How to Avoid Willful Infringement
Intellectual Property News: Patent, Trademark, and Copyright
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To set the scene, the Federal Circuit held in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (1983) that a potential infringer has an affirmative duty to exercise due care to determine whether or not he or she is infringing. This placed the burden on the potential infringer to seek competent counsel and obtain either a non-infringement opinion or invalidity opinion prior to undertaking the possible infringing activities. This would prevent a finding of willful infringement and treble damages.
The decision in Underwater Devices put an extremely heavy emphasis on obtaining non-infringement opinions and/or invalidity opinions in order to ensure that a court could not hold that any infringement was willful. However, in 2007, the Federal Circuit n In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) reversed its previous holding in Underwater Devices and adopted an “objective recklessness” standard. This standard removed the affirmative duty of the infringer to obtain an opinion from counsel. As a result of the decision in In re Seagate, the bar was dramatically lowered for an infringer to demonstrate that the infringement was not willful by allowing any argument of non-infringement or invalidity to be presented well after the infringing activities.
This standard remained in effect until the Supreme Court decided in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016) that the In re Seagate decision was overly rigid. Thus, the Court shifted the pendulum back in the opposite direction toward Underwater Devices by disregarding the objective standard in In re Seagate and, instead, adopting a “subjective recklessness” standard. This encourages the Court to analyze the “particular circumstances” of each case on a case-by-case basis. While this decision does not put an absolute burden back on the potential infringer to provide an infringement opinion or validity opinion, as provided in Underwater Devices, it breathes life back into the importance of obtaining an infringement opinion at the outset of undertaking any potentially infringing actions instead of waiting to present such arguments at trial.
As a result of the Halo decision in 2016, it is critical that companies seek competent counsel and obtain these types of opinions sooner than later to rebut any claims of willful infringement. Often, companies may seek such an opinion from a competent in-house employee due to his or her familiarity with the potentially infringing product, such as legal counsel, patent attorney or other, patent agents, or engineers. The critical question though is whether such an opinion may be successfully relied upon in court to prove non-willful infringement or whether the opinion may be deemed to be self-serving and unreliable when prepared by an in-house employee, especially one that is not a qualified patent attorney.
With respect to opinions written by in-house non-patent related counsel, it was held in Underwater Devices that obtaining legal advice from a company’s own in-house counsel who is not a patent attorney is only one factor to be weighed when determining lack of good faith. Therefore, just because an attorney is in-house counsel does not mean that the attorney’s opinions are necessarily suspect. The Federal Circuit held in Radio Steel & Mfg. Co. v. MTD Products, Inc., 788 F.2d 1554, 1559 (Fed.Cir.1986) that an oral opinion by non-patent counsel was sufficient to form the basis of a defendant’s good-faith belief. Similarly, the court in Western Electric Co., Inc. v. Stewart–Wagner Corp., 631 F.2d 333, 337 (4th Cir.1980) held that reliance on an opinion prepared by in-house counsel was reasonable. It should be noted, however, that the opinion provided by the in-house counsel in Underwater Devices contained only unsupported conclusions regarding the validity of the patent and infringement without a thorough review of the file histories of the patents at issue. Therefore, it cannot be said that an attorney must be an experienced patent attorney to be considered competent in preparing an infringement or validity opinion. Instead, the attorney is held to the same standard and expected to provide the same level of due diligence that would be expected of any patent attorney.
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