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At first glance, Knorr-Bremse v. Dana Corp. seems like many other cases that come before the U.S. Court of Appeals for the Federal Circuit — one manufacturer suing another for patent infringement. But the case heard by the full court on Feb. 5 could be the catalyst for overturning 20 years of case law. The question at issue: May judges infer that a company willfully infringed a patent if the company fails to produce a legal opinion showing that it is not in violation of the patent? A finding of willful infringement can bring treble damages and an award of attorney fees for the patent owner. The case also raises tricky questions about whether companies should be penalized for invoking attorney-client privilege. “This rule that is being reviewed has really been a festering sore in the patent profession for a long time,” says Donald Dunner, a partner with D.C.’s Finnegan, Henderson, Farabow, Garrett & Dunner and counsel for the American Intellectual Property Lawyers Association, which filed an amicus brief. (At press time, the Federal Circuit had not issued a decision in the case.) Taking the negative-inference issue up on its own, the court had solicited feedback from the bar. Lawyers filed 24 amicus briefs representing more than 40 organizations and individuals in, and out of, the IP community. Most urged full reversal of current case law. The trial judge, T.S. Ellis III of the Eastern District of Virginia, adhered to precedent and concluded that the defendants must “produce an exculpatory opinion of counsel in response to a charge of willful infringement.” If they did not, a negative inference to support the charge was appropriate, Ellis wrote in a February 2001 opinion. Herbert Cantor, a senior counsel at D.C.’s Crowell & Moring representing Knorr-Bremse, says the trial court’s ruling should stay put. If the law is to be reversed, it should be done by Congress, Knorr-Bremse argues in its brief. In May 2000, Knorr-Bremse Systeme für Nutzfahrzeuge GmbH, a German maker of air disc brakes, sued Swedish manufacturer Haldex Brake Products, U.S. affiliate Haldex Brake Products Corp., and U.S. retailer Dana Corp. for patent infringement. Ellis found that Haldex had obtained legal opinions on infringement, but was refusing to turn them over and thus, “It is reasonable to conclude that such opinions were unfavorable.” (Dana did not learn of the patent until the suit began and did not obtain a legal opinion, Ellis said.) The judge concluded that the defendants willfully infringed. He barred them from selling certain brakes in the United States and awarded nearly $700,000 in attorney fees and costs to Knorr-Bremse. (The issue of treble damages was moot, since no damages were awarded.) Ellis relied on case law — stemming from the 1983 case Underwater Devices Inc. v. Morrison-Knudsen Co. Inc. — that says an entity that knows of another’s patent has a “duty of care” to obtain legal advice before it acts in a way that could infringe the patent. If an accused infringer later refuses to disclose its lawyer’s opinion, then a court can conclude that the company received advice suggesting that it could be infringing. A court can also infer that the accused did not obtain a legal opinion. For Finnegan, Henderson’s Dunner, the law leaves a potential infringer with no real choice: Either invoke the attorney-client privilege and suffer an inference that one willfully infringed, or release the legal opinion and possibly waive the privilege for other documents. The parties’ dispute over this patent was also ongoing in Germany, says Wesley Whitmyer Jr., principal attorney for Haldex. If his client waived the privilege in U.S. court, that waiver might extend to the German litigation, says Whitmyer, a partner at St. Onge, Steward, Johnston & Reens in Stamford, Conn. All the amicus briefs addressing the attorney-client privilege urged the Federal Circuit to do away with a negative inference when a defendant invokes the privilege. The law “undercuts entirely the whole reason for the privilege,” says Susan Hackett, senior vice president and general counsel for the Association of Corporate Counsel. But the amicus briefs disagreed as to whether a negative inference is acceptable when the accused infringer fails to obtain a legal opinion. The Intellectual Property Owners Association wrote that an infringer with “express written notice of infringement” should obtain advice of counsel, and a negative inference should be allowed if an opinion is not sought. But others point out several reasons why a party might not seek a legal opinion. For example, in-house counsel may find it unnecessary when they themselves have made decisions for the corporation, says Hackett. Proponents for reversing the precedent point to other harmful effects. Some patent owners and users do not research existing patents to avoid knowledge of possible infringement. Making changes “will eliminate people’s fear of reading patents,” says Herbert Wamsley, executive director of the Intellectual Property Owners Association, which is urging legislation to change the precedent. But legislation may be unnecessary if the Federal Circuit — as many predict — overturns or revises the law. Christine Hines is a reporter at Legal Times. She can be reached at [email protected].

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