US Federal Court Raises the Threshold for Proving Willful Patent Infringement

The US Federal Circuit established a standard for evaluating willful patent infringement in its 1983 decision Underwater Devices Inc v Morrison-Knudsen Co (Underwater Devices, 717 F2d 1380). The standard created an affirmative duty for potential infringers who had actual notice of another's patent rights, to exercise due care to determine whether their own actions infringed those rights. This requirement to exercise due care includes a duty to obtain competent legal advice before initiating any possibly infringing activities. Following from Underwater Devices, if a patentee was able to establish willful infringement, it would be permitted to seek enhanced (treble) damages. As a result, potential infringers routinely sought legal advice in the form of freedom-to-operate (FTO) legal opinions to confirm that they had fulfilled their affirmative duty. The FTO opinion could be relied on to support an "advice of counsel" defense to willful infringement. The standard's requirements and the use of FTO opinions raised issues surrounding the attorney-client privilege and work product doctrine. Potential infringers, in effect, were forced to waive attorney-client privilege because in order to counter a claim of willful infringement, they had to produce the FTO opinion. Unhappy with the current state of the law, the US Federal Circuit recently overruled Underwater Devices in In re Seagate Technology (Seagate, Fed Cir Docket No 830). Under the new test, a plaintiff must show an "objective recklessness", that is:

1. that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent, and
2. 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 state of mind of the accused infringer is irrelevant in these determinations. In light of the Seagate decision, plaintiffs asserting a claim of willful infringement may want to provide the accused infringer with a reasoned case for infringement prior to commencing litigation. This will assist in establishing that the objectively defined risk was "known" to the accused infringer. For the full text of the reasons for judgment, see: http://www.fedcir.gov/opinions/M830.pdf For commentary, visit: http://tinyurl.com/yql3cv Summary by: Michael Migus