Toc Spring 2009 Supplemental - Table of Contents

JurisdictionUnited States,Federal
Publication year2009
CitationVol. 5 No. 5

Shidler Journal of Law, Commerce & TechnologyVolume 5, Issue 5Spring 2009 Supplemental

Table of Contents

5 Shidler J. L. Com. and Tech. 20Willful Infringement After Seagate : How the Willfulness Standard Has Changed and What Attorneys Should Know About ItKevin Raudebaugh

5 Shidler J. L. Com. and Tech. 21Safe Haven No More: How Online Affiliate Marketing Programs Can Minimize New State Sales Tax LiabilityJennifer Heidt White

5 Shidler J. L. Com. and Tech. 22Invalidity of Covenants not to Compete in California Affects Employers NationwideSheri Wardwell

5 Shidler J. L. Com. and Tech. 23Evaluating Columbia Pictures Industries v. Bunnell and the Role of RAM Under the Federal Rules of Civil Procedure on E-discoveryLoren M. Hall

5 Shidler J. L. Com. and Tech. 24Intellectual Property Protection for Fashion Design: An Overview of Existing Law and A Look Toward Proposed Legislative ChangesN. Elizabeth Mills

5 Shidler J. L. Com. and Tech. 201Willful Infringement After Seagate How the Willfulness Standard Has Changed and What Attorneys Should Know About It

Shidler Journal of Law, Commerce and Technology Volume 5, Issue 5 Spring 2009 Supplemental

Willful Infringement After Seagate : How the Willfulness Standard Has Changed and What Attorneys Should Know About It

Kevin Raudebaugh (fn1)

Kevin Raudebaugh

Abstract

In In re Seagate Technology, LLC, the Court of Appeals for the Federal Circuit changed the standard for willful patent infringement from one akin to negligence, to one more aligned with recklessness. While the general standard is set forth in the decision, the Seagate Court stated that it would leave the development of the new standard's meaning to future cases. This Article surveys cases applying Seagate to determine the meaning of this novel standard, and explores what evidence courts have considered relevant to the willfulness inquiry. This Article also discusses how Seagate has affected the desirability of opinions of counsel and clearance searches, and concludes with recommendations for practicing attorneys about how to avoid willfulness charges.

Table of Contents

Introduction

Willfulness Before Seagate

The Seagate Opinion

The Effects of Seagate : Clearance Searches Can Be Conducted with Greater Freedom

Opinions of Counsel and the Closeness of the Case

Evidence of Attempts to Work Around Existing Patents

Cessation of Infringing Activities

Issuing Demand Letters

Conclusion

Practice Pointers

Introduction

1 Patent infringement lawsuits have some of the highest damages awards in private litigation, with jury awards and settlements regularly in the hundreds of millions of dollars.(fn2) A finding of willfulness raises the stakes in a patent infringement suit because it carries up to a treble damages penalty under the Patent Act.(fn3) Due to the incentive of treble damages, willfulness is frequently alleged; one study has shown that willfulness is alleged in over 90% of infringement cases.(fn4) Thus, it is particularly important for attorneys dealing with patented technology to be aware of ways to defend against and avoid charges of willfulness.

2 The United States Court of Appeals for the Federal Circuit (CAFC) radically changed the standard for willfulness in In re Seagate Technology, LLC. The Seagate Court made it much easier to defend against willfulness charges, but left questions as to how the new standard would be interpreted by the courts. (fn5) Since Seagate, a number of opinions by United States District Courts and the CAFC have made it easier to interpret its impact. From the subsequent opinions, as well as Seagate itself, conclusions can be drawn regarding what measures are effective for defending against a charge of willfulness. This Article begins by describing the state of willfulness before Seagate. It will then analyze the main holdings of the Seagate opinion before examining court opinions subsequent to Seagate to determine how the standard is being developed and applied.

