Barry v. Medtronic, Inc.

• Decision Date: 20 April 2017
• Docket Number: CIVIL ACTION No. 1:14-cv-104.
• Citation: 250 F.Supp.3d 107
• Parties: Mark BARRY, M.D., Plaintiff, v. MEDTRONIC, INC., Defendant.
• Court: U.S. District Court — Eastern District of Texas

250 F.Supp.3d 107

Mark BARRY, M.D., Plaintiff,

v.MEDTRONIC, INC., Defendant.

CIVIL ACTION No. 1:14-cv-104.

United States District Court, E.D. Texas, Beaumont Division.

Signed April 20, 2017

Sean P. DeBruine, Dan Johnson Law Group, San Francisco, CA, Dario Alexander Machleidt, Kilpatrick Townsend & Stockton LLP, Seattle, WA, David Clay Holloway, Kilpatrick Townsend & Stockton LLP, Atlanta, GA, Erwin Lee Cena, Kilpatrick Stockton LLP, San Diego, CA, Laura Kathryn Mullendore, Kilpatrick Townsend & Stockton LLP, Denver, CO for Plaintiff.

Scott J. Bornstein, Julie P Bookbinder, pro hac vice, Zahra Alexis Smith, Richard Charles Pettus, Cassandra A. Adams, Allan A. KassenoffJohn Edward Handy, Greenberg Traurig, LLP, New York, NY, Mary–Olga Lovett, Aimee Marie Housinger, Greenberg Traurig LLP, Houston, TX, Clyde Moody Siebman, Siebman Burg Phillips & Smith LLP, Sherman, TX, Elizabeth Siebman Forrest, Siebman, Burg, Phillips & Smith LLP, Plano, TX, Eric Fletcher, Wilmer Cutler Pickering Hale & Dorr, Boston, MA, for Defendant.

ORDER GRANTING IN PART MOTION FOR ENHANCED DAMAGES AND DENYING MOTION FOR ATTORNEY'S FEES

Ron Clark, United States District Judge

Plaintiff Dr. Mark A. Barry brought suit, asserting that Defendant Medtronic, Inc. indirectly infringed two patents,¹ U.S. Patent No. 7,670,358 ("the '358 Patent") and U.S. Patent No. 8,361,121 ("the '121 Patent"), which relate to a system and method of aligning spinal vertebrae to correct common spinal deformities like scoliosis. After a six-day jury trial, the jury returned a verdict, finding in favor of Dr. Barry on every issue, including indirect infringement, various theories of invalidity, and willfulness, and awarded Dr. Barry $20,346,390. Dkt. 411 (Jury Verdict).

The court subsequently granted Medtronic's motion for judgment as a matter of law on one issue, finding no substantial evidence to support the jury's determination on overseas indirect infringement and the corresponding jury award. Dkt. 442 at 20–22.² This reduced the total damages award by $2,625,210, bringing the current total damages award to $17,721,180. The court denied Medtronic's motions for judgment as a matter of law on all other issues.

Dr. Barry moves for enhanced damages under 35 U.S.C. § 284 and attorney's fees under 35 U.S.C. § 285. Dkt. 431. Medtronic opposes both motions. Dkt. 437.

The court concludes that an enhancement of 20% of the total final damages award is merited. But because the court finds this case is not "exceptional" pursuant to 35 U.S.C. § 285, Dr. Barry's motion for attorney's fees is denied. Each issue is addressed in turn below.

I. ENHANCED DAMAGES

A. Legal Framework

Section 284 of the Patent Act states that a court "may increase the damages up to three times the amount found or assessed" when actual damages are awarded for infringement. 35 U.S.C. § 284. It is up to a district court to decide whether to increase damages, and if so, by how much. Halo Elecs., Inc. v. Pulse Elecs., Inc. , ––– U.S. ––––, 136 S.Ct. 1923, 1935–36, 195 L.Ed.2d 278 (2016). The type of conduct justifying enhancement was described by the Supreme Court as "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate." Id. at 1932.

In this case, the jury was carefully instructed on willfulness and on Dr. Barry's burden of proof. Dkt. 414 at 19–20. The jury was instructed that it must find "wanton disregard for Dr. Barry's patent rights" or that infringement "is in bad faith, deliberate, or flagrant." The jury was given a list of factors to consider. Medtronic did not object to the instruction. Medtronic asserted there was no substantial evidence to support the jury's finding and moved for judgment as a matter of law, but the court disagreed and denied Medtronic's motion.

The jury's finding of willfulness is a sufficient predicate under Halo to raise the issue of enhanced damages. Halo , 136 S.Ct. at 1934. However, a finding of willfulness does not require that a district court enhance damages. Id. at 1933. The court must take "into account the particular circumstances of each case" and assiduously consider whether "the egregiousness of the defendant's conduct based on all the facts and circumstances" warrants enhancement. See id. at 1933 ; see also Read Corp. v. Portec, Inc. , 970 F.2d 816, 826–27 (Fed. Cir. 1992). Enhanced damages are not to be meted out in typical "garden-variety" patent suits, and instead, should be reserved for truly "egregious cases." Halo , 136 S.Ct. at 1932, 1934–35. Just as the decision of whether to enhance damages under Section 284 is committed to the sound discretion of the court, the amount of the enhancement—not to exceed treble damages—is also discretionary.

