End Nears in 40-Year Patent Battle Over Gore-Tex Blood VesselsSusan Decker
In 1973, a plant manager with W.L. Gore & Associates Inc. was testing whether the chemical compound used in Gore-Tex weatherproof fabric could be modified to also make artificial blood vessels.
The manager shipped the material to several researchers, including a Phoenix cardiologist, setting up one of the longest patent disputes in U.S. history. An appeals court ruling Jan. 13 may finally end the case.
The battle over who invented the artificial blood vessel -- and who would get royalties from an innovation that revolutionized the medical field and is still widely used today -- has taken 40 years and involved more than $1 billion in royalties paid to medical device maker C.R. Bard Inc. so far.
“You will not likely ever see another case play out like this ever again,” said John O’Quinn of Kirkland & Ellis in Washington, who’s been on the team of Bard lawyers for the past five years.
One reason the decade’s long saga is unlikely to happen again is that laws were changed to eliminate most of the “who was first” debates and to change the term of patents so there’s less incentive to delay applications.
While patent disputes have been known to last a decade or more -- it took laser inventor Gordon Gould 30 years to get his patents while Hughes Aircraft Co.’s fight with the government over geosynchronous satellite patent royalties lasted a quarter century -- the Gore and Bard case is notable for both its length and animosity.
The patent fight dates to 1974 when Gore filed the first patent application on behalf of its Flagstaff, Arizona plant manager, Peter Cooper, who came up with the idea of the artificial vessels.
Six months later, David Goldfarb, the cardiologist credited for being first to develop a functioning artificial blood vessel, filed his own application.
It took 28 years for the U.S. Patent and Trademark Office and appeals courts to sort through claims and counterclaims and award the patent to Goldfarb. While Cooper may have gotten the concept, they found Goldfarb was first to alter Gore-Tex so it could be used in the human body.
Goldfarb assigned his rights in 1980 to Bard, which will collect about $35 million per quarter in royalties on Gore sales until the patent expires in August 2019.
After almost three decades of arguing that it was entitled to the patent, Gore sought to invalidate it. Even after it lost at the patent office, before a jury, and then at a U.S. appeals court, Gore was still trying to get the case thrown out.
Meanwhile, the companies competed in the market and there Gore won easily. In a 2009 court order, the judge put Gore’s market share at 62 percent and Bard’s at 28 percent.
Before the invention of the vascular graft, if doctors wanted to replace a blood vessel in a patient who was in danger of losing a leg or had an aneurysm, they had to take a vessel from another part of the patient’s body. There was a high risk the limb would have to be amputated anyway.
The synthetic chemical used in the artificial vessels, called polytetrafluorethylene or PTFE, was originally invented in the 1930s by DuPont Co. and is the basis of Teflon non-stick coating. When heated and stretched, the material forms minuscule holes big enough to let out human sweat yet small enough that rainwater can’t pass in.
Gore used that expanded version to come up with Gore-Tex, used in breathable, but weatherproof jackets and shoes, in the 1960s. Since it’s inert, meaning it won’t cause a chemical reaction, and is highly flexible, Gore began considering how it could be used in the human body.
The invention “changed the way people are treated and saved lives,” said Max Grant of Latham & Watkins in Washington, one of Bard’s trial lawyers. “The invention was Goldfarb’s and nobody else’s and Gore’s efforts to wrest control of it over that 40 years was at best a bad business decision.”
Last Tuesday, the U.S. Court of Appeals for the Federal Circuit in Washington may have closed the case, saying Gore had willfully infringed the patent and owed Bard another $208 million including costs, which Gore said it’s been holding in escrow in anticipation of the ruling.
Gore already has paid more than $1 billion, including $19 million of Bard’s legal fees and some interest costs. It also has to pay royalties of 12.5 percent to 20 percent of its sales of vascular grafts, depending on the product, which were rates set by the trial judge. Judge Mary Murguia, now an appeals court judge, doubled the jury’s royalty because it would be too harmful to patients to take Gore’s products off the market
Nothing, Murguia wrote in 2009, “can rewrite the history of Gore’s objectively reckless and willful conduct towards Dr. Goldfarb over these past thirty years.”
Gore said it was disappointed with the latest court ruling on willfulness and is assessing its options.
“Our company remains strong,” said Jenny Maher, a spokeswoman for Newark, Delaware-based Gore. “We have been prepared for this possibility, and our business activities will continue without disruption. We remain committed to providing products to the market that improve health and save lives.”
Scott Lowry, a spokesman for Bard, said the company was pleased with Tuesday’s ruling. He declined to comment further, saying it’s still “ongoing litigation.”
Bard has used part of the money collected from Gore on research and expanding into emerging markets and about half to buy back shares, said Lawrence Keusch, an analyst with Raymond James & Associates, who has an outperform rating on Bard.
“The punchline here for any investor is it’s less about the one-time payments and more about the way these funds have allowed the company to execute on a strategy plan,” he said.
The artificial blood vessels are only a small portion of Bard’s vascular division, which brought in $830 million in 2013 sales, about 27 percent of the company’s revenue.
The amount of legal fees over the past four decades is unknown -- the $19 million awarded by the trial judge covered only a portion of Bard’s legal fees in the civil suit. There also were Gore’s lawyers, the costs for the 28-year patent office battle, and ancillary suits such as one in which Goldfarb accused Cooper of stealing laboratory slides, which were returned.
The case may be among the last of its kind. In 2011, the law was changed so patents go to the first to file an application, instead of first to invent something. Length of patent terms also changed and now are valid for 20 years from the date of application.
The case has changed how companies handle agreements with researchers and prepared to patent ideas, said Stephen Korniczky, a patent lawyer with Sheppard Mullin
“They are much more careful and thorough when keeping lab notes and records of the developments they were working on,” he said. “It came down to who was better able to document what they were doing at the time.”
While Gore can ask the appeals court to reconsider its ruling -- one of three judges on the panel sided with Gore -- or appeal to the U.S. Supreme Court, the decision Tuesday is likely to be the end of the dispute.
“I don’t know what rocks are under the surface -- it looks like the end, but I could be wrong,” said Michael Jakes, a patent lawyer with the firm Finnegan in Washington who’s followed the case. “Never say never.”