Seagate's Progeny

Posted on February 2, 2008 by Brian Wm. Higgins

     As promised in my earlier post regarding In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007), below is a summary of cases citing the much talked about Federal Circuit opinion. This survey includes opinions published on or before January 31, 2008, but is not inclusive.

  • Federal Circuit: "Under this [objectively high likelihood that its actions constituted infringement of a valid patent] standard, both legitimate defenses to infringement claims and credible invalidity arguments demonstrate the lack of an objectively high likelihood that a party took actions constituting infringement of a valid patent." The court did not elaborate on the meanings of "legitimate" and "credible". Black & Decker, Inc. v. Robert Bosch Tool Corp. (Fed. Cir. 2008)

  • E.D. New York: Motion to bifurcate liability and willfulness issues denied on several grounds, including the overlap of evidence between the two issues. Computer Assoc. Intl., Inc. v. Simple.com, Inc. (E.D.N.Y. 2007)

  • N.D. Illinois: "Because willfulness depends on an infringer's prelitigation conduct, in most circumstances, communications of trial counsel have little, if any, relevance. Thus, trial counsel opinions and work product of trial counsel are not subject to waiver, absent exceptional circumstances." Se-Kure Controls, Inc. v. Diam USA, Inc. (N.D. Ill. 2008)

  • N.D. Illinois: Knowledge of patentee's pending patent application at time of launching new product is not enough to demonstrate willfulness; determination generally is based on post-patent, rather than pre-patent conduct; failure to assert a noninfringement defense and reliance solely on an invalidity defense is not sufficient to establish defendant acted despite an objective likelihood of infringement. Trading Techs. Intl., Inc. v. eSpeed, Inc. (N.D. Ill. 2008)
  • N.D. Illinois: At the time Sandoz launched its product in the market, there was an appellate judicial opinion stating that the claims of the patents at issue were susceptible to invalidity and unenforceability challenges. Trial court said that “proves an objectively low likelihood that marketing a product that reads on those same claims would be infringing upon a valid patent.”  Abbott Labs. v. Sandoz, Inc. (N.D. Ill. 2007)

  • N.D. California: Summary judgment of no willful infringement by Ivax denied because of "ample evidence upon which a reasonable juror could base the conclusion that Ivax sold its Metformin ER product despite an objectively high likelihood that its actions constituted infringement of a valid patent." Depomed, Inc. v. Ivax Corp. (N.D. Cal. 2007)

  • C.D. California: Granting motion for reconsideration of post-trial rulings in view of In re Seagate because court’s instructions to jury were “drawn from a now-discredited line of authority”; noting that “absent a finding of willfulness, the Court’s award of enhanced damages cannot stand”; and “the award of attorney’s fees…cannot stand.” Broadcom Corp. v. Qualcomm Inc. (N.D. Cal. 2007)

  • D. Massachusetts: “In determining whether infringement was willful, a court should consider: (1) whether there was a bona fide disagreement regarding patent invalidity or infringement, (2) whether the infringer solicited or followed the advice of counsel, (3) whether there was continued infringement after notice of probable infringement was received, (4) whether there was a degree of similarity between the patented and accused devices, (5) whether the infringer took efforts to avoid infringement, and (6) whether the infringer was indemnified against infringement costs.” No citation given. Cohesive Technologies, Inc. v. Waters Corp. (D. Mass 2007)

  • W.D. Wisconsin: Evidence of defendant’s failure to seek advice of counsel prior to selling the accused devices, defendant’s effort to obtain a license from plaintiff’s predecessor, customer demand for a waterproof system, and letters from the patentee accusing defendant of infringement relate to the second prong of the willfulness test: what defendant knew or should have know with respect to a high likelihood of infringement. Franklin Elec. Co. v. Dover Corp. (W.D. Wis. 2007)

  • M.D. Pennsylvania: Defendant did not act “with an objectively high likelihood that its actions constituted infringement of a valid patent” when he read patent and attempted to design around claims. Rhino Assoc., LP v. Berg Mfg. and Sales Corp. (M.D. Pa. 2007)

  • E.D. Texas: Although defendant ultimately did not prove its invalidity defense by clear and convincing evidence, it received and relied upon opinion letters from outside counsel that concluded that the patents were invalid and not infringed by Defendant’s product, and it sent letters to plaintiff setting forth its position before litigation, which prompted Plaintiff to reexamine own patent. This was “hardly objectively unreasonable” as to whether there was a high likelihood of infringement. TGIP, Inc. v. AT&T Corp. (E.D. Tex. 2007)

  • See previous related posts about In re Seagate on this website:
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Waiving Attorney-Client Privilege: Patent Opinions Developed by In-House Engineers, Patent Agents and Attorneys

Posted on February 1, 2008 by Brian Wm. Higgins

     By now, those who follow patent issues in this country will undoubtedly have heard of In Re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), in which the Federal Circuit heightened the standard for establishing willful patent infringement to a recklessness standard, and clarified the scope of the waiver of attorney-client privilege and work product immunity with regard to opinions of counsel relied on by defendants accused of willfully infringing. Several courts have since addressed the Seagate opinion in some detail, including the U.S. District Court for the Southern District of New York, which is presiding over the original Seagate matter (Convolve, Inc. v. Compaq Computer Corp., No. 00-civ-5141). 

