Seagate Court Unanimously Rejects Affirmative Duty of Care Standard for Willfulness Infringement

In In re Seagate, Misc. Docket No. 830 (Fed. Cir. August 20, 2007), a unanimous Federal Circuit,
sitting en banc, overturned its long-standing
precedent in Underwater Devices Inc. v.
Morrison-Knudsen Co., 717 F.2d 1380 (1983) and held
that proof of willful infringement (permitting
enhanced damages) requires at least a showing of
objective recklessness. In abandoning the Underwater
Devices’ affirmative duty of due care standard, the
court stated clearly that there is no affirmative
obligation to obtain an opinion of counsel.

In Seagate, defendant who produced opinions of counsel
in defense of a charge of willful infringement were
ordered to produce all documents and communications
between it and any counsel, including trial counsel
and in house counsel regarding the subject matter of
the opinions, including trial strategy and advice of
trial counsel. Defendant Seagate petitioned for a
writ of mandamus, seeking protection from orders
compelling production of trial counsel opinions
relating to infringement, invalidity, and
enforceability of the patents in suit. The Federal
Circuit ordered en banc review of the petition,
certifying three questions for review: (1) whether the
assertion of the advice of counsel defense to willful
infringement extended waiver of the attorney-client
privilege to communications with that party’s trial
counsel; (2) the effect of any such waiver on
work-product immunity; and (3) the propriety of the
duty of care standard in Underwater Devices.

The duty of care in Underwater Devices was inaugurated
as an affirmative requirement prior to infringement,
but eventually evolved to one evaluated under a
totality of the circumstances, and later to one which
forced an infringer to choose between waiver of the
privilege and the likeliness of a finding of
willfulness if liability was proven. The Knorr-Bremse
abrogation of adverse inferences for failure to obtain
or produce advice of counsel was a belated remedy for
the Hobson’s choice that crippled accused infringers
for many years, and the Echostar extension of the
waiver to materials protected by the work product
immunity further illustrated the complex
administration of the waiver rules in the context of
their relationship to willful infringement defenses.

First, the federal circuit reconsidered the burdens of
complying with the duty of care under modern patent
litigation practice and analogized the standards for
willfulness in other areas of civil law. The court
held that to establish willful infringement, a
patentee must first show by clear and convincing
evidence “that the infringer acted despite an
objectively high likelihood that its actions
constituted infringement of a valid patent.” The
state of mind of the accused infringer is not relevant
to this objective inquiry. If this threshold objective
standard is satisfied, the patentee must also
demonstrate that the objectively-defined risk
(determined by the record developed in the
infringement proceeding) was either known or so
obvious that it should have been known to the accused
infringer. The court provided no further guidance on
the application of this two-part standard, but
relegated further development to future matters
involving willfulness.

Second, the court held that waiver associated with the
advice-of-counsel defense does not extend to trial
counsel. Fairness to the parties, the demands of an
adversarial system of justice, and the fact that
willful infringement is based on prelitigation conduct
were all cited as reasons why communications with
trial counsel are not waived when communications with
opinion counsel are disclosed.

Third, the federal circuit held that generally,
relying on opinion counsel’s work product does not
waive work product immunity with respect to trial
counsel. The court left open the possibility that
situations may arise in which waiver may be extended
to trial counsel, such as if a patentee or his counsel
engages in chicanery.

Seagate raises the standard for proof of willful
infringement to objective recklessness and unburdens
litigants from both the intricacies of waiver and the
confusion over the affirmative duty of care that has
evolved over the past two decades. In so doing,
Seagate unquestionably changes the calculus underlying
the economics of infringement associated with market
entry. The deterrent effect of a finding of
willfulness is diminished if not nearly absent; only
time will tell if economically-justified infringement
will result in a weakened patent system.

For further information please contact Michael R. Dzwonczyk (mdzwonczyk@sughrue.com) at Sughrue Mion, PLLC.

The information contained in this alert is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

 

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