Last year’s Seagate decision by the Federal Circuit left some wondering whether there remained any use for opinion letters addressing infringement, validity or enforceability of a patent. Several cases in 2008 suggest that opinion letters do, in fact, remain strategically important. Patent infringement is a strict liability offense. Once it is determined that infringement has occurred, the only consideration is whether infringement was willful and thus warrants an enhanced damages award. For decades, accused infringers in patent suits have relied on opinions of counsel to defend against willful infringement claims that may lead to enhanced damages. An opinion of counsel is a letter written by a patent attorney that concludes that a patent is invalid, unenforceable, and/or is not infringed by a potential or accused infringer’s products or services. Reliance on opinions has provided accused infringers with a defense against willful infringement allegations, while allowing them to continue developing, manufacturing, using, or selling accused technology. Indeed, potential infringers, upon receiving notice of another’s patent rights, previously had an affirmative duty to seek and obtain competent legal advice from counsel before continuing or initiating any possible infringing activity. This affirmative duty was imposed on them by their general duty to exercise due care to determine whether or not they are infringing a patent once on notice of the patent.
The standard changed last year when the Court of Appeals for the Federal Circuit overruled the affirmative-duty-ofcare- standard it originally had set out 25 years prior in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983). In its landmark decision in In re Seagate Technology LLC, 497 F.3d 1360 (Fed.Cir. 2007), the Federal Circuit abandoned the affirmative-duty-ofcare- standard and the affirmative obligation to obtain an opinion of counsel as a requirement for a defense of willful infringement, and set out a new two-part standard for proof of willful infringement permitting enhanced damages. First, the new standard requires a showing, by clear and convincing evidence, of at least “objective recklessness” on behalf of an accused infringer, i.e., that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Second, once objective recklessness is established, the patentee must prove that the risk was either known or so obvious that it should have been known to the accused infringer.
The court explained that the new standard is more in line with definitions of willfulness set out in other areas of law. The term “willful” is not unique to patent law. As used in other civil contexts, the term generally describes reckless behavior. According to the court, the previous Underwater Devices standard was “akin to negligence” and hence, was inconsistent with application of willfulness theories in other civil contexts. The court also noted that the new standard is in line with Supreme Court precedent equating willfulness with recklessness. The court provided no specific guidance on how to apply the new standard and specifically reserved further application of it for future cases.
The new standard raised several questions, one of which is whether opinion letters, which are no longer required, can nevertheless be useful in defending against willfulness allegations. Indeed, after the new standard was articulated by the Federal Circuit, some commentators predicted that opinion letters would not be useful anymore in defending against willfulness allegations and enhanced damages. However, some recent decisions suggest otherwise.
The Federal Circuit itself suggested, in Finisar Corp. v. DirectTV Group, Inc., 523 F.3d 1323 (Fed. Cir. 2008), that obtaining opinion letters, although not required, remains a very useful tool against willfulness allegations. In Finisar, the Federal Circuit held that a competent opinion letter of non-infringement or invalidity shows that the accused infringer did not engage in objectively reckless behavior. The accused infringer in Finisar, DirectTV Group, obtained an opinion letter of non-infringement with respect to the accused patent and proceeded to use its accused television broadcast satellite systems while relying on the letter. The Federal Circuit concluded that DirectTV’s reliance on the competent opinion letter provided “a sufficient basis for [the accused infringer] to proceed without engaging in objectively reckless behavior with respect to the [accused] patent.” Thus, although the court abandoned the affirmative duty to obtain a legal opinion to avoid a finding of willfulness, a competent opinion letter may still negate a claim of an objectively reckless behavior and provide a defense to willful infringement.
While opinion letters may still be useful in defending against willfulness, they may not be enough on their own. In Cohesive Technologies, Inc. v. Waters Corp., 526 F. Supp. 2d 84 (D. Mass. 2007), a Massachusetts court based its finding of no willfulness on a fact that the defendant obtained an opinion letter from in-house counsel. But, in addition to considering the opinion letter obtained by the accused infringer, the court found that other facts in the dispute between the parties supported a lack of objective recklessness. The court found that Waters Corporation, the defendant, engaged in sufficient due diligence in determining whether its accused products infringed the patent at issue in the case prior to manufacturing the accused product. Once Waters Corporation was on notice of the patent, it engaged scientists to evaluate whether the accused product infringed the claims of the asserted patent. The scientists conducted several experiments and independently concluded that the asserted patent was not infringed. The scientists also met with the in-house counsel to discuss their findings and the opinion letter reflected their conclusions. The results of the experiments and conclusions of the scientists were presented at trial and the defendant’s positions in the case were consistent with conclusions in the opinion letter. Thus, in addition to the competence of the opinion letter, due diligence in determining whether the patent is infringed prior to commencement of litigation and credibility of defense positions during litigation also may be important in defending against willfulness.
Other recent decisions confirm the importance of arguments and positions advocated by accused infringers during litigation with respect to willful infringement. In ResQNet.com, Inc. v. Lansa, Inc., 533 F. Supp. 2d 397 (S.D.N.Y. 2008), although the accused infringer was unsuccessful and lost at trial as to both infringement and invalidity issues with respect to an accused patent, the court refused to find willfulness and enhance damages because the defendant’s arguments at trial were “substantial, reasonable and far from the sort of easily-dismissed claims that an objectively reckless infringer would be forced to rely upon.” In one of very few post-Seagate decisions, Black & Decker, Inc. v. Robert Bosch Tool Corp., 260 Fed. Appx. 284 (Fed. Cir. 2008), the Federal Circuit stated that legitimate and credible defenses to infringement and invalidity arguments presented during litigation will demonstrate lack of objective recklessness on behalf of the accused infringer and negate a finding of willfulness.
These recent decisions suggest that under the new standard articulated in In re Seagate Technology, as with the previous Underwater Devices standard, the totality of circumstances surrounding infringing activity still are considered in determining whether infringement is willful and warrants enhanced damages. The decisions also suggest that reliance on a favorable opinion of counsel, although not critical to the determination of whether infringement was willful as it was under the old test, is still a factor that courts may consider in determining whether the accused infringer’s behavior was objectively reasonable and thus not reckless. Thus, the In re Seagate Technology decision did not render opinion letters obsolete. Applications of the new standard, although not vast, still show that competent opinion letters relied upon by accused infringers may establish a lack of willfulness.