Gore collected hundreds of millions of dollars that rightfully belonged to Plaintiffs.2 During the thirty-four years since Dr. Goldfarb filed his patent application, Gore (successfully) used every possible legal argument, procedural mechanism, and delay tactic to forestall issuance of Dr. Goldfarb's patent. Even after issuance, Gore refused to acknowledge Dr. Goldfarb's contributions to medical science and forced Dr. Goldfarb and Bard to litigate every issue ­ sometimes repeatedly. Gore has received every possible commercial benefit arising from its success in delaying the issuance and enforcement of the Goldfarb Patent, garnering billions of dollars of profits. And, even though the jury found Gore to be a willful infringer, Gore has not done one thing to change its infringing conduct since the verdict. Plaintiffs are entitled to interest on their "foregone use" of the monetary award. Devex, 461 U.S. at 655 n.10 (failure to award prejudgment interest "not only undercompensates the patent owner but may also grant a windfall to the infringer and create an incentive to prolong litigation") (emphasis added).

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The damages amount awarded at trial only includes infringing sales from the Goldfarb Patent's issuance (August 20, 2002) to an arbitrary date selected by the parties to facilitate presentation of damages evidence at trial (June 30, 2007). Plaintiffs are entitled to a further accounting and award of the lost profit and reasonable royalty damages assessed by the jury from the June 30, 2007 cut-off date until the date of final judgment (July 30, 2008). Plaintiffs have moved separately for such damages and are entitled to prejudgment interest on that amount as well as the $185 million awarded at trial.

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. authorities.

Bard's motion is supported by the following Memorandum of Points and

MEMORANDUM OF POINTS AND AUTHORITIES ARGUMENT After a lengthy trial, the jury unanimously found Gore liable for willful infringement and awarded $185,589,871.02 in compensatory damages. (Doc. No. 771 at 20, 22-23.) The jury award included lost profits arising from Gore's willful infringement of certain products and reasonable royalties on other products. (Id. at 22-23.) Prejudgment interest on the compensatory damages award (including both lost profits and reasonable royalties) is necessary to ensure "complete justice" in this case. Devex, 461 U.S. at 656. It is long settled that: [P]rejudgment interest is typically included as part of the patentee's recovery to ensure compliance with the statutory mandate of 35 U.S.C. § 284 that damages be `adequate to compensate for the infringement.'" Stickle v. Heublein, Inc., 716 F.2d 1550, 1564 (Fed. Cir. 1983) (quoting Devex, 461 U.S. at 656); Sensonics, Inc., 81 F.3d at 1574 (award of "prejudgment interest is the rule, not the exception"). The normal procedure under Devex is to award prejudgment interest from the date of infringement to the date of payment, since only such award will satisfy "Congress' overriding purpose [in section 284] of affording patent owners complete compensation." Bio-Rad Labs., Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 967 (Fed. Cir. 1986) (quoting Devex, 461 U.S. at 655) (alteration in original). The objective of awarding prejudgment interest is to put the patentee in "as good a position as he would have been in had the infringer entered into a reasonable royalty agreement," and permits the patentee to recover "the forgone use of the money between the time of infringement and the date of the judgment." Devex, 461 U.S. at 655-56. An award of interest from the time that the royalty payments would have been received merely serves to make the patent owner whole, since his damages consist not only of the value of the royalty payments but also of the foregone use of the money between the time of the infringement and the date of the judgment.