     In the Convolve case, Seagate opposed Convolve's claims of willful patent infringement by relying on an opinion generated by its engineering staff together with its in-house counsel and a patent agent (they also relied on outside counsel’s opinion). Convolve then moved for an order compelling Seagate to allow discovery from Seagate's in-house counsel. The court didn't buy Seagate’s argument that the opinion was simply an engineering report, and instead found that Seagate had waived the attorney-client privilege as to all documents within the scope of the waiver as defined in In re Echostar Communs. Corp. It ordered Seagate to produce not just emails concerning the in-house opinion, which Seagate previously had produced, but any letters, memorandum, conversations, or the like between the Seagate's attorney and his client, as well as any documents referencing the communications between attorney and client concerning the opinion.  Memorandum and Order (Jan. 22, 2008).

     This ruling would have been different had Seagate not conducted its own internal patent infringement investigation before engaging outside counsel, and then relied on that investigation to establish that its actions did not rise to the level of recklessness. Companies that use in-house employees to investigate patent infringement claims (which is common), and then help in-house attorneys to develop an opinion regarding patent infringement, should not expect documents and conversations about that investigation to remain protected under the attorney-client privilege or work product doctrine, even if the company later procures and relies on an opinion from outside counsel. You just never know how far a judge will go with a waiver under In re Echostar.

     Check back later for a summary of what other courts are saying about In re Seagate.

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Seagate vs. Patent Reform Act of 2007

Posted on August 29, 2007 by Brian Wm. Higgins

Summary:  Don't get too comfortable with Seagate's "objective recklessness" standard for determining willfulness in patent litigation: the Patent Reform Act of 2007 could change everything.

 

     35 U.S.C. § 284, enacted in 1952, provides that a court "may increase damages up to three times the amount found or assessed" in the case of willful patent infringement. In 1983, the Federal Circuit established the standard for evaluating willfulness: 

“Where . . . a potential infringer has actual notice of another’s patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing. Such an affirmative duty includes, inter alia, the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity.”

Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 (Fed. Cir. 1983)(emphasis added).  Thus, an accused infringer could establish that its continued accused activities were done in good faith if it reasonably relied on advice from counsel. The duty of care standard survived until just recently, when the Federal Circuit overruled the standard and held that:

"Proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness." 

In re Seagate Technology, LLC, Civ. No. 830 (Fed. Cir. 2007) (en banc) (Newman, J., Garjarsa, J., concurring).  Under Seagate, 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."  Once the threshold objective standard is satisfied, the patentee "must also demonstrate that this 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." According to the Federal Circuit, the state of mind of the accused infringer is not relevant to this objective inquiry.

     The Patent Reform Act of 2007, if enacted, would include a new § 284 concerning willful patent infringement (see Senate and House bills S.1145 and H.R.1908, respectfully; see also related posts here).  The new law would allow a court to find willfulness only if the patent owner presented clear and convincing evidence that the accused did one of the following three things:

"(A) after receiving written notice from the patentee...alleging acts of infringement...the infringer, after a reasonable opportunity to investigate, thereafter performed one or more of the alleged acts of infringement;

"(B) the infringer intentionally copied the patented invention with knowledge that it was patented; or

"(C) after having been found by a court to have infringed that patent, the infringer engaged in conduct that was not colorably different from the conduct previously found to have infringed the patent, and which resulted in a separate finding of infringement of the same patent."

     Part of the new law, if enacted in its current form, would limit willfulness damages where the infringer has an informed good faith belief that the patent was invalid or unenforceable, or would not be infringed by the conduct later shown to constitute infringement of the patent.  An "informed good faith belief" may be established by:

(1) "reasonable reliance on advice of counsel;"

(2) "evidence that the infringer sought to modify its conduct to avoid infringement once it had discovered the patent;" or

(3) "other evidence a court may find sufficient to establish such good faith belief."

     Under the new law, there is no requirement, like in Seagate, to perform an objective risk of infringement assessment or establish that an accused infringer knew or should have known of the risks.  However, like in Seagate, the new law would also not impose a requirement that infringers obtain advice of counsel as a prerequisite to making, using, or selling a product or performing a method.  As William Lafuze and Michael Valek noted in their recent article [1]:

"If [patent reform is] enacted, the advice-of-counsel defense will remain an option, but accused infringers will not face the same pressure to waive privilege over such advice because there will be additional, statutorily defined limits and defenses to willfulness." 

