The U.S. Court of Appeals for the Federal Circuit recently held that failure to obtain a non-infringement opinion from qualified independent counsel may be circumstantial evidence of an intent to induce others to commit patent infringement. Broadcom Corp. v. Qualcomm Inc., No. 2008-1199 (Fed. Cir. Sept. 24, 2008).

The Federal Circuit reversed the District Court’s construction of one claim of a patent-in-suit, held this claim invalid and reversed the jury’s infringement verdict. The Federal Circuit also held that substantial evidence supported the jury’s infringement and validity findings with respect to the other patents-in-suit and remanded for a re-determination of damages in light of its holding the one claim invalid. More significant was the court’s treatment of opinion-of-counsel letters as circumstantial evidence of inducement to infringe.

Broadcom and Qualcomm both manufacture computer chips for use in mobile devices such as cell phones. At issue in this case were three patents covering technology allowing mobile phones to process information from multiple third-generation (3G) networks simultaneously. Broadcom alleged that several processor chips produced by Qualcomm infringed the technology covered by these patents. Because Qualcomm sold its chips for use by other phone makers and network providers, Broadcom asserted both direct and inducement infringement claims.

Qualcomm incorrectly argued that the Federal Circuit’s 2007 In re Seagate1 case altered the standard for establishing the intent element of inducement and rendered opinion-of-counsel evidence irrelevant in determining intent.2 In Seagate, the Federal Circuit altered the standard for willfulness liability for direct infringement to require a reckless disregard of other’s patents, rather than requiring an affirmative duty of due care to avoid infringement. Consequently, the jury was not permitted to draw a negative inference of willfulness due to the failure to obtain a non-infringement opinion-of-counsel.

Qualcomm argued that based on the intervening Federal Circuit standard of recklessness in the In re Seagate case, required for willful direct infringement associated with treble damages liability, it was an error to instruct the jury to consider whether Qualcomm obtained the advice of a competent lawyer before producing its products in determining whether Qualcomm intended to induce infringement. In other words, the defendant argued that it should not be liable for inducement if it were not liable for willfulness, because the specific intent standard for inducement should be greater than recklessness required for willful infringement.

However, the Federal Circuit rejected these arguments in Broadcom, finding the inducement standards unchanged and finding that inducement may be found even when willfulness is absent. The failure to seek a non-infringement opinion may be circumstantial evidence of intent to induce infringement, because it is relevant to whether the accused infringer “knew or should have known” that its action would cause another to directly infringe. Finally, the failure to obtain such an opinion, Qualcomm’s notice of the patents, Broadcom’s infringement contentions, and the fact that Qualcomm worked closely with its customers to develop and support the accused products but did not give customers instruction on avoiding infringement, all supported the jury’s verdict of inducement infringement by substantial evidence.

Broadcom highlights the need for companies to obtain non-infringement opinions when their products may be included in potentially infringing devices and processes, and to work closely with customers to ensure that downstream uses of their products does not infringe any third-party patents.