'In re Seagate Technology': Closing the Gate on Willful Infringement

Companies accused of patent infringement have another reason to breathe easier. On August 20, 2007, the U.S. Court of Appeals for the Federal Circuit issued an en banc decision making it harder for patent holders to obtain enhanced damages for willful infringement and limiting the scope of waiver resulting from reliance on an opinion of counsel. As a result, the days of including a boilerplate charge of "willful infringement" and seeking enhanced damages in nearly every patent infringement action may be gone. The decision is the most recent in a string of cases affecting the strength of patent rights. The decisions include the U.S. Supreme Court's recent rulings in eBay, which made it more difficult for patent holders to obtain injunctions, and KSR, which relaxed the requirements for proving that a patent is invalid as obvious.

Court Eliminates Duty of Due Care and Raises Standard for Proving Willful Infringement

The context for the Seagate decision hearkens back to the creation of the Federal Circuit in 1982, which was in part motivated by the perception of widespread disregard for patent rights. In its early days, the Federal Circuit strengthened patent rights by announcing that a potential infringer who is notified of another's patent has an affirmative duty of due care to determine whether or not he is infringing. Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983). Failure to satisfy this duty could lead to a finding of "willful" infringement, and the possibility of treble damages. This led to the now common practice of obtaining an opinion of counsel that a patent is invalid, unenforceable and/or not infringed to discharge the duty. At trial, a party could rely on this opinion from its attorney to try to avoid a finding of willfulness.

However, this framework raised practical concerns. Those concerns largely resulted from an accused infringer's need to choose between waiving the attorney-client privilege by relying on the opinion, or maintaining the privilege and losing the benefit of the opinion. Until a few years ago, failure to produce an opinion led to an inference that the accused infringer obtained no advice or that the advice was unfavorable. Although the Federal Circuit eliminated this inference, thorny issues remained, such as the scope of waiver created by relying on an opinion.

In In re Seagate, the en banc Federal Circuit unanimously overruled Underwater Devices, eliminating the duty of due...