Under the Influence: On the role of the written opinion from counsel in patent infringement litigation
Douglas Y'Barbo(1)
Let's tell the future
Let's see how it's been done.
By numbers. By mirrors. By water.
By Dots made at random on paper.
--Suzanne Vega(2)
Under the Influence:
On the role of the written opinion from counsel in
patent infringement litigation
Douglas Y'Barbo
This Article is about the role of the written opinion from counsel in assessing enhanced damages for willful patent infringement. It is divided into four parts--each is more or less independent of the other, and can be read that way. Part I is an introduction: it describes the subject matter, its context, and its significance. Part II is a reasonably comprehensive list of essential legal principles, and supporting authority that relate to the subject of this Article. Part III is a brief essay that presents a legal rule to replace the current one. Part IV is a more exhaustive presentation of the shortcomings of the present legal rule.
PART I
The United States Patent Code allows a prevailing plaintiff in a patent infringement lawsuit to recover not only compensatory damages but also damages ("enhanced damages") beyond what is necessary to compensate the patent owner:
Upon finding for the claimant the court shall award the claimant damages adequate to compensate for infringement, but in no event less than reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.
When the damages are not found by a jury, the court shall assess them. In either event the court may increase the damages up to three times the amount found or assessed. (italics supplied).(3)
The factual predicate for enhanced damages is "willful" infringement. The patent owner proves willfulness by showing that the infringer did not comply with the required duty; according to the Federal Circuit:
[W]here a potential infringer has actual notice of another's patent rights he has an affirmative duty of due care. The test is whether, under all the circumstances, a reasonable person would prudently conduct himself with any confidence that a court might hold the patent invalid or not infringed.(4)
The duty of care normally requires that a potential infringer obtain competent legal advice before infringing or continuing to infringe…."(5)
So, a firm has a duty of due care to avoid infringement. While a competent opinion from qualified patent counsel that the firm has relied upon is the traditional (and the most effective) means to discharge that duty, the Federal Circuit consistently reiterates that a competent, relied upon opinion is not a sufficient (nor necessary) condition to shield an infringer from an enhanced damages award; instead, the Federal Circuit habitually re-emphasizes, courts shall look at the "totality of the circumstances."(6) So, what are the circumstances the court has (or will) consider? In Bott v. Four Star Corp., the Federal Circuit set forth a list of three factors:
(1) whether the infringer deliberately copied the ideas or designs of another; (2) whether the infringer, when he knows of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; and (3) the infringer's behavior as a party to the litigation."(7),(8)
Nevertheless, an infringer can, practically speaking, immunize himself against an award of enhanced damages by proffering a written opinion from counsel. In order for a proffered opinion to furnish the sought-after immunity it must be: (1) competent; and (2) the infringer must have actually relied upon it.(9)
Whether it was relied upon is almost never difficult to determine. Generally it relates to timing--i.e., did the infringer initiate plans to manufacture the accused device before or after it received the opinion letter. Instead, the emphasis is always upon the "competence" prong. The patent owner will often go to great expense to prove that the opinion obtained from counsel was not competent. So, it's upon this question that the enhanced damages inquiry typically hangs.
The economic consequences of this inquiry are almost out of proportion--liability and damages already having been decided, all that's left is for the court to multiply the damage award by a number from one to three and possibly add award attorneys' fees also. Hence, a $500,000 damages award could become a $3 million award ($1.5 million in enhanced damages plus another $1.5 million in attorneys' fees); a $3 million damage award can become a total award of more than $10 million--just based on this one question: whether the opinion was "competent."
The proper role of the written opinion from counsel is as important as any single issue in patent law, for two reasons. First, beyond question, litigation behavior is driven by the prospect of recovering enhanced damages and attorneys' fees. Granted, parties might still sue one another for patent infringement if all they could hope to obtain was roughly their profits lost due to the infringement and an injunction (no multiplied damages and no attorneys' fees), but they would do so less often--far less often I'll bet. The primary reason is that patent infringement litigation is extraordinarily expensive. One million dollars per year for three years is not out of the ordinary for a single party to spend prosecuting or defending itself against a single patent--an amount I suspect most patent owners would be far less willing to spend if they knew going in that they could recover only their profits lost due to the infringement or worse, a reasonable royalty. What's more, the prospect of success is not high. Only 54% of patents litigated to final judgement over a very recent eight-year span were held valid. From among this much smaller fraction of the population, were the plaintiffs who successfully recovered damages. Therefore, the expected recovery from compensatory damages alone (total available recover discounted by the probability of winning) is quite low.
