I. Introduction

Patent infringement lawsuits are often a major concern for defendants, primarily due to the potential for damage awards that are often some of the highest in private litigation, often ranging anywhere from tens of millions to hundreds of millions of dollars. As if this were not enough cause for concern, a defendant is also faced with the threat that a court may increase a damage award up to three times (and award plaintiff’s attorneys’ fees) upon a finding that the asserted patent was willfully infringed.1 Due to the potential for recovery of treble damages, it is highly likely that a defendant facing an allegation of patent infringement will also be faced with the allegation that the infringement was willful.2 Thus, it is particularly important to be aware of the factors a court will consider in addressing a claim of willful infringement. One of these factors is a defendant’s “actual notice” of an asserted patent.

II. Background -- The Pre-Seagate “Due Care” Standard For Willful Infringement

Under the “due care” standard for willful infringement laid out by the United States Court of Appeals for the Federal Circuit in Underwater Devices, Inc. v. Morrison-Knudson Co., Inc., an accused infringer would be found to have willfully infringed an asserted patent when: (1) the accused infringer had actual notice of the asserted patent, and (2) the accused infringer did not meet his “affirmative duty to exercise due care to determine whether or not he is infringing.”3 Because the “affirmative duty of due care” was typically satisfied by obtaining a competent noninfringement opinion from outside counsel prior to commencing the acts accused of infringement,4 actual notice of a patent typically played a clear role in the willfulness analysis under the “due care” standard -- it defined the point at which a party was effectively obligated to obtain a competent noninfringement opinion.

A failure to obtain such an opinion put the put the party at risk of a finding of willfulness in the event that the party was later accused of infringing the patent. Thus, under the “due care” standard for willful infringement, it was important for a party to know when actual notice of a patent had been received such that a competent noninfringement opinion could be obtained timely thereafter.

The Federal Circuit did not explicitly define actual notice in the Underwater Devices case; however, subsequent cases provided some clarification. For example, a notification of potentially infringing activity, such as a cease and desist letter, was held to constitute actual notice.5 However, a party could not simply sit back and wait to receive a cease and desist letter before seeking out a competent noninfringement opinion, as actual notice was also found in situations in which no explicit notification of potentially infringing activity was received (such as a situation in which a party’s attorney was merely established to have seen a reference to a patent in the USPTO Official Gazette).6

Although it was not exactly clear what constituted actual notice under the “due care” standard for willful infringement (the bar appears to have been fairly low, particularly in light of the decisions holding something less than notification of potential infringement could constitute actual notice), what was more clear was how a party should respond to actual notice to avoid a possible future finding of willful infringement -- by obtaining a competent noninfringement opinion.

III. Seagate And The “Objective Recklessness” Standard For Willful Infringement

In the 2007 In re Seagate en banc decision, the Federal Circuit overruled the above-discussed “due care” standard for willful infringement, replacing it with a recklessness standard.7 To prove willfulness under this new standard, a patentee must first show by clear and convincing evidence that an accused infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.8 A “totality of the circumstances” analysis applies,9 and the accused infringer’s “state of mind” is not relevant to the inquiry.10

If a patentee shows “objective recklessness” on the part of the accused infringer, the patentee must then show that the objectively-defined risk, determined by the record developed in the infringement proceeding, was either known or should have been known to the accused infringer.11 With regard to this second prong, the Federal Circuit did not define the factors governing whether an accused infringer “should have” known of the risk of infringement, but explained that the “standards of commerce would be among the factors a court might consider.”12 The concurrence by Judge Newman suggests that such standards are grounded in principles of fairness and the reasonableness of the accused infringer’s actions: “[t]he standards of behavior by which a possible infringer evaluates adverse patents should be the standards of fair commerce, including reasonableness of actions taken in particular circumstances.”13

In Seagate, the Federal Circuit did not discuss the role, if any, of actual notice under the new recklessness standard. In applying Seagate, some courts have treated actual notice as a prerequisite to an assertion of willful infringement.14 Some courts have even required notice of an infringement claim (not just notice of another’s patent rights) as a prerequisite to willful infringement.15 Even if actual notice is considered a prerequisite to a finding of willful infringement, however, Seagate does not appear to have affected the fairly low bar for what constitutes actual notice.16

Other courts view actual notice of another’s patent rights as one of a number of factors to be considered in determining, based on the totality of the circumstances, whether the accused infringer acted in an objectively reckless manner.17 Additional factors addressed by courts in assessing willfulness under the Seagate recklessness standard include the following:

  • the strength of invalidity and noninfringement arguments — developed before18 or during19 litigation
  • the closeness of key claim construction issues20
  • the need for a jury to resolve close factual questions21
  • evidence of copying by the accused infringer22
  • whether there was a degree of similarity between the patented and accused devices23
  • whether the infringer took efforts to avoid infringement24
  • whether the accused infringer was indemnified against infringement costs25
  • whether the accused infringer was aware of the patented device26
  • grant or denial of preliminary injunction27
  • knowledge of patentee’s enforcement efforts28
  • failed license negotiations29
  • attempts to design around the patented invention30
  • pre-sale patent analysis31
  • whether the asserted patent issued before the accused product was developed or sold32
  • widespread publicity of the patent or related licensing agreements33
  • knowledge that a product infringed34
  • attempts to copy or use the patent as a “roadmap” for the accused product35

In Seagate, the Federal Circuit did make one thing clear with regard to actual notice under the new recklessness standard for willful infringement -- an accused infringer is under no absolute affirmative obligation to obtain an opinion of counsel.36 However, obtaining an opinion of counsel before litigation may strengthen arguments against willfulness,37 and the failure to do so may be a factor that weighs in favor of a finding of objective recklessness.38 Despite the fact that the failure to obtain an opinion may weigh in favor of a finding of objective recklessness, courts have held that “it is improper to allow an adverse inference or evidentiary presumption that such an opinion would have been unfavorable.”39

Thus, under the “objective recklessness” standard for willful infringement, what a party should do in response to actual notice is less clear than under the previous “due care” standard. Because Seagate eliminated the affirmative duty to investigate possible infringement, it is tempting to conclude that it is no longer necessary to obtain a competent opinion of counsel in response to receipt of actual notice of another’s patent rights (particularly in light of the cost associated with such opinions). However, because the failure to obtain a competent opinion of counsel likely will in practice usually weigh to a not-insignificant degree in favor of a finding of objective recklessness, a decision not to obtain a competent opinion of counsel remains a risky strategy.

IV. Conclusion

Although the shift from the “due care” standard for willful infringement to the “objective recklessness” standard of Seagate eliminated the duty to obtain a competent noninfringement opinion in response to actual notice of another’s patent rights, obtaining such an opinion likely remains a good course of action to consider in most cases because: (1) obtaining an opinion before litigation may strengthen arguments against willfulness, and (2) the failure to obtain an opinion may be a factor that weighs in favor of a finding of objective recklessness.