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On Aug. 20, 2007, the U.S. Court of Appeals for the Federal Circuit, ruling on a Petition for Writ of Mandamus to the U.S. District Court for the Southern District of New York, explicitly overruled its own prior precedent. The en banc Federal Circuit, in In re Seagate Technology, LLC, 1 held that “proof of willful infringement [in a patent case - which would allow for treble damages and the recovery of attorney's fees] requires at least a showing of objective recklessness.” Instead of needing to show that the accused merely acted negligently (as in the past), the patentee must now show that the infringer acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Meeting that threshold, the patentee must then show that “this objectively defined risk . . . was either known or so obvious that it should have been known to the accused infringer.” Thus, with this one decision overruling Underwater Devices Inc. v. Morrison-Knudsen Co., 2 and the standard set out therein, the Federal Circuit abandoned almost 25 years of willful infringement jurisprudence. No longer do parties with notice of another’s patent rights have “an affirmative duty to exercise due care to determine whether or not he is infringing.” No longer is there a “duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity.” Indeed, no longer is there an “affirmative obligation to obtain opinion of counsel.” In the event, however, an opinion of counsel is obtained, and the accused party chooses to waive the privilege and produce that opinion to counter a willful infringement charge (i.e., to show that its actions were not reckless or willful), no longer need an accused be concerned that the waiver will extend to trial counsel (unless, for instance, chicanery is involved). The Federal Circuit made clear that “asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute waiver of the attorney-client privilege for communications with trial counsel.” Nor does this waiver extend “to trial counsel’s work product . . . absent exceptional circumstances” such as “if a patentee or his counsel engages in chicanery.” FACTS LEADING TO THE PETITION On July 13, 2000, Convolve Inc. and the Massachusetts Institute of Technology (Convolve/MIT) sued Seagate alleging willful patent infringement. Prior to suit, Seagate retained counsel and subsequently obtained three written opinions, concluding invalidity, noninfringement and/or unenforceability. To counter the willful infringement charge, Seagate chose to waive the privilege and produce the opinions. Convolve/MIT were not satisfied. They believed the waiver extended beyond opinion counsel and sought to obtain (and moved to compel) discovery of any communications and work product of Seagate’s trial counsel. The trial court compelled production, stating that any advice from trial counsel that undermined the reasonableness of relying on the opinions would warrant disclosure. Seagate petitioned for writ, and the Federal Circuit sua sponte ordered en banc review of the petition and set out the following questions: 1. Should a party’s assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party’s trial counsel? See In re EchoStar Commc’n Corp., 448 F.3d 1294 (Fed. Cir. 2006). 2. What is the effect of any such waiver on work-product immunity? 3. Given the impact of the statutory duty of care standard announced in Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983), on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself? In re Seagate Tech., LLC, Misc. Docket No. 830 (Fed. Cir. Jan. 26, 2007). In answering the first question negatively, and the third affirmatively, the Federal Circuit reviewed the reasoning of Underwater Devices, in effect justifying its ruling, and traced subsequent precedent. Starting with the patent statute, the court noted that 35 U.S.C. �284 gives the district court discretion to enhance damages. This, confirmed the Federal Circuit, requires a showing of willful infringement. At the time Underwater Devices was decided (in 1983), the Federal Circuit had just been formed and there was “widespread disregard of patent rights . . . undermining the national innovation incentive.” Over time, the Federal Circuit enumerated factors informing the inquiry of willfulness but at least one factor remained important: obtaining an opinion of counsel. Practical concerns, however, arose, particularly as related to the attorney-client privilege and work product doctrine. Should an accused infringer waive the privilege and produce the opinion (and risk prejudicing itself on the question of liability – disclosing whatever negatives may be stated in the opinion), or should the accused maintain the privilege and risk treble damages? Should adverse inferences arise if no opinion were produced? And, what should be the scope of waiver – should it extend to work product? Some courts conducted in camera reviews, others stayed damages and/or willfulness discovery, and others bifurcated trials. Revisiting the definition of “willful,” the Federal Circuit reached out to its sister circuits (who have employed a “recklessness” standard for enhancing statutory copyright infringement damages) as well as the Supreme Court (who have noted that the “standard civil usage” of “willful” includes reckless behavior). Recognizing the difference the Federal Circuit stated:
In contrast, the duty of care announced in Underwater Devices sets a lower threshold for willful infringement that is more akin to negligence. This standard fails to comport with the general understanding of willfulness in the civil context, Richland Shoe Co., 486 U.S. at 133 (“The word ‘willful’ . . . is generally understood to refer to conduct that is not merely negligent”), and it allows for punitive damages in a manner inconsistent with Supreme Court precedent, see, e.g., Safeco, slip op. at 6-7, 18-19, 21 n.20; Smith v. Wade, 461 U.S. 30, 39-49 (1983). Accordingly, we overrule the standard set out in Underwater Devices and hold that proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness. Because we abandon the affirmative duty of due care, we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.
It remains to be seen how the Federal Circuit’s new test for willfulness will affect the business and the patent law community. The Federal Circuit itself has left “it to future cases to further develop the application of this standard” – it did not “purport to set out an absolute rule.” Judge Pauline Newman, in her concurring opinion, may have said it best by acknowledging on one hand that “every possibly related patent [need not] be exhaustively studied by expensive legal talent” but “reasonable care” must be taken – the “fundamental issue remains the reasonableness, or in turn the culpability, of commercial behavior that violates legally protected property rights.” Robert C. Scheinfeld is the head of the intellectual property group in the New York office of Baker Botts and Parker H. Bagley is a partner in the intellectual property group of Milbank Tweed, Hadley & McCloy. ENDNOTES: 1. In re Seagate Tech., LLC, Misc. Docket No. 830 (Fed. Cir. Jan. 26, 2007). 2. 717 F.2d 1380 (1983).

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