Moreover, while the parties may disagree over the damages award--the disagreement is typically not large, since it's related to some objective number available to both parties, e.g., the patent owner's lost profits, the infringer's profits attributable to the infringing device, a royalty rate reasonable in the industry.(10) What parties tend to disagree over is the probability of success--i.e., how likely it is that either one will win. Of course, when the patent owner estimates his chance of success at 70%, and the accused infringer estimates his own chance of success at, say 60%, then litigation is likely. But despite this, settlement is often likely since the bargaining range is fairly small. (Under current theory, bargaining range, or the difference in the two parties expected recovery, or expected exposure, drives litigation).(11)
On the other hand, the prospect of enhanced damages, combined with the compound uncertainty of whether they will be awarded and in what amount has the effect of enlarging the bargaining range which actually discourages settlement.(12)
If patent infringement litigation is driven by the prospect of enhanced damages (and attorneys' fees) or is at least very sensitive to it, then the legal rules that govern recovery of enhanced damages should be clear--that is, both the prospective plaintiff and defendant ought to be able to assess, at the start of litigation or just before, the chance of an enhanced damages award, which I claim will largely determine whether the patent infringement suit is brought, and if it is, how the defendant responds.
Therefore, a legal rule governing enhanced damages that was both clear and fair would benefit patent owners who wish to reliably assess their expected recovery; it would benefit competing firms who need to reliably assess their expected exposure, and it would benefit the trial courts and Federal Circuit by reducing the number, length, and cost of patent infringement lawsuits.
PART II
Here are what I believe to be the essential legal principles (legal rules and empirical observations) that relate to willful patent infringement, and in particular, to the role of opinions from counsel in shielding against willful infringement.
1. Willfulness--the predicate determination for enhanced damages under the Patent Code--is a many-factored test ("totality of the circumstances") which, generally speaking, tracks the open-ended tests for punitive damages in the common law.(13)
2. In practice though, the primary factors that determine a willfulness determination are: (1) imitation versus independent development; (2) a competent, relied upon opinion from counsel; and (3) the infringer's conduct during litigation.(14)
3. Infringer imitation (little or no independent development) and reliance on a competent opinion from counsel are the strongest factors that contributes to a willfulness finding.(15)
4. The focus of most willfulness disputes is the opinion from counsel.(16)
5. An opinion from counsel can insulate an infringer from an enhanced damages award provided that the opinion is "competent" and "relied upon" by the infringer--a nascent third prong is whether the infringer intentionally withheld material information from the attorney who prepared the opinion.(17)
6. The opinion's "competence," which is the epicenter of disputes over willfulness, is assessed along two axes: (1) the qualifications of the attorney who prepared the opinion (must be a registered U.S. patent attorney/agent); and (2) much more importantly, the opinion's thoroughness, which in turn subsumes two elements: (a) breadth: a discussion of all primary legal issues that reasonably bear on validity, enforceability, and infringement; (b) depth: a thorough discussion of each of those issue in an objective way--e.g., an invalidity argument under § 103 must include an objective factors analysis; an argument of non-infringement under the doctrine of equivalents must include a review of the prosecution history).(18)
7. The sophistication (experience, training, position/responsibility) of the infringer's representative who receives the opinion (e.g., registered patent attorney versus non-legally trained) is taken into account when inferring the infringer's state of mind based on technical defects in the opinion.(19)
8. Absence of an opinion from counsel does not always lead to a willfulness finding.(20)
9. Frank, equivocal opinions are preferred to absolute, unequivocal ones.(21)
10. Opinions prepared by outside counsel are preferred to ones prepared by in-house counsel.(22)
11. Written opinions are overwhelmingly preferred to oral ones.(23)
12. Willful infringement requires actual notice of the patent--knowledge of the patent must be actual knowledge, it cannot be implied or constructive knowledge (i.e., the infringer knew or should have known of the patent). A written opinion from counsel is of course sufficient to provide the requisite actual knowledge.(24)
