In a recent and unanimous en banc decision, the U.S. Court of Appeals for the Federal Circuit reversed its long-standing rule requiring that an accused patent infringer exercise an affirmative duty of due care to determine whether or not he is infringing to avoid a finding of willful infringement. The court instead held that proof of willful infringement “requires at least a showing of objective recklessness.” In re Seagate Tech., LLC, Misc. No. 830, 2007 WL 2358677, at *5 (Fed. Cir. Aug. 20, 2007) (en banc). Under this “recklessness” standard, defendants have no affirmative obligation to obtain advice from opinion counsel to avoid claims of willful infringement.
The court further held that asserting the advice of opinion counsel does not generally constitute waiver of the attorney-client privilege or work-product protection for communications with trial counsel. Id. at *9-10.
Background: Plaintiffs in the case sued Seagate for infringement of three patents and alleged willful infringement. Id. at *1. Seagate notified the plaintiffs that it would rely on the advice of opinion counsel to defend against claims of willful infringement. Seagate disclosed the advice and all work product of opinion counsel and made him available for deposition. The trial court then concluded that Seagate waived the attorney-client privilege for all communications with any counsel, including trial counsel, concerning the subject matter of the opinion.
Seagate petitioned the Federal Circuit for a writ of mandamus. The Federal Circuit stayed the discovery orders and sua sponte ordered en banc review.
Willfulness: Writing for the unanimous court, Judge Haldane Mayer noted that the statute governing enhanced damages, 35 U.S.C. § 284, does not contain any standard for awarding them. The courts historically required a showing of willful infringement before damages could be enhanced, and set out a standard for evaluating willful infringement in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983). That case imposed an affirmative duty on an accused infringer that he exercise due care to determine whether he infringed; such a duty included, inter alia, the duty to obtain competent legal advice from independent opinion counsel before initiating potentially infringing activity. In re Seagate Tech., LLC, 2007 WL 2358677 at *3 (quoting Underwater Devices, 717 F.2d at 1389-90). Although an infringer’s reliance on favorable advice of counsel, or his failure to proffer any favorable advice, was not dispositive of the willfulness inquiry, it was crucial to the analysis. Id.
To establish the proper standard for a finding that infringement was “willful,” the court examined the meaning of that term outside the patent context. The court noted that the term “willful” enjoyed a well-established meaning in the civil context. For example, other circuits employ a recklessness standard for enhancing statutory damages for copyright infringement. The Supreme Court recently addressed the meaning of willfulness as a condition for punitive damages, concluding that the common law and “standard civil usage” of “willful” include reckless behavior. Id. at *5 (citing Safeco Ins. Co. of Am. v. Burr, 551 U.S. __, Nos. 06-84, -100, slip op. at 7 (June 4, 2007)).
The Federal Circuit noted that the duty of care set forth in Underwater Devices was “more akin to negligence” than to recklessness. Id. The en banc court therefore overruled the Underwater Devices standard and held that “proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness.” Id. The court emphasized that under the objective “recklessness” standard, “there is no affirmative obligation to obtain opinion of counsel.” Id.
Under this standard for willfulness, “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.” Id. (citing Safeco, slip op. at 19). “The state of mind of the accused infringer is not relevant to this objective inquiry.” Id. The patentee must then establish that this objectively-defined risk was known, or should have been known, to the accused infringer. Id.
Waiver: The Federal Circuit further held that waiver of the attorney-client privilege and work product protection that results from reliance on advice of opinion counsel does not extend to communications with trial counsel. The court noted that “the significantly different functions of trial counsel and opinion counsel advise against extending waiver to trial counsel.” Id. at *7. While opinion counsel “serves to provide an objective assessment for making informed business decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision-maker.” Id.
Therefore, the Federal Circuit held that “asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute waiver of the attorney-client privilege for communicating with trial counsel.” Id. at *9. Further, “the same rationale generally limiting 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.” Id. at *10.
Accordingly, the court granted Seagate’s petition for a writ of mandamus and ordered the district court to reconsider its discovery orders. Id. at *11.