Comments:
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Federal Circuit Clarifies Waiver of Attorney-Client Privilege and Work Product Immunity in Patent Litigation

Posted on August 21, 2007 by Brian Wm. Higgins

Summary: The Federal Circuit clarifies the scope of the waiver of attorney-client privilege and work product protection that results when an accused patent infringer asserts an advice of counsel defense to a charge of willful infringement. Case:  In Re Seagate Technology, LLC, Civ. No. 830 (Fed. Cir. 2007) (en banc) (Newman, J., Garjarsa, J., concurring).


     Convolve, Inc., and MIT (“Convolve”) sued Seagate, alleging willful infringement of U.S. Patent Nos. 4,916,635, 5,638,267, and  6,314,473. Prior to the lawsuit, Seagate had obtained from outside counsel three opinion letters covering infringement, validity, and enforceability of those patents. Seagate notified Convolve of its intent to rely upon the three opinions in defending itself against willful infringement.  It then disclosed its outside counsel’s work product and made him available for deposition. Convolve then moved to compel discovery of any communications and work product of Seagate’s other counsel, including its trial counsel. The S.D.N.Y. sided with Convolve, concluding that Seagate waived the attorney-client privilege for all communications between it and any counsel, including opinion, trial, and in-house counsel, concerning the subject matter of the opinion letters. 

     In response, Seagate filed a petition for writ of mandamus with the Federal Circuit, which was granted. After ordering en banc review, the Federal Circuit ordered the S.D.N.Y. to reconsider its order compelling discovery.  In doing so, the Federal Circuit overruled its earlier decision in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (1983), and clarified the scope of the waiver of attorney-client privilege and work product protection that results when an accused patent infringer asserts an advice of counsel defense to a charge of willful infringement. The court’s opinion addressed three significant issues: the standard for awarding enhanced damages, the scope of the waiver of trial counsel-client privileged communications, and the scope of the waiver of trial counsel’s work product.

Standard for Awarding Enhanced Damages in Patent Cases

     The Federal Circuit concluded that the duty of care it announced in Underwater Devices was akin to negligence, which was a lower threshold compared to other comparable civil statutory frameworks. Such a low standard, the court said, “does not comport with the general understanding of willfulness in the civil context…, and it allows for punitive damages in a manner inconsistent with Supreme Court precedent.”  Accordingly, the court overruled the Underwater Devices standard and held that proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness, a higher standard than negligence. “Because we abandon the affirmative duty of due care,” the court wrote, “we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.”

Scope of Attorney-Client Waiver

     Noting that district courts have reached varying results with respect to whether communications with trial counsel are waived when a client relies upon opinion of counsel as a defense to a charge of willfulness, the Federal Circuit said:

“[W]e conclude that the significantly different functions of trial counsel and opinion counsel advise against extending waiver to trial counsel. Whereas opinion counsel serves to provide an objective assessment for making informed business decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker. And trial counsel is engaged in an adversarial process. * * * Because of the fundamental difference between these types of legal advice, this situation does not present the classic “sword and shield” concerns typically mandating broad subject matter waiver. Therefore, fairness counsels against disclosing trial counsel’s communications on an entire subject matter in response to an accused infringer’s reliance on opinion counsel’s opinion to refute a willfulness allegation. “

     The court supported its position with several additional reasons, but it also noted that in reaching its decision, “[w]e do not purport to set out an absolute rule.”  Trial courts should continue, the court said, to exercise their discretion in unique circumstances to extend waiver to trial counsel, such as if a party or counsel engages in “chicanery” (def'n: trick, trickery, subterfuge).

Scope of Work Product Waiver

     Relying upon the same rationale limiting waiver of the attorney-client privilege with regard to trial counsel, the Federal Circuit concluded that a party relying upon opinion counsel’s work product does not waive work product immunity with respect to trial counsel.   This general limitation is necessary because of the nature of the work product doctrine, the court said, and because protecting lawyers from broad subject matter disclosure “strengthens the adversary process, and . . . may ultimately and ideally further the search for the truth.” However, the Federal Circuit also stated “we leave 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.”

Held: Seagate’s petition for a writ of mandamus was granted; the district court was ordered to reconsider its discovery orders in light of the Seagate opinion.

Comments:

  • This case may strengthen the long held belief by patent attorneys that patent litigation trial counsel should be different than opinion counsel. See William L. LaFuze, Matthew R. Rodgers & Michael A. Valek, Exculpatory Patent Opinions and Special Problems Regarding Waiver of Privilege, 6 J. MARSHALL REV. INTELL. PROP. L. 313 (2007) (available here)

  • In the Seagate opinion, the Federal Circuit noted that a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer’s pre-filing conduct. By contrast, when an accused infringer’s post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement. A patentee who does not attempt to stop an accused infringer’s activities in this manner should not be allowed to accrue enhanced damages based solely on the infringer’s post-filing conduct. Similarly, if a patentee attempts to secure injunctive relief but fails, it is likely the infringement did not rise to the level of recklessness.   What does this say about the use of injunctions in patent cases in the future?

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