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Bio-Rad, 807 F.2d at 967 (vacating order limiting prejudgment interest and remanding). A. Prejudgment Interest Should Be Awarded At the Arizona Statutory Rate of 10% The appropriate interest rate to apply for prejudgment interest is committed to the district court's discretion. See, e.g., Laitram Corp. v. NEC Corp., 115 F.3d 947, 955 (Fed. Cir. 1997). Because the calculation of the rate of prejudgment interest is not unique to patent law, the Federal Circuit recognizes that the law of the regional circuit controls the rate of prejudgment interest. Venture Indus. Corp. v. Autoliv ASP, Inc., 196 Fed. Appx. 894, 900 (Fed. Cir. 2006); Go Med. Indus., Pty., Ltd. v. Inmed Corp., 471 F.3d 1264, 1272 (Fed. Cir. 2006). In the Ninth Circuit, there is a preference for using the forum state's statutory interest rate.3 See, e.g., In re Hayes Microcomputer Prods., Inc. Patent Litig., 766 F. Supp 818, 824 (N.D. Cal. 1991) (infringer failed to convince court of "the necessity to depart from the California statutory interest rate"); Brooktree Corp. v. Adv. Micro Devices, Inc., 757 F. Supp 1101, 1103 (S.D. Cal. 1990) ("While it is true that the state statutory rate is not controlling in the context of a suit based on a federal claim, courts do often use the statutory rate in the state in which they sit to calculate an award of prejudgment interest." (internal citation omitted)). In Arizona, the statutory prejudgment interest rate is ten percent (10%). Ariz. Rev. Stat. § 44-1201(A); AMHS Ins. Co. v. Mut. Ins. Co. of Ariz., 258 F.3d 1090, 1103 (9th Cir. 2001). Use of an interest rate below the Arizona State Rate of ten percent would be unfair to Plaintiffs because it would be inadequate to compensate for Gore's infringement.4 See Devex, 461 U.S. at 652; Hockerson-Halberstadt, Inc. v. Propet USA,
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The Court retains discretion to "select an award [of prejudgment interest] above the statutory rate." Lam, Inc. v. Johns-Manville Corp., 718 F.2d 1056, 1066 (Fed. Cir. 1983) (emphasis added). Dr. Leonard testified at trial regarding amount of prejudgment interest on the incomplete portion of damages (through June 30, 2007) using the "risk-free" 3-month T-bill rate which he described as having "about the lowest interest rate you can get ... ." (11/15/07 Tr. at 1405-06.) That testimony does not hamper Plaintiffs from presenting a post-trial showing that the Arizona statutory interest rate better serves the compensatory purpose of prejudgment interest. See, e.g., Fisher-Price, Inc. v. Safety 1st, Inc., 2008 U.S. Dist. LEXIS

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Inc., 62 Fed. Appx. 322, 334 (Fed. Cir. 2003) (vacating award of prejudgment interest at the prime rate as inadequate and remanding to "redetermine the rate of prejudgment interest"). The purpose of awarding statutory prejudgment interest is not only to compensate the prevailing party for the delay in the use of the money, but also to offset the costs of bringing the action and to provide an incentive for prompt settlement. Venture Indus., 196 Fed. Appx. at 900. To compensate Plaintiffs for their foregone use of the money, Gore should pay the same rate of interest that anyone in Arizona would have paid if she or he had caused damages ­ ten percent (10%). B. The Prejudgment Interest Should Be Subject to Interest Compounded Quarterly After the Court determines the prejudgment interest rate, it must separately determine how to apply that rate. Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1555 (Fed. Cir. 1995) ("[T]he determination whether to award simple or compound interest is a matter largely within the discretion of the district court."). "[A]n award of compound rather than simple interest assures that the patent owner is fully compensated." Fromson v. Western Litho Plate & Supply Co., 1989 U.S. Dist. LEXIS 14593, at *27 (E.D. Mo. Dec. 6, 1989) (citing Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506, 1510 n.1 (Fed. Cir. 1984)), aff'd, 909 F.2d 1495 (Fed. Cir. 1990). Because the award of prejudgment interest is intended to "make the patent owner whole," Bio-Rad, 807 F.2d at 967, the Court should evaluate when royalty payments were "typically paid" as it pertains to this case. Atmel Corp. v. Silicon Storage Tech., Inc., 202 F. Supp. 2d 1096, 1101 (N.D. Cal. 2002) (assessing prejudgment interest on a quarterly basis because the evidence showed that patent "royalty agreements are typically paid on a quarterly basis"), aff'd, 76 Fed. Appx. 298 (Fed. Cir. 2003).

36712, at *22 (D. Del. May 5, 2008) (finding that although plaintiff's "expert witness recommended the 10-year Treasury bill rate ... [n]onetheless, based on [plaintiff's] showing after trial, the court in its discretion finds the [higher] prime rate best serves the compensatory purpose of an award of prejudgment interest because it better reflects the time value of money [plaintiff] lost due to [defendant's] infringement").