13. Actual knowledge of the patent by an officer or director of the infringer-corporation will be imputed to the corporation.(25) The Federal Circuit has not addressed the question of whether actual knowledge by any employee (or agent/contractor) having a duty to communicate that knowledge, will be imputed to the corporation.(26)
14. If the infringer refuses to produce an opinion from counsel, the fact finder is permitted to infer, though is not required to infer, either that the infringer had no opinion, that he did not rely upon it, or that it reached an adverse conclusion.(27)
15. An infringer who produces an opinion from counsel waives attorney-client privilege as it relates to that document and all materials in connection with its preparation.(28) What little protection is available through the work product doctrine.(29) (The Federal Circuit has expressed a preference for separate trials as a way to minimize the obvious and inevitable conflict--i.e., the desire to produce the opinion to avoid enhanced damages, and the desire to avoid disclosing privileged communications to opposing counsel.)(30)
16. A willfulness determination is a necessary though not a sufficient condition for enhanced damages.(31)
17. An enhanced damages award is not compensatory but punitive.(32)
18. The amount of the enhancement must bear some reasonable relationship to the degree of willfulness. Treble damages--the maximum enhancement allowable under the Patent Code--are not routine, but are reserved for the most egregious cases of willfulness.(33)
19. The standard for enhanced damages under § 284 of the Patent Code and the standard for attorneys' fees under § 285 are different, though enhanced damages and attorneys fees awards are correlated.(34)
20. The burden of proof relating to willful infringement is a little confusing: The patent owner-plaintiff must prove willful infringement (a question of fact) by clear and convincing evidence. On the other hand, the putative infringer has an affirmative duty to exercise due care to avoid infringement.(35)
21. Willfulness is a question of fact--determined by a jury--and is reviewed under the abuse of discretion standard.(36) Although a jury makes the willfulness finding, the court, based on that finding, sets the level of enhancement.(37)
PART III
Right now, the usual way an infringer insulates itself against a charge of willful infringement is by handing over a written opinion from counsel. In order for the opinion to shield the infringer against willful infringement (and therefore enhanced damages) the opinion must be competent and it must have been relied upon. The first of these requirements refers to the opinion's substance--its thoroughness, and its plausibility. What I urge in this Essay is that we eliminate entirely the competence prong from this inquiry.
I genuinely empathize with firms whose existence depends upon developing new technology--not only must they operate in a landscape littered with patents of dubious validity, but if they identify a potential problem with a competitor patent through their own diligent search, retain qualified counsel to render an opinion on that patent vis-à-vis the firm's own putative commercial activity, then provide counsel with all relevant information to render that opinion--they are still exposed to very harsh punitive damage awards under the Patent Law. Because should this lawyer's written opinion turn out to be anything less than an exhaustive pronouncement on every issue of even the remotest relevance: omit a doctrine of equivalents analysis, omit an objective factors analysis, fail to base a validity analysis on un-cited prior art, omit any other of patent law's hyper-technical minutiae that relates to infringement, validity, or enforceability, regardless of whether it influences the opinion's conclusion, and the firm pays for that, and in a big way, which is more than a little strange--that the purely technical quality of a legal document is somehow probative of the reader's (infringer's) state of mind, a reader almost always unqualified to assess the technical merit of the document. But that's just what the law requires for a firm to insulate itself against a charge of willful infringement: that it critically evaluate its lawyer's advice rather than just point to some good faith basis for having relied upon it.
What's worse is that once the firm hires outside counsel and pays a large sum for this voluminous, indiscernible, and not very useful document--that document's value is only realized by handing the entire document over to the other party in the lawsuit (often a competitor) and therefore waiving its attorney-client privilege.
So what functions might an opinion from counsel serve--ex post, in an infringement dispute? One, we can rely upon the opinion's substance--what it actually says--to establish the requisite good faith belief of non-infringement. This is pretty much what courts do today.