To guide the analysis, courts before and after Halo have relied on nine factors from Read Corp. v. Portec, Inc. , a 1992 Federal Circuit case. See i4i Ltd. v. Microsoft, Inc. , 598 F.3d 831, 859 (Fed. Cir. 2010) ("[T]he standard for deciding whether—and by how much—to enhance damages is set forth in Read. "); WBIP, LLC v. Kohler, Co. , 829 F.3d 1317 (Fed. Cir. 2016) (approving a 50% enhancement based on analysis of Read factors); Imperium IP Holdings (Cayman), Ltd. v. Samsung Elecs. Co. , 203 F.Supp.3d 755, 758–59 (E.D. Tex.2016). Those factors are: (1) whether the infringer deliberately copied the ideas or design of another ("copying"), (2) whether "the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good faith belief that it was invalid or that it was not infringed," (3) the infringer's behavior as a party to the litigation, (4) the defendant's size and financial condition, (5) closeness of the case, (6) duration of defendant's misconduct, (7) remedial action taken by the defendant, (8) defendant's motivation for harm, and (9) whether defendant attempted to conceal its misconduct.³ Read , 970 F.2d at 827–28. These factors provide "useful guideposts" in the court's exercise of discretion but are not binding or exhaustive. Imperium , 203 F.Supp.3d at 763–64 ; see also Finjan v. Blue Coat Sys. , Case No. 13-CV-0399-BLF, 2016 WL 3880774, at *16 (N.D. Cal. July 18, 2016). As one court stated, "[w]hile the Read factors remain helpful to the [c]ourt's execution of its discretion, an analysis focused on egregious infringement behavior is the touchstone for determining an award of enhanced damages rather than a more rigid, mechanical assessment." Imperium , 203 F.Supp.3d at 763. The parties do not dispute that the Read factors should guide the court's analysis of enhanced damages. Dkt. 431 (P's brief) at 6–7; Dkt. 437 (D's brief) at 7–8.

B. The Read factors support enhancement of damages.

1. Factors weighing in favor of enhancement

a. Read factor 1: Copying

The evidence demonstrates that Medtronic was, at the very least, reckless as to whether it copied Dr. Barry's inventive method and system, which weighs in favor of enhancement. The copying inquiry under Read focuses not on whether Medtronic copied Dr. Barry's patent but whether it copied "the ideas or design of another," regardless of when Dr. Barry's patents might have issued. Read , 970 F.2d at 827. "Slavish copying" of a commercial embodiment is not required. See Stryker Corp. v. Intermedics Orthopedics, Inc. , 96 F.3d 1409, 1414 (Fed. Cir. 1996). "Smoking gun" evidence of copying is also not required; recklessness towards copying alone merits some enhancement. See WBIP, LLC v. Kohler Co. , Civ. Action No. 11-10374-NMG, 2014 WL 585854, at *7 (D. Mass. Feb. 12, 2014), aff'd , 829 F.3d 1317 (Fed. Cir. 2016) (" WBIP (Dist. Ct. Decision)").

i. Evidence of deliberate or at least reckless copying.

Dr. Lawrence Lenke was Medtronic's chief medical surgical consultant in Medtronic's efforts to develop a spine derotation system, which came to be known as the apical derotator project. Medtronic employees working on the project described Dr. Lenke as their "key point of contact" and stated that he was "an industry partner for [Medtronic]." Tr. at 1460:10–22; Tr. at 1502:15–1506:9. Mr. Johnson testified that the two of them had monthly calls and regularly met to discuss development, in particular the status reports about the project that were entitled "Lenke Status Reports." Id. Medtronic helped prepare and file the application for the patent underlying Medtronic's VCM system, which names Dr. Lenke as an inventor.

Dr. Lenke has been a paid consultant of Medtronic since 2001 (Stipulations in Joint PTO (Dkt. 386 at 13)) and earns approximately $4 to $4.5 million per year from Medtronic in the form of royalties. Tr. at 1590. Separately, Medtronic pays Dr. Lenke an hourly amount for his work on product development under the formal contractual agreement between Medtronic and Dr. Lenke. Tr. at 1590:4–8; 1691:21–1690:4. Dr. Lenke testified that he had been trying since at least early 2001 to develop an appropriate method for spine derotation. Tr. at 1596–97 (testifying to start of work on apical derotator project in 2000 or early 2001); Tr. at 1685–86.

Dr. Lenke also helps market and promote Medtronic products for Medtronic, including the Legacy and Solera systems with the VCM kits, the accused products in this case. He traveled internationally to get feedback about the apical derotator concept and promoted Medtronic products abroad. See, e.g. , Tr. at 1475:14–1476:2. He was also paid $750 per hour for consultation through this case. See 1689:21–1690:4. He testified to having worked on, and personally designed, "dozens" of instruments or products for Medtronic, and that at any given time between 2001 and the present, he could be working on anywhere between ten and thirty projects for Medtronic. Tr. at 1689:10–14; Tr. at 1587:7–11. During trial, Medtronic made no efforts to separate itself from the work of Dr. Lenke or present him as an uninterested third party.

Based on these facts, the court finds that Dr. Lenke was Medtronic's agent regarding Medtronic's development and sale of...