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Here, the evidence demonstrates that if Gore had entered into a license agreement with Plaintiffs, it would have made royalty payments on a quarterly basis. Both the 1980 License Agreement between Dr. Goldfarb and C.R. Bard and "the 1997 Agreement [that] created a new license agreement between Dr. Goldfarb and Impra/BPV," (Doc. No. 833 at 19), state that payments are to be made "on a calendar quarter basis." (PX4 at 5; see PX191 at 2.) Had Gore been making royalty payments as it should have, it would have done so according to typical commercial practices ­ on a quarterly basis ­ the same way Bard and Impra/BPV had paid Dr. Goldfarb. See Atmel Corp. 202 F. Supp. 2d at 1101 (compounding prejudgment interest on a quarterly basis "because royalty agreements are typically paid on a quarterly basis"); Studiengesellschaft Kohle v. Dart Indus., Inc., 862 F.2d 1564, 1580 (Fed. Cir. 1988) (affirming award of prejudgment interest compounded quarterly).5 To compensate Plaintiffs for their

foregone use of the monetary award, the interest Gore pays should be compounded at the same rate at which C.R. Bard and BPV paid royalties to Dr. Goldfarb ­ quarterly. C. Plaintiffs Are Entitled to Prejudgment Interest On Any Award of Attorney Fees Imposed By the Court To determine whether Plaintiffs are entitled to recover their reasonable attorney fees under 35 U.S.C. § 285, the Court must undertake a two-step process: The district court must first determine whether the case is exceptional, a factual determination we review for clear error; if the case is found to be exceptional, the district court must then determine whether attorneys fees should be awarded, a determination we review for abuse of discretion. Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d 1362, 1370 (Fed. Cir. 1999). Plaintiffs have separately moved the Court to find the case exceptional and for an award of attorney fees. The related question at issue in this motion is whether prejudgment interest should accrue to any recoverable attorney fees; it should.

In other contexts where "`[p]rejudgment interest is an element of complete compensation,'" courts generally find that "compound prejudgment interest is the norm in federal litigation." See, e.g., In re Oil Spill, 954 F.2d 1279, 1331-32 (7th Cir. 1992) (quoting West Virginia v. United States, 479 U.S. 305, 310 (1987)).

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In Mathis v. Spears, the Federal Circuit held that "a district court does have authority, in cases of `bad faith or other exceptional circumstances,' to award prejudgment interest" on the award of attorney fees under 35 U.S.C. § 285. 857 F.2d 749, 761 (Fed. Cir. 1988) (remanding to determine whether to award prejudgment interest "in light of all the facts and circumstances"); see also R.L. Harmon, Patents and the Federal Circuit § 15.2(a) (8th ed. 2007) (Federal Circuit has "extended [the Supreme Court's holding in] Duplate [Corp. v. Triplex Safety Glass Co., 298 U.S. 448 (1936)] to cover attorney fee awards under 35 U.S.C. § 285"). This makes sense because a plaintiff, like Bard, that is forced in bad faith by a willful infringer to enforce its rights not only loses the attorney fees needed to address willful infringement but the interest on that money as well. To the extent the Court determines that Bard should recover attorney fees as a result of Gore's willful infringement, it should exercise its discretion and award prejudgment interest on the recoverable, out of pocket, attorney fees incurred to enforce Dr. Goldfarb's patent rights.6 II. CONCLUSION WHEREFORE Plaintiffs respectfully request that the Court: (i) order Gore to pay prejudgment interest from the time of infringement (August 20, 2002) to the date of judgment (July 30, 2008) at the Arizona statutory rate of ten percent; (ii) order that the compounding of such prejudgment interest shall be quarterly; (iii) order that the award of prejudgment interest shall also pertain to the recovery of Plaintiffs' reasonable attorney fees, if any; and (iv) award such other relief as the Court deems just.

Because Plaintiffs paid their attorneys fees on a monthly ­ not quarterly ­ basis, the prejudgment interest sought herein actually understates the amount necessary to make them whole. Nonetheless, for ease of calculation, Plaintiffs only seek the same quarterly compounding interest for any recoverable attorney fees that they otherwise seek for prejudgment interest on the jury's damages award.

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August 12, 2008. Bard Peripheral Vascular, Inc., David Goldfarb, M.D. & C. R. Bard, Inc. By their attorneys, By: s/ Andrew M. Federhar FENNEMORE CRAIG P.C. ANDREW M. FEDERHAR 3003 North Central Avenue, Suite 2600 Phoenix, Arizona 85012-2913 Phone (602) 916-5000 LATHAM & WATKINS, LLP STEVEN C. CHERNY 885 Third Avenue New York, NY 10022 Phone (212) 906-1200 MAXIMILIAN A. GRANT 555 Eleventh Street, N.W. Washington, DC 20004 Phone (202) 637-2200

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CERTIFICATE OF SERVICE I hereby certify that on August 12, 2008, I electronically transmitted the attached document to the Clerk's Office using the ECF System for filing and transmittal of a Notice of Electronic Filing to the ECF registrants.

s/ Katrina Thomas Secretary for Andrew M. Federhar

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