Expert Commentary

Opinion of Counsel after

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.


Intellectual Property
November 2008

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.


1 35 U.S.C. §271(b) (2007).

2 DSU Med. Corp. v. JMS Co., 471 F.3d. 1293, 1305 (Fed. Cir. 2006) (citing Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 564 (Fed. Cir. 1990)).

3 Id. (citing Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 125 S. Ct. 2764, 2779 (2005)).

4 Id. at 1306 (citing Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 668 (Fed. Cir. 1988)).

5 Id. ("[t]he state of mind of the accused infringer is not relevant to this objective inquiry.").

6 Id. at *14 (noting that the evidence of Qualcomm obtaining invalidity opinions was properly excluded as it declined to waive privilege with respect to those opinions).

7 Finisar Corp. v. DirectTV Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 2008).

8 Broadcom Corp., 2008 WL 4330323, at *14 (finding that failure to seek legal advice, along with other factors under the totality of circumstances, are sufficient for jury to infer a lack of good faith.).

9 Specific Intent is Necessary to Induce Infringement under U.S. Law, Asialaw, April 2007.


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.

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