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If an accused patent infringer points to an opinion of counsel to rebut allegations of willfulness, does that also waive the attorney-client privilege for similar communications with trial counsel? In a hotly contested, closely watched case, the U.S. Court of Appeals for the Federal Circuit on June 7 sat en banc to hear arguments for and against waiver. The question raised by In re Seagate Technology confronts every defendant facing a charge of willful patent infringement and the associated risk of treble damages. (The patentee and its licensee are seeking $800 million from Seagate.) In the wake of another Federal Circuit ruling, In re EchoStar Communications Corp. (2006), many trial courts concluded that if an accused infringer chooses to rely on an opinion of counsel to rebut willfulness, that party must disclose all legal advice from any source, including trial counsel. The district court in Seagate agreed. Seagate petitioned for a writ of mandamus from the Federal Circuit. The Seagate debate stirred passions on both sides and attracted 21 amicus briefs. Many patentees argue that the availability of enhanced damages is a critical tool for bringing scofflaws to justice. They contend that in virtually every civil case — patent or otherwise — a litigant may not raise an advice-of-counsel defense, thereby putting its own state of mind at issue, and then waive only part of the advice of counsel. Patentees contend that they have a fundamental right to cross-examine their adversary and that they are entitled to discover all advice that the infringer received — not merely the carefully selected advice that the infringer might want to enter into evidence. Patent infringement defendants respond that they have a fundamental right to seek candid advice from opinion and trial counsel. They argue that they should not face a Hobson’s choice between losing their right to effective trial counsel and being branded willful infringers, subject to treble damages. Thus, Seagate argued that the waiver of privilege should extend only to opinion counsel and should exclude advice provided by trial counsel. The fundamental purpose of the willful infringement inquiry is to ferret out defendants that flagrantly disregard patents without any reasonable basis for their actions. The Federal Circuit in EchoStar and the lower court in Seagate lost sight of that. If upheld, the Seagate ruling will curtail honest communication with trial counsel, discourage the use of opinions of counsel, and, where opinions are obtained and disclosed, allow patentees to embark on an expensive, time-consuming, and often counterproductive detour. A DEFENDANT’S DISREGARD This comment is not meant to excuse willful infringement. Intentional misconduct warrants a strong legal remedy, and the Patent Act expressly allows courts to enhance damages up to three times the amount found or assessed. In 1983, the Federal Circuit announced the affirmative duty-of-care standard in Underwater Devices Inc. v. Morrison-Knudsen Co. The court was troubled by a perfunctory memo from the infringer’s counsel that read in part: “Courts, in recent years, have — in patent infringement cases — found the patents claimed to be infringed upon invalid in approximately 80% of the cases. I would recommend we continue to refuse to even discuss the payment of a royalty with Underwater Devices. Underwater Devices must recognize that if they sue us, they might kill the goose that lays the golden eggs.” The court concluded that what this memo “clearly demonstrated was [the defendant's] willful disregard for the . . . patents.” Thus, the court held that treble damages were appropriate. On its facts, Underwater Devices was not a difficult case to decide because the infringer showed so little regard for the patent. But over the years, patentees began to allege willfulness in virtually every case, even when the defendant’s conduct was far less wanton. Trial courts rarely granted summary judgment of nonwillfulness before trial, usually sending the question to the jury. Because patent cases are often won or lost when patent claims are construed in a pretrial Markman hearing, saving the question of willfulness for the jury tends to bias the result in the patentee’s favor. Juries do not participate in the Markman process, and thus they may not hear the accused infringer’s primary reason for believing that it did not infringe. By offering an opinion of counsel into evidence, the defendant can explain to the jury the claim construction issues that it lost at the Markman hearing and can explain why, even if it lost on those issues, it had acted reasonably. As patent infringement cases grew in number and magnitude, the danger of treble damages grew as well, and more defendants chose to obtain an opinion of counsel. In 2004, the Federal Circuit held in Knorr-Bremse Systeme für Nutzfahrzeuge GmbH v. Dana Corp. that courts and jurors should not draw an adverse inference if an accused infringer elects not to waive the privilege and disclose an opinion of counsel. Knorr-Bremse thus eliminated a key risk of obtaining opinions of counsel, further encouraging them. ALL IS WAIVED Many defendants, including Seagate, used separate opinion and trial counsel and revealed only the advice provided by opinion counsel. Aggressive plaintiff challenges to such partial waivers were inevitable. Two years after Knorr-Bremse, the Federal Circuit in EchoStar announced that it would not permit a patent infringement defendant to selectively waive the privilege. The court wrote, “Selective waiver of the privilege may lead to the inequitable result that the waiving party could waive its privilege for favorable advice while asserting its privilege on unfavorable advice. In such a case, the party uses the attorney-client privilege as both a sword and a shield. To prevent such abuses, we recognize that when a party defends its actions by disclosing an attorney-client communication, it waives the attorney-client privilege as to all such communications regarding the same subject matter.” In the wake of EchoStar, whenever an accused infringer relied on advice of counsel to rebut willfulness, the patentee pushed for disclosure of all communications on the subject. The strategy often succeeded, as many district courts extended the subject matter waiver to communications with trial counsel (although some did not). The magistrate judge in Seagate followed the general trend, holding that the defendant must disclose all communications with counsel, including those with trial counsel. The judge’s order broadly held that all advice of counsel on infringement, validity, and enforceability “must be disclosed even if it is communicated in the context of trial preparation” and that the waiver “continues to such time as Seagate’s alleged infringement ends.” Seagate petitioned the Federal Circuit for a writ of mandamus, arguing that the waiver violated due process. The court agreed to hear the following issues en banc: • Should a party’s assertion of the advice-of-counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with trial counsel?

