Lawyer Article

On August 20, 2007, the United States Court of Appeals for the Federal Circuit decided In re Seagate Technology, LLC, overruling 24 years of legal precedent on the subject of willful patent infringement. In so doing, the Federal Circuit severely narrowed the circumstances under which a prevailing patentee can seek increased damages for willfulness. The Federal Circuit also definitively ruled that invoking an advice-of- counsel defense to combat a charge of willful infringement does not by itself destroy the privileged status of communications with outside trial counsel and of such counsel’s work product.

Key Conclusions of Seagate 

• An accused infringer no longer has “an affirmative duty of due care” to avoid infringement upon receiving actual notice of another’s patent rights. Thus, such actual notice no longer triggers the obligation to obtain, in every instance, an opinion of counsel for the purpose of determining whether there is infringement, or whether the patent is invalid or unenforceable. (However, see next section explaining that opinions may still be an attractive option where there is an “objectively-defined risk.”) 
• To obtain enhanced damages, a prevailing patentee must now prove that the infringer was “objectively reckless.” This means that the patentee must prove that the infringer acted despite the fact that it knew, or should have known, of “an objectively high likelihood that its actions constituted infringement of a valid patent.”
• Under the new, objective willfulness standard, the state of mind of the accused infringer is no longer relevant. What matters now is whether the accused infringer acted reasonably after it received actual notice of another’s patent rights. 
• Ordinarily, the only conduct that can now be evaluated for willfulness will be pre-litigation conduct. 
• Invoking the advice-of-counsel defense and disclosing the opinions of a patent opinion counsel does not by itself result in a waiver of either the attorney-client privilege or the work product doctrine applicable to outside trial counsel. 
• However, invoking the advice-of-counsel defense might still result in a waiver of privileges as to communications with, and work product of, in-house counsel, to the extent that either relates to the subject matter of the opinion produced. The Federal Circuit expressly left that question open in Seagate.

Consequences of Seagate 

• Opinions No Longer Required in Every Case, But Accused Infringers Should Be Aware of Circumstances that Could Create an “Objectively-Defined Risk” and Should Consider Obtaining Opinion of Counsel in Such Circumstances – The Federal Circuit left it to future case law to answer the question of what circumstances could create an “objectively-defined risk” of willful infringement. However, commentary on Seagate has already provided three potential scenarios of such risk: (1) history of prior litigation between the parties; (2) the accused infringer closely copies the patented invention; and (3) the patentee sends a detailed communication explaining how the accused product infringes one or more claims of the patent.² If any of these scenarios exist, the potential infringer should strongly consider obtaining an opinion of counsel on whether the patent of which it has received actual notice is infringed, invalid, and/or unenforceable. 
• If Opinion is Needed, Obtain Opinion from an Outside Counsel Who Will Not be Trial Counsel – In protecting against disclosure of materials as to trial counsel, the Federal Circuit in Seagate expressly contrasted roles played by opinion counsel and trial counsel³, and in so doing implicitly left intact preexisting law requiring a broad privilege waiver applying to all communications with opinion counsel addressing the same subjects as that counsel’s opinion⁴. If the same individual acts as both Opinion Counsel and Trial Counsel, there is a danger of a court extending the privilege waiver to that individual’s efforts in both capacities, on grounds that it would be virtually impossible for that individual to separate knowledge obtained through each role. Therefore, maintaining separate Opinion Counsel and Trial Counsel can help prevent such a privilege waiver. 
• Increased Focus on Pre-Litigation Conduct Requires Greater Depth of Pre-Filing Investigation to Justify Willfulness Allegation – Patentees have, according to one source, alleged willfulness in 90% of cases.⁵ Such frequency is expected to drop radically in the wake of Seagate. Patentees must now seriously consider whether to allege willfulness in any complaint. If a patentee makes such an allegation without having first conducted an adequate investigation into the defendant’s pre-litigation conduct to support that allegation, the patentee now runs a serious risk of having sanctions levied against it by the trial judge. 
• Preliminary Injunction Now a Prerequisite to Allow Consideration of Accused Infringer’s Post-Filing Conduct – The Federal Circuit in Seagate declared: “A patentee who does not attempt to stop an accused infringer’s activities in this manner [by way of preliminary injunction] should not be allowed to accrue enhanced damages based solely on the infringer’s post-filing conduct.” At the same time, the Federal Circuit warned that if the accused infringer prevails against a preliminary injunction motion by defeating the plaintiff’s claim that success is likely on the merits, then this would likely suffice to avoid a charge of willfulness, as well. Therefore, although a detailed discussion of preliminary injunction motions is beyond the scope of this article, suffice it to say that bringing a preliminary injunction motion carries certain risks, and the patentee should thoroughly explore the benefits and risks with its counsel before filing such a motion.

Notes
1 By Nanda Alapati and Michael A. Cicero, © 2007 Womble Carlyle Sandridge & Rice, PLLC. Mr. Alapati and Mr. Cicero are Members at Womble Carlyle Sandridge & Rice, PLLC (“Womble Carlyle”), where Mr. Alapati concentrates his practice on the preparation and prosecution of patent applications, and where Mr. Cicero concentrates his practice on intellectual property litigation. The views herein expressed are solely those of the authors and are not necessarily the views of Womble Carlyle or its clients, are set forth only for purposes of discussion of the state of the law as of the date of this article, and should not be construed as legal advice. Any questions concerning the application of legal principles to particular facts should be presented in confidence to appropriate legal counsel.

2 Kenneth W. Brothers, Seagate Curtails Claims for Willful Infringement, IP LAW 360, at pp.3-4 (Aug. 21, 2007), available in www.law360.com; Elaine Chow, Landmark Seagate Decision Sinks Willfulness Test, IP LAW 360, at p.3 (Aug. 21, 2007), available in www.law360.com (quoting Kenneth W. Brothers).

3 In re Seagate Tech., LLC, ___ F.3d ___, 2007 WL 2358677, at *7 (Fed. Cir. Aug. 20, 2007) ("Whereas opinion counsel serves to provide an objective assessment for making informed decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker.").

4 Id. at *10 (“Similarly, Convolve has been granted access to the materials relating to Seagate’s opinion counsel’s opinion, and he was made available for deposition. The extent of this waiver accords with the principles and spirit of [Supreme Court precedent].”) (emphasis added); In re Echostar Comm. Corp., 448 F.3d 1294, 1301 (Fed. Cir. 2006) (“[W]e recognize that when a party defends its actions by disclosing an attorney-client communication, it waives the attorney-client privilege as to all such communications regarding the same subject matter.”).

5 Chow, supra (again quoting Kenneth W. Brothers).