Willfulness Before Seagate

3 Prior to Seagate, courts judged willfulness by what was, in essence, a negligence standard.(fn6) Soon after the creation of the CAFC, and mindful of its mandate to correct a "widespread disregard of patent rights . . . undermining the national innovation incentive,"(fn7) the CAFC established a "due care"(fn8) standard for willful infringement. Under the "due care" standard, when "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."(fn9) Although courts considered the "totality of the circumstances" in assessing willfulness,(fn10) in practice, the analysis usually focused on whether the defendant acquired an opinion of counsel.(fn11) Thus, when a party received a demand letter from a company accusing them of infringement, the receiving party had an affirmative duty to investigate that charge by obtaining an opinion of counsel. The opinion would typically analyze both whether the allegedly infringed patent was valid and whether the activities actually infringed on it. Unfortunately, the opinion had questionable value when it came to subsequent litigation.

4 Before Seagate, defendants faced a dilemma when asserting an opinion of counsel defense. The disclosure of an opinion letter at trial had the potential to waive both the attorney-client privilege and attorney work-product privilege for both in-house and litigation counsel, resulting in an advantage for the plaintiff.(fn12) However, if a party failed to assert the opinion to preserve these privileges, a jury could make a negative presumption about the contents of the letter.(fn13)

5 Unfortunately, there was considerable confusion over the extent of a privilege waiver,(fn14) and the waiver was the source of substantial secondary litigation. In 2003, the CAFC eliminated the negative presumption that could arise for withholding an opinion of counsel letter,(fn15) but an effective opinion remained the best possible defense to a willfulness charge, and many defendants gave up their privileges in order to assert them. In response, the CAFC attempted to clarify the scope of waiver through an en banc hearing, but failed to successfully do so, and perhaps even added to the confusion.(fn16)

6 During this same period, there was increasing national attention on the state of patent law. A lawsuit over the Blackberry technology initiated by a patent holding company received broad media coverage as the litigation threatened to shut down the network.(fn17) This may have led to the Supreme Court's decision to hear eBay, Inc. v. MercExchange, LLC, in which the Court tempered the CAFC's position that injunctive relief should be applied automatically upon a finding of infringement.(fn18) The United States Supreme Court continued to hear patent cases where it corrected CAFC decisions to be more in line with Supreme Court precedent,(fn19) and the CAFC responded by revisiting some of its own precedent in light of Supreme Court jurisprudence. This review included the standard for willfulness and the application of a waiver.

The Seagate Opinion

7 The CAFC heard Seagate en banc to answer three specific questions relating to willful infringement: (1) should the assertion of the advice of counsel defense extend also waive the attorney-client privilege for communications with trial counsel; (2) what is the effect of that waiver on work-product immunity; and (3) should the standard for willful infringement be changed?(fn20) In answer to the first question, the court held that "as a general proposition . . . asserting the advice of counsel defense and disclosing opinions of counsel do not constitute waiver of the attorney-client privilege for communications with trial counsel;"(fn21) however, a waiver still may occur in "unique circumstances" such as those involving "chicanery."(fn22) The CAFC then applied this same rule to work-product immunity using the same "general proposition" and "chicanery" language, and noting that the Supreme Court has approved of narrowly restricting the scope of the work product waiver.(fn23) These answers helped immensely to clarify that the waiver attached to the assertion of an opinion of counsel defense. Nevertheless, the most significant change to jurisprudence was the answer to the third question, how the standard for willful infringement should be changed.

8 The CAFC specifically overruled its previous standard for willful infringement of patents,(fn24) and replaced it with a more stringent standard. Again, the Seagate Court noted Supreme Court jurisprudence on the topic, which likened willful behavior to recklessness,(fn25) as being the proper framework for its decision.(fn26) The CAFC stated that the previous standard, which was "more akin to negligence," is overruled, and the new standard "requires at least a showing of objective recklessness."(fn27)

9 To prevail in a claim of willfulness, a patentee must now "show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent."(fn28) A patentee must "also demonstrate that this objectively-defined risk . . . was either known or so obvious it should have been known to the accused infringer."(fn29) This holding substantially raised the bar for proving willfulness by eliminating the affirmative obligation to obtain...

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