Knorr-Bremse: Death of an Inference

In its long awaited decision, a virtually unanimous en banc panel of judges of the U.S. Court of Appeals for the Federal Circuit overturned 18 years of precedent, revoking the so-called "adverse inference" rule explaining it had resulted in inappropriate burdens on the attorney-client relationship. Knorr-Bremse Systems Fuer Nutzfahrzeuge GmbH v. Dana Corp., Case Nos. 01-1357, -1376, 02-1221, - 156 (Fed. Cir. Sept. 13, 2004).

Evidence of actual copying is rarely available. As a result, courts have focused on whether an accused infringer had a good-faith belief its conduct was proper. Over time, the Federal Circuit imposed an affirmative duty on a potential infringer to act with due care, which included obtaining a competent opinion of counsel. Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 (Fed. Cir. 1983). The due care and competent opinion of counsel requirement led the Federal Circuit to find a failure to obtain opinion of counsel could warrant an adverse inference that the accused infringer had not obtained an opinion or any such opinion was or would have been adverse. Kloster Speedsteel AB v. Crucible, Inc., 793 F.2d 1565, 1580 (Fed. Cir. 1983). Finally, the Federal Circuit held the failure to introduce an exculpatory opinion of counsel could also lead to an adverse inference. Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1572-73 (Fed. Cir. 1988).

This precedent imposed a significant Hobson's choice on accused infringers when confronted with allegations of willful infringement. On the one hand, accused infringers who had obtained an opinion from counsel were forced to reveal those opinions and waive the attorney-client privilege and sometimes even attorney work product. On the other hand, accused infringers could elect not to reveal their opinions or not reveal they had obtained an opinion, in which case, the court drew the adverse inference. Faced with this choice, accused infringers more often than not chose to produce the opinions and waive the attorney-client privilege and work product protections.

In Knorr-Bremse, the Federal Circuit after having reviewed at least 24 amicus curiae briefs, overruled the longstanding precedent and has alleviated the Hobson's choice previously faced by accused willful infringers. The Federal Circuit held that it is improper for the trier of fact to draw an adverse inference when the attorney-client privilege and/or work product privilege is invoked; and it is...