The "willful" infringement of a patent enables the plaintiff to collect treble damages, as well as attorneys' fees. On September 13, 2004, in Knorr-Bremse Systems Fuer Nutzfahrzeuge GmbH v. Dana Corp., the Federal Circuit overturned 18 years of precedent on how to establish willful infringement in patent cases. After reviewing about 24 amicus curiae briefs, the virtually unanimous en banc court held that when the attorney-client privilege and/or work-product privilege is invoked by a defendant in a patent infringement suit who had sought advice on infringement, it is inappropriate for the trier-of-fact to draw an adverse inference with respect to willful infringement when the opinion is withheld. Further, the court found that when the defendant had not obtained legal advice, it was also inappropriate to draw an adverse inference of willful infringement.
In most patent cases, evidence of intentional copying is seldom available. Thus, the courts have focused on whether an accused infringer had a good-faith belief that its conduct was proper. In the early 1980s, the Federal Circuit imposed an affirmative duty on an accused infringer to act with due care, including the duty to seek and obtain advice from counsel. Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 (Fed. Cir. 1983). Later, in Kloster Speedsteel AB v. Crucible, Inc., 793 F.2d 1565, 1580 (Fed. Cir. 1983), and Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1572-73 (Fed. Cir. 1988), the Federal Circuit reasoned that a defendant's silence on an opinion of counsel could warrant an adverse inference that the accused infringer had not obtained an opinion or any such opinion was or would have been adverse.
Thus, for nearly 20 years, accused infringers were faced with few good alternatives when confronted with allegations of willful infringement. To avoid the adverse inference, a defendant who had obtained an opinion from counsel had to reveal those opinions and waive the attorney-client privilege and the attorney work product shield. The problem was that many patent owners used the attorney-client waiver of the opinion as leverage to seek broad discovery, even for materials communicated by litigation counsel and attorney work product of litigation counsel. If the accused infringer elected not to reveal its opinion or not reveal it had obtained an opinion, the court drew the adverse inference of willful infringement.
In the Knorr-Bremse opinion, the Federal Circuit addressed several separate questions. To the question “[w]hen the attorney-client privilege and/or work-product privilege is invoked by a defendant in an infringement suit, is it appropriate for the trier-of-fact to draw an adverse inference with respect to willful infringement,” the court answered with an resounding “no.” Balancing the attorney-client privilege versus the duty to disclose opinions of counsel, the Federal Circuit stated that “a special rule affecting attorney-client relationships in patent cases is not warranted.”
The Federal Circuit also answered the second question, “when the defendant had not obtained legal advice, is it appropriate to draw an adverse inference with respect to willful infringement,” with “no.” The Federal Circuit held “that it is inappropriate to draw a similar adverse inference from failure to consult counsel.” Yet, the court noted that potential infringers still have “an affirmative duty of due care to avoid infringement of the known patent rights of others.” Thus, the Federal Circuit did not ameliorate duty to obtain an opinion of counsel when faced with a non-frivolous patent infringement allegation.
The Federal Circuit also determined that a substantial defense to infringement is not sufficient to defeat liability for willful infringement even if no legal advice has been secured. The Federal Circuit noted that this was a merely factor to be weighed in the totality of the circumstances analysis.
After Knorr-Bremse, accused infringers are no longer faced with an adverse inference stemming from the choice of not divulging an opinion of counsel or from not having obtained one. Instead, the burden is now on the patent holder to prove under the totality of the circumstances that an accused infringer acted willfully. Whether the accused infringer obtained a competent opinion of counsel is now simply one factor to consider in this analysis. Other factors include:
- Whether the infringer deliberately copied the ideas or design of another (ideas and design would encompass, for example, copying the commercial embodiment).
- The infringer's behavior as a party to the litigation.
- The defendant's size and financial condition.
- The closeness of the case.
- The duration of the defendant's misconduct.
- Remedial action taken by the defendant.
- The defendant's motivation for harm.
- Whether the defendant attempted to conceal its misconduct.
One large issue not addressed by Knorr-Bremse is whether the trier-of-fact can or should be told whether or not counsel was consulted as part of the totality of the circumstances analysis. Despite several amicus curiae briefs on the issue, the Federal Circuit explicitly refused to address the issue because it was not raised in the underlying case or on appeal. Other open issues include the governing law on the scope of waiver (Federal Circuit vs. regional circuit), the extension of the waiver to work product not communicated to the client, and temporal limitations on the waiver (limiting the waiver to before the filing date of the lawsuit). Thus, the Federal Circuit's role in resolving willful infringement analysis has not yet gone by the wayside.