## Facts

- Ethicon, Inc. obtained patent rights covering a process for making disposable plastic gloves adhered to paper and sold similar gloves through a division.
- Handgards, Inc. (formed from a merger of glove manufacturers) competed in selling heat-sealed plastic gloves to manufacturers of home hair-coloring kits.
- Ethicon filed and prosecuted multiple patent infringement suits against Handgards’ predecessors and related persons/entities.
- Those infringement actions ultimately resulted in a judgment that the asserted patent was invalid.
- Handgards then sued Ethicon under § 2 of the Sherman Act, alleging Ethicon used infringement litigation in bad faith as part of a scheme to monopolize or attempt to monopolize the relevant glove market.
- A jury returned a verdict for Handgards and awarded antitrust damages (trebled by the court).
- Ethicon appealed, challenging (among other matters) jury instructions on the proof required to show bad faith and on the causation standard for damages.

## Issues

1. Whether an antitrust plaintiff must prove “bad faith” patent enforcement (as an element of a § 2 claim based on litigation conduct) by clear and convincing evidence rather than by a preponderance of the evidence.
2. Whether the jury instructions on antitrust damages adequately required that the damages awarded be directly attributable to the unlawful conduct, rather than to lawful competition or other market factors.

## Decision

- The Ninth Circuit reversed the judgment for Handgards and remanded for a new trial.
- The court held the district court erred by instructing that bad faith could be found on a preponderance of the evidence; bad faith in patent enforcement must be proven by clear and convincing evidence.
- The court found the damages instructions deficient because they did not sufficiently require that damages “flow” from, and be attributable to, the proven antitrust violation rather than other causes.
- Because the instructional errors could have affected liability and the amount of recovery, a new trial was required.

## Legal Principles

- Patent infringement litigation is presumptively pursued in good faith; antitrust liability based on enforcement litigation requires overcoming that presumption.
- When § 2 liability is predicated on allegedly ill-founded patent suits brought to exclude competitors, bad faith must be established by clear and convincing evidence.
- A patentee’s loss on the merits, including a later invalidity determination, does not by itself establish bad faith or antitrust liability.
- Antitrust damages must be causally linked to the unlawful conduct; jury instructions must require damages to be attributable to the violation and not to lawful competition, market conditions, or other independent factors.
- Some uncertainty in measuring antitrust damages is tolerated only after the fact of injury and causal connection to the violation are properly established.

## Conclusion

The Ninth Circuit set a heightened proof requirement for antitrust claims premised on bad-faith patent litigation and required stricter causation guidance for damages, reversing and remanding for a new trial due to erroneous jury instructions on both points.


Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir. 1979)