Federal Circuit Rewrites Law of Willful Infringement in Seagate Decision
August 28, 2007On August 20, 2007, the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) handed down an en banc (i.e., full court) decision in In re Seagate Technology, LLC. The decision, which completely rewrites the law of willful infringement, will profoundly affect patent litigation and patent opinion practice. It will also substantially alleviate the burden previously imposed on those given notice of potential patent infringement.
Background
United States patent law provides that a company that willfully infringes a patent can be found liable for treble damages and attorneys fees. Before Seagate, Federal Circuit precedent obliged a company given notice that it might be infringing a patent to promptly obtain an opinion of counsel. Unless the opinion concluded either that the company did not infringe or that the patent was invalid, the company risked a finding of willful infringement.
The requirement to obtain such an opinion as a shield against a willfulness finding imposed substantial costs on such companies. The standard underlying that requirement also markedly increased the cost and unpredictability of patent litigation.
The Seagate Decision
Seagate changes all that. Seagate overrules a 1983 Federal Circuit case that had established an “affirmative duty to exercise due care” to determine whether one is infringing, and does away with the affirmative obligation to obtain an opinion of counsel. In its place, Seagate sets up a new standard for establishing willful infringement under which a patentee must show that the infringer acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent.”
Under this new objective standard, the availability of a substantial defense on the merits should, in most cases, prevent a finding of willfulness. The state of mind of the accused infringer is not relevant to that objective inquiry.
Seagate also held that the patentee has the additional burden of showing that this objectively-defined risk was either known or so obvious that it should have been known to the accused infringer.
Finally, in another part of the opinion, Seagate ruled that a waiver of either attorney-client privilege or the work product exemption with respect to opinion counsel did not extend to trial counsel.
Seagate’s Impact on Opinion Practice
Companies given notice that they might potentially be infringing a patent should still consult counsel, as with any legal situation involving risk. Although Seagate reduces the consequences of failing to obtain a detailed opinion, namely, the threat of treble damages and attorneys fees, it does not reduce the risk of being found liable for infringement. Companies must still guard against the cost, distraction, and possible economic and business downside if they lose.
Companies thus may still wish to have counsel prepare a written analysis, although in many instances that analysis need not be of the same level of formality and detail as had become the norm. Even a less formal opinion would, at a minimum, confirm the availability of a substantial defense and rebut the contention that the company had knowledge of an “objectively high likelihood” of an unfavorable result.
Seagate’s Impact on Litigation
Under the new standard, patentees will clearly have difficulty establishing willful infringement. Seagate, however, does not do away with the doctrine. A company still risks treble damages and attorneys fees in those cases where it does not have a substantial defense. But because most litigated cases involve one or more substantial defenses, patentees will seek and obtain treble damages and attorneys fees much less frequently.
The separate ruling protecting the opinions and work product of trial counsel eliminates a major concern of trial lawyers. The expected decrease in the role of opinions as evidence under the new objective standard, however, will reduce the impact of this part of the court’s opinion.
For Further Information
As always, please contact your Wolf Greenfield attorney if you are interested in exploring how this decision affects your IP goals or strategies.
View as PDF