Do You Need An Infringement Opinion?
Summary
While infringement opinions are no longer required to avoid a finding of willful infringement, there are still instances in which an opinion proves useful.
Discussion
In cases of wilful infringement, damages may be increased by the court - up to triple the amount proved. Consequently, for more than 20 years it was imperative that commercial products be pre-cleared with an attorney's non-infringement opinion.
Furthermore, the Federal Circuit allowed judges and juries to infer that an opinion had been unfavorable if the accused infringer used attorney-client privilege to withhold it from discovery. The inference was sufficient "proof" of willful infringement to support increased damages. Consequently, non-infringement opinions were written like pre-litigation briefs. The frank advice that a business needs to evaluate infringement risk was only provided orally, if at all.
In Seagate, the full Federal Circuit finally took a serious look at the practice that had developed since Underwater Devices. They decided that the decision had undermined the rationale for the attorney-client privilege and had allowed findings of willfulness on a basis closer to negligence than to that used in other civil contexts such as copyright infringement. Seagate overruled the Underwater Devices decision and developed a new standard in which to analyze willful infringement.
The new standard is a two-part test. First, "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." Second, "the patentee must also demonstrate that this objectively-defined risk ... was either known or so obvious that it should have been known to the accused infringer." The court further stated that there is now "no affirmative obligation to obtain opinion of counsel" in order to avoid a finding of willful infringement. (Emphasis added.)
Nevertheless, clearance studies - and sometimes formal clearance opinions - should still be an integral part of commercial product development. First and foremost, the possibility of infringement still exists. Even though liability for triple damages is less likely under the new Seagate standard, the costs in defending an infringement suit and in paying ordinary infringement damages are still very high, and a finding of infringement creates a possibility for an injunction. The Seagate decision frees up attorneys to provide much more frank advice about infringement risk. Consequently, clearance studies should be much more helpful to business owners weighing the cost-benefit of pursuing product development.
Secondly, if a favorable clearance opinion has been obtained, an accused infringer still has the option of producing that opinion to defend against a willfulness accusation. Such opinions provide substantial and persuasive evidence that the accused infringer had an objective basis to believe that the risk of infringement was not high.
In a different context, patent owners should consider obtaining a detailed infringement opinion before suing an infringer. By signing a pleading alleging patent infringement, the litigation attorney is "certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances...the claims...and other legal contentions...are warranted by existing law." Fed. Rules Civ. Pro. 11(b)(2). A detailed infringement opinion before commencing a lawsuit documents that the patent owner has done the analysis to make this certification.
In summary, while infringement opinions are no longer required to avoid a finding of willful infringement, there are still instances in which an opinion proves useful.
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This article was prepared by Jim Shands and Walter Steinkraus.
Mr. Shands may be reached at jshands@vaslaw.com or at 952.563.3023. For a bio, please visit his web page at:
http://www.vaslaw.com/Attorneys/JamesShands.aspx
Mr. Steinkraus may be reached at wsteinkraus@vaslaw.com or at 952.563.3004. For a complete bio, please visit his web page at: http://www.vaslaw.com/Attorneys/WalterSteinkraus.aspx
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Walter Steinkraus
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