In re Seagate Technology, LLC, Misc. Docket No. 830: Unanimous En Banc Decision Also Clarifies Scope of Waiver of Attorney-Client Privilege When Accused Infringer Relies on Opinion of Counsel
On August 20, 2007, in a unanimous en banc opinion, the Court of Appeals for the Federal Circuit established a new standard for willful patent infringement (which can form the basis for an award of multiple damages). In doing so, the Court overruled the "affirmative duty of due care" standard it had established 24 years ago in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983). The Court also held that when an accused infringer relies on an opinion of counsel in defense of a charge of willfulness, the consequent waiver of the attorney-client privilege and work product protection as to patent opinion counsel does not, as a general proposition, extend to the accused infringer's trial counsel.
Convolve, Inc. and the Massachusetts Institute of Technology sued Compaq Computer Corp. and Seagate Technology, LLC on July 13, 2000, alleging willful infringement of three patents directed to computer disk drive technology. Seagate relied on non-infringement opinions from its outside counsel to defend against the claims of willful infringement. As a consequence of this reliance, the district court held that Seagate had waived the attorney-client privilege and work product protection as to both its opinion counsel and its trial counsel regarding the subjects addressed in the opinions. Thus, the district court ordered production of all such privileged and work product materials.
Seagate petitioned the Federal Circuit for a writ of mandamus to vacate the district court's order. The Federal Circuit took the opportunity to revisit the standard for establishing willful infringement. In overruling the "affirmative duty of due care" standard set out in Underwater Devices, the Federal Circuit held that proof of willful infringement requires at least a showing of "objective recklessness." In concert with the legal concept of willfulness generally applied in civil law, the Federal Circuit guided that "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." Furthermore, the Federal Circuit held that "the patentee must also demonstrate that the objectively-defined risk was either known or so obvious that it should have been known to the accused infringer."
Unlike the affirmative duty of care required under Underwater Devices, in this objective inquiry, the state of mind of the accused infringer is not relevant. The Federal Circuit also emphasized that because it had abandoned the affirmative duty of due care, there is no affirmative obligation on the part of the accused infringer to obtain opinion of counsel.
The Court noted that "when a complaint is filed, a patentee must have a good faith basis for alleging willful infringement. So a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer's pre-filing conduct." The Court pointed out that if an accused infringer's post-filing conduct is reckless, the patentee can seek a preliminary injunction. If the patentee fails to do so, the patentee "should not be allowed to accrue enhanced damages based solely on the infringer's post-filing conduct."
In a concurring opinion, Judge Newman, the author of the original Underwater Devices opinion, agreed with the Court's decision to overrule Underwater Devices. Newman explained that the decision was justified "but only because that case has been misapplied, in the extremis of high-stakes litigation, to mean that 'due care' requires more than the reasonable care that a responsible enterprise gives to the property of others."
In determining the proper scope of waiver of attorney-client privilege when an accused infringer raises an opinion of counsel defense to the charge of willful infringement, the Federal Circuit found that "the significantly different functions of trial counsel and opinion counsel advise against extending waiver to trial counsel." Furthermore, the Court found that the long-recognized compelling need to protect trial counsel's thoughts, and the realization that in ordinary circumstances willfulness will only depend on an infringer's prelitigation conduct, both weighed against extending waiver to trial counsel.
Similarly, the Court found that "the same rationale generally limiting the waiver of the attorney-client privilege with trial counsel applies with even greater force to so limiting work product waiver because of the nature of the work product doctrine." The doctrine serves to strengthen the adversarial process and further the search for the truth. Applying these considerations, the Federal Circuit held that the district court's extension of the waiver of attorney-client privilege and work product protection to Seagate's trial counsel was improper.
The district court also had ruled that Seagate waived the attorney-client privilege and work product protection with respect to its communications with its in-house counsel regarding the opinions of counsel. That ruling, however, was not on appeal before the Federal Circuit.
For the full Seagate opinion, see: http://www.fedcir.gov/opinions/M830.pdf