• What is the effect of any such waiver on work product immunity? • Given the impact of the statutory duty-of-care standard on the issue of waiver, should the court reconsider Underwater Devices and the duty-of-care standard itself?

WHAT WERE YOU THINKING? By ordering a broad waiver of all communications with trial counsel and opening the door to an extensive inquiry into the accused infringer’s “state of mind,” Seagate and other post- EchoStar decisions have created more problems than they solved. If a defendant’s conduct has been sufficiently culpable to warrant enhanced damages, such culpability should be apparent from nonprivileged information — including the weakness of the defenses raised at the Markman hearing and at trial, a lack of responsiveness to licensing overtures (particularly where many others in the industry have accepted the patent’s validity by taking licenses), and an absence of efforts to design around or avoid the patent. A detailed exploration of the accused infringer’s state of mind, including all advice received from all counsel, is rarely productive, necessary, or dispositive. Indeed, in cases where willfulness is not already apparent from nonprivileged information, the patentee’s odds of finding a smoking gun in the infringer’s legal files are slim. If the defendant has made objectively reasonable arguments in good faith and otherwise proceeded reasonably, it does not become “willful” merely because trial counsel warned that opinion counsel may have been mistaken. In virtually every patent case, trial counsel offers cautionary advice. Patent litigation raises hard questions on which reasonable minds may differ: Is the defendant infringing under the doctrine of equivalents? Would a person of ordinary skill in the art find that the patent adequately describes and enables the invention? Is the claimed invention obvious in view of the prior art? These questions and many others (which are often matters of first impression) are inherently subjective, and the reversal rate at the Federal Circuit is high. The fact that trial counsel has advised about weaknesses or vulnerabilities does not necessarily demonstrate the defendant’s culpability. It may merely demonstrate that patent litigation is often uncertain and unpredictable. The “sword and shield” concern expressed by EchoStar assumes that if opinion counsel’s advice is revealed, trial counsel’s advice must be always disclosed to explore the defendant’s state of mind. Certainly, a defendant may open the door to such waiver by making broad, sweeping statements about its state of mind, but a broad waiver should not automatically occur whenever a defendant reveals an opinion of counsel. As noted, a defendant may wish to disclose the opinion simply to explain to the jury what the defendant argued at claim construction, demonstrating that the defendant’s arguments were reasonable, even if the court ultimately disagreed with them. Last but not least, the broad waivers ordered by the Seagate lower court and others will inevitably turn trial counsel into trial witnesses. Patentees typically allege not only past infringement but also ongoing infringement. Under Seagate, that would place trial counsel in the witness chair, opening a Pandora’s box of procedural, due process, and ethical concerns. Courts properly award enhanced damages against those that willfully and wantonly misappropriate the intellectual property of others. But the pursuit of such behavior need not overshadow every patent case, interfere with a defendant’s right to counsel, or create counterproductive sideshows. The automatic, blanket waivers of privilege for trial counsel’s advice in many post- EchoStar cases were misguided. Waiver of trial counsel’s advice should be the exception, not the rule, when a patent opinion is disclosed.
Timothy S. Teter is a partner in the Palo Alto, Calif., office of Cooley Godward Kronish. A former engineer and registered patent agent, Teter focuses on representing clients in complex commercial litigation, primarily patent- and technology-related cases. The views expressed here are those of the author and not his firm or its clients.

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