Opinion of Counsel after Broadcom v. Qualcomm
November 2008
Opinions of counsel are often sought by companies
that foresee defending against a patent lawsuit. These opinions usually provide
conclusions about invalidity and unenforceability of the patents and whether
company products have or have not infringed the patents.
by Sanford
E. Warren Jr. and Iris Mok
Akin Gump Strauss
Hauer & Feld LLP
While the Federal Circuit Court of Appeals has lessened the need for such
opinions in In re Seagate Tech., LLC., 497 F.3d
1360 (Fed. Cir. 2007), under willful infringement, (see
Willful Infringement after
Seagate), it reaffirms the importance of obtaining these opinions when determining
whether the company has induced others to infringe.
Inducement of Infringement
Section 271(b) of the Patent Laws imposes liability as an infringer on someone
who "actively induces infringement of a patent."1
Inducement requires that the alleged infringer not only knowingly induced the
acts that directly infringes the patent, but also knowingly induced the direct
infringement.2 In other words, it requires the infringer
to have a specific intent to cause another to infringe.3
To show such intent, both direct and circumstantial evidence may be used.4
In DSU Med. Corp. v. JMS Co., 471 F.3d. 1293,
1305 (Fed. Cir. 2006), the Federal Circuit upheld a jury finding that the accused
infringer had no specific intent to infringe the patent, because it had obtained
opinions from its counsel that its product did not infringe the patent.
Difference between Inducement and Willful Infringement
Willful infringement provides enhanced damages to patent holders once infringement
is found. The Federal Circuit held in Seagate
that a showing of objective recklessness is required to prove willful infringement.
Unlike inducement, there is no requirement to show specific intent of the accused
infringer, as only an objective inquiry is necessary to determine whether the
infringer has acted despite high likelihood that its actions constitute infringement.5
If the accused infringer is objectively reckless, the patent holder must show
that it was either known or so obvious that it should have been known to the
accused infringer. Thus, even though no specific intent to infringement is needed,
knowledge of a high likelihood of infringement is required to prove willfulness.
Opinion of Counsel as Related to Inducement and Willful Infringement
Although in the case, Seagate had obtained several opinions that concluded
its products did not infringe the patent at issue, the Federal Circuit seemed
to suggest that opinion of counsel is no longer necessary to defend against
willful infringement. This analysis is consistent with the new objective standard
set forth in the case, because it focuses on the likelihood that the accused
infringer's actions will infringe a valid patent rather than the subjective
intent of the infringer to cause infringement. However, this does not mean that
opinion of counsel is not relevant in determining specific intent of inducing
infringement.
In Broadcom Corp. v. Qualcomm Inc., No. 2008-1199,
2008-1271, 2008-1272, 2008 WL 4330323, at *13 (Fed. Cir. Sept. 24, 2008), the
Federal Circuit distinguished willful infringement from inducement even further
when it held that opinion of counsel remains a relevant factor in determining
specific intent of inducement. Even though the intent requirement of inducement
is higher than that of willful infringement, inducement may still be found despite
the lack of willfulness.
The court found the opinion of counsel as part of the circumstantial evidence
that may be used to establish a requisite intent to cause infringement. Therefore,
it remains relevant to the inducement analysis. The rationale behind this finding
is that it would be unfair to allow the accused infringer to use opinion of
counsel as a defense, but disallow the patent owner from asserting failure to
obtain an opinion as part of the intent to induce. In this case, the court upheld
the jury's finding that Qualcomm possessed the specific intent to induce based
on the totality of circumstances, including failure to investigate, failure
to explore design around approaches, failure to take remedial steps, and failure
to obtain legal advice.6
Thus, whether the accused infringer obtained opinion of counsel, like the
case in DSU, or failed to obtain such opinion,
as in the case of Broadcom v. Qualcomm, the Federal
Circuit reaffirmed that obtaining an opinion of counsel is one of many factors
the court looks at when determining intent to induce others to infringe.
Necessity of Opinion of Counsel after Broadcom v.
Qualcomm
Based on the above holdings, an opinion of counsel in areas of invalidity,
enforceability, and non-infringement still has its place in any infringement
analysis. Even after Seagate, the Federal Circuit
has considered opinion of counsel a factor when determining objective recklessness.
In fact, the Federal Circuit has considered opinion of counsel quite broadly
in that it found a competent opinion of counsel of either invalidity or non-infringement
provided the accused infringer a sufficient basis to proceed without engaging
in an objectively reckless behavior.7 Therefore,
not only is an opinion of counsel relevant in the inducement context as demonstrated
in Broadcom v. Qualcomm, it continues to be a
factor that the Federal Circuit considers when assessing willful infringement.
So, is an opinion of counsel still necessary after
Broadcom v. Qualcomm? Companies may want to obtain
such an opinion as a defense tool, even though there is no affirmative duty
to do so, because the inability to produce such an opinion may give a jury an
inference of the lack of good faith, even though negative inference is not allowed
for failure to produce an opinion.8 The dilemma
thus becomes whether companies should minimize their up-front costs and take
the risk of inducement liability or enhanced damages based on the failure to
obtain such an opinion.
Generally, the costs associated with obtaining a validity or non-infringement
opinion are in the thousands. This may be a small price to pay in comparison
to inducement and willful infringement awards, which may be in the millions.
In addition, inducement liability not only applies to domestic companies that
sell their products to others within the United States, it also applies to those
who sell their products to U.S.-based companies outside the United States under
exceptions to extraterritorial rules.9 If foreign
companies have knowledge that their products will infringe a valid patent and
continue to sell such products to a U.S.-based company, they are still subject
to inducement liability under Section 271(b). Therefore, both foreign companies
and domestic companies selling products overseas should be careful when deciding
against obtaining an opinion as their products may end up being sold to U.S.-based
companies that are not ordinarily in their chain of commerce.
Conclusion
Based on holding from the Federal Circuit Court of Appeals and the cost benefit
of obtaining an opinion, companies should think twice before selling their products
if they are aware of any potential infringement of a valid patent. They should
also consult their counsel as to whether a formal opinion is necessary based
on the scope of the claims in the patent. Because opinion of counsel remains
a relevant factor in inducement, a formal opinion of invalidity or non-infringement
may provide just the basis companies need to rebut the inference of the lack
of good faith when this claim is asserted. In addition, having the opinion produced
may show that companies have performed the due diligence necessary to prove
the lack of objective recklessness in the willful infringement context.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author's employer or IRMI. Expert Commentary articles
and other IRMI Online content do not purport to provide legal, accounting, or other
professional advice or opinion. If such advice is needed, consult with your attorney,
accountant, or other qualified adviser.