The Use of Exculpatory Opinions in Defending Against a Charge of Willful Infringement

The exercise of intellectual property rights has become a mainstay of business over the last 10 years. Indeed, business models are proliferating where obtaining patents for the purpose of licensing and enforcement are the sole activity of the enterprise. Even among those entities that routinely engage in R&D or the manufacture and sale of products, more and more are investing in the acquisition of IP rights, and many have realized that enforcement of those rights against competitors is an effective tool in protecting markets and/or generating revenue. As a consequence, corporate executives and general counsels are likely to face, at least once in their careers, a charge that their companies are infringing upon another entity's intellectual property rights.

Especially threatening is the receipt of a notice that your company's products infringe patents held by another. The threat is worrisome for a variety of reasons. First, the threat is often leveled at a company's core technology, changes to which are almost never trivial. Second, patent infringement carries with it the very real threat of devastating injunctive relief. Finally, damages in such cases, while nominally calculated in terms of a reasonable royalty or lost profits, may, at the discretion of the court, be enhanced up to three times for so-called willful infringement. In order to navigate this minefield and defend themselves against claims of willfulness, many companies engage counsel in order to obtain advice as to whether their actions violate valid patent rights of some third party and/or how to avoid such violations by design arounds. This article, addresses defenses to a charge of willfulness, and in particular, some of the issues which may arise when relying on opinions of counsel as a defense to a patent owner's claim of willful infringement.

The "Totality of the Circumstances" Test

When considering whether an infringer acted in bad faith, thereby supporting an increased damage award, courts look at a "totality of the circumstances," including (1) whether the infringer copied the invention of another; (2) whether the infringer, when it knew of the other's patent, investigated the scope of the patent and formed a good-faith belief that it was either not infringed, invalid or both; (3) whether the infringer mounted a substantial (albeit unsuccessful) challenge in the issues of validity and infringement; (4) the closeness and complexity of the legal and factual issues presented; (5) whether the infringer engaged in good faith efforts to design around the patent; and (6) the infringer's behavior in the litigation. 1 Because there are few situations where sufficient evidence of actual copying or litigation conduct egregious enough to find willfulness are present, the primary focus for courts when considering willful infringement claims is usually on whether an alleged infringer has formed a good-faith belief that its conduct was justified.

In the seminal case, Underwater Devices, Inc. v. Morrison-Knudsen Co.,2 the U.S. Court of Appeals for the Federal Circuit imposed as affirmative duty on a potential infringer to exercise due care to determine whether or not its activities are infringing. This duty includes obtaining competent legal advice from counsel...