Court upholds $371 million CR Bard patent award

Court upholds $371 million CR Bard patent award

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(Global Markets) - A divided federal appeals court upheld a $371.2 million award in favor of C.R. Bard Inc in a long-running patent infringement dispute with W.L. Gore & Associates over vascular grafts.

The U.S. Federal Circuit Court of Appeals in Washington, D.C. said there was "substantial" evidence to support a 2007 Arizona jury verdict that Gore, the maker of Gore-Tex, willfully infringed a Bard patent through its sale of the grafts.

Shares of Bard rose as much as 3.7 percent after the decision.

Prosthetic vascular grafts are used to bypass or replace blood vessels to ensure sufficient blood flow to various parts of the body.

Bard's patent had been issued in 2002, 28 years after an application was first filed, and sued Gore for infringement the following year.

The Arizona jury had awarded Bard $185.6 million for lost profit and unpaid royalties, an award that trial judge Mary Murguia later doubled.

"This should be the final curtain of the saga," Judge Arthur Gajarsa wrote for a 2-1 Federal Circuit panel. "We cannot revisit the facts anew, nor meander through the record and select facts like our favorite jelly beans, nor characterize the facts as the Bard would in a Shakespearean tragedy."

The $371.2 million award exceeds C.R. Bard's total reported net income of $328 million for all of 2011. It is unclear whether Gore will appeal the decision to the entire Federal Circuit or to the U.S. Supreme Court.

Neither company responded to requests for comment. Each said it generates close to $3 billion of annual revenue. Bard is based in Murray Hill, New Jersey, and privately held Gore in Newark, Delaware.

Analysts estimated that the litigation could ultimately result in more than $800 million of payments to Bard, including accumulated royalties.

Friday's decision is "a positive milestone," Leerink Swann analyst Rick Wise wrote. "Although Gore still has several possible levels of appeals ... the court's ruling today will likely be very much what the final ruling will look like."

Wise has a "market perform" rating for Bard.

Writing for the Federal Circuit majority, Gajarsa said the Arizona jury had more than enough evidence to conclude that Gore "knew or should have known of the objectively high likelihood" that its grafts infringed Bard's patent.

He also said Murguia acted within her discretion in doubling the damage award, citing the jury finding of willfulness and the "extensive litigation" between the parties, in which Gore had "repeatedly lost yet continued to infringe" the patent.

Judge Pauline Newman dissented.

Murguia last year joined the 9th U.S. Circuit Court of Appeals. She was appointed by President Barack Obama.

In afternoon trading, Bard shares were up $2.67, or 2.9 percent, at $94.98, after earlier rising to $95.68.

The case is W.L. Gore & Associates Inc v. C.R. Bard Inc et al, U.S. Federal Circuit Court of Appeals, No. 2010-1510.

(Reporting By Jonathan Stempel in New York; Additional reporting by Debra Sherman in Chicago; Editing by Lisa Von Ahn and John Wallace)

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U.S. court finds against Rambus, shares plunge

U.S. court finds against Rambus, shares plunge

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WASHINGTON (Global Markets) - A U.S. appeals court found memory chip designer Rambus Inc was wrong to shred hundreds of boxes of documents relevant in two patent infringement lawsuits it filed, sending its shares down sharply.

The U.S. Court of Appeals for the Federal Circuit, in one of two parallel rulings, said on Friday it was clear Rambus had destroyed documents but it was not clear the action was so serious that a lower court should have tossed out its suit.

It sent the dismissal back to the U.S. District Court in Delaware, adding that the lower court might still decide the shredding was serious enough for Rambus to lose the case it brought against Micron Technology, the top U.S. maker of memory chips for computers.

In the other ruling, the appeals court found Rambus destroyed documents related to a patent suit it successfully brought against Korea's Hynix Semiconductor. It asked a California court in that case to review its ruling in view of the document destruction.

The decisions slammed Rambus' shares, which ended Friday at $15.83, down 17.9 percent on Nasdaq.

Rambus executives said on a conference call they had not decided if they would appeal Friday's decisions.

According the court record, Rambus held at least two "shred days" as part of a strategy to get ready for litigation over its patents.

Despite a stated goal of getting rid of all documents once they were old enough, employees were instructed to look for helpful documents to keep, documents that would help prove Rambus had intellectual property, the appeals court said.

According to a document German chipmaker Infineon filed in a separate case, Rambus employees were told there would be "pizza, beer, champagne, etc." at a 1998 shred day.

SHRED DAYS

"It is undisputed that Rambus destroyed between 9,000 and 18,000 pounds of documents in 300 boxes," the appeals court said in its majority opinion in the Micron case.

Judge Arthur Gajarsa dissented in part, saying the lower court's dismissal of Rambus' suit because of the shredding should have been allowed to stand.

Rambus designs memory chips and licenses technology used in them to other chipmakers.

Investors had been watching for the appeals court's rulings. If the court had ruled for Rambus it would have helped it negotiate additional licensing arrangements.

Much of Rambus' income has come from patent litigation against companies it accuses of not paying for its technology.

"We are very disappointed with the decisions in these cases," said Thomas Lavelle, senior vice president and general counsel at Rambus. "We are hopeful when the district courts reconsider these decisions, they will find, as we believe, there was no bad faith and no prejudice."

One analyst said the share price drop was over the Hynix lawsuit. "I think the market is reacting to the technical finding of (document) spoliation and the near-term loss of the roughly $400 million that was waiting for it in the Hynix case," said Michael Cohen, principal of MDC Financial Research, LLC, who owns Rambus stock.

FRUSTRATING OPPONENTS

The appeals court said "it was not clear error" for the Delaware court to conclude that Rambus' document policy was aimed at boosting its litigation strategy by frustrating the fact-finding efforts of opponents.

Micron had won in the Delaware court when a judge invalidated 12 Rambus patents, citing document destruction by Rambus as the reason.

But Rambus won against Hynix in a separate trial, when a federal judge in California found that nine Rambus patents were valid and had been infringed.

Trading in Rambus was halted six times on Friday as the stock hit circuit breakers after rapidly rising and then falling through the 10 percent threshold in a matter of minutes.

At nearly 15 million shares traded, volume was 18 times the daily average.

Messages left at Micron and Hynix offices seeking comment were not returned.

Rambus has filed lawsuits against a long list of technology companies in the past decade. Samsung Electronics settled a patent suit with Rambus in January 2010 in a deal that could cost it $900 million.

Friday's cases were: Hynix Semiconductor v. Rambus, 09-1299 and Micron Technology v. Rambus 09-1263 in the U.S. Court of Appeals for the Federal Circuit.

(Reporting by Diane Bartz; Additional reporting by Noel Randewich in San Francisco; Editing by Tim Dobbyn)

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