An implicit premise that underlies that legal rule--with its microscopic fixation on the opinion's substance--is that a reasonable person cannot rely on bad legal advice. Another is that the legal advice actually forms the infringer's state of mind--so by examining the written opinion from counsel we have an objective indicium of the infringer's state of mind. The first premise is demonstrably false: If a decision-maker were sufficiently knowledgeable to assess the quality of the legal analysis underlying the legal conclusions, then he wouldn't really need the lawyer's opinion at all; based upon the information he provided counsel, he could form his own opinion.(38)
As for the second--that the infringer's state of mind is somehow formed by the opinion, and therefore is evidence of it--the rejoinder is almost as obvious.(39)
For instance, if the attorney who drafted the opinion based his invalidity analysis on § 103, yet failed to consider an objective factors analysis (a legally proper rebuttal to a § 103 case of unpatentability/invalidity), the Federal Circuit would not hesitate to deem that opinion "incompetent," which means that the opinion cannot be relied upon establish the requisite good faith belief of non-infringement. The fact is that most grounds upon which opinions are deemed incompetent are not even faintly discernible to a lawyer untrained in patent law, let alone to a technical manager. And therefore it's just hard to imagine that the infringer's state of mind was affected at all by the absence (or misstatement) of that kind of detail. In other words, the technical quality of the opinion (not its conclusions but its comprehensiveness and the plausibility of its reasoning) is not probative at all of the reader's (infringer's) state of mind. But under the present rule, that's why the opinion's substance is scrutinized (not just its conclusions, but the reasoning as well)--to infer the infringer's state of mind. Yet, the law allows a firm to seek the advice of counsel, then rely on that advice--I am not sure what else that can mean other than that the firms' officers/directors are relieved of the burden of personally evaluating the matter themselves. But then the legal standard seems to require that the firm's fiduciaries personally scrutinize the quality of that advice to avoid enhanced damages.
In any event, a second possibility for the function a written opinion might serve, is that we can rely upon the opinion as a bright-line safe harbor--a turnstile immunity, or an administrative expedient to avoid altogether the tedious inquiry into the infringer's state of mind--which we can never really know for sure, indeed, as things stand now, and to be fair we let the parties introduce just about whatever evidence they can get their hands on to try and prove what that state of mind was. The inevitable result is another trial (on enhanced damages) after the first one (on liability and compensatory damages).
In this second case, we don't really care what the opinion says--in other words we are not relying on the opinion's substance to assay the infringer's state of mind. As I said, the nexus between the opinion's competence, as judged by its substance, and the infringer's state of mind, is fragile indeed-so much so that I suspect that fixation on the opinion's substance is a genuine obstacle to a sensible inquiry into the infringer's state of mind (which is the desired endpoint).
So rather than the opinion's content, we look instead to the circumstances under which it was prepared, e.g.: why? (the infringer's own diligent search or warning by the patent owner); by whom? (a competent patent attorney); and when? (well before the infringing conduct began). Of course, under the current legal rule, we certainly don't ignore these things, but they are not the center of gravity of the analysis, instead the opinion's substance is.
But doesn't the legal rule proposed here--i.e., essentially erasing the competence prong from the willfulness inquiry--let patent infringers off the hook too easily? Put another way, won't it encourage them to draft sham opinions? It shouldn't. For those infringers who did not obtain the advice of counsel, my rule and the present one look just alike. For infringers who obtained the advice of counsel but do not rely on it, my rule and the present one look just alike. For infringers who intentionally withheld information from counsel who it hired to prepare the opinion, my rule and the present one look just alike. And for infringers who rely upon a frivolous opinion, a comparison of the opinion's conclusions with the litigation's outcome ought to expose it as frivolous--and in a far more objective way an ex post analysis of the opinion's content.(40) And so the rule I propose and the one we have now, converge in the critical (but small) class of disputes, and ought to produce identical outcomes in all other classes.
Additionally, the vast majority of companies that request an opinion do so in order to determine whether their proposed course of conduct will infringe (or how they can modify their conduct so that they won't infringe) and not merely to insulate themselves against willful infringement. In other words, the legal rule regarding the advice-of-counsel defense will usually not affect the quality of the legal advice lawyers provide their clients.
Second, the rule I urge here might actually result in better-drafted opinions not worse ones. More particularly, I doubt the current rule actually encourages lawyers to furnish advice to their clients in the form that best allows their client to plan their commercial activity. How can it? Right now, every lawyer knows that if the opinion he or she drafts turns out to be wrong it will much later be dissected and compared against an imaginary, exemplary opinion that contains a thorough discussion of every conceivable issue in patent law relating to infringement, validity, and enforceability. So mindful of this, the lawyer drafts and gives to his client a written opinion not so easily digested--circumlocution at the expense of concision, formula at the expense of frank insight, and profusion at the expense of parsimony.
At the same time, clients have a strong incentive to withhold information from the attorney who drafts the opinion, since if that opinion is ever needed, then the client will have to disclose the opinion to the plaintiff-patent owner--as well as all documents in connection with its preparation.
So then I suspect that eliminating the competence prong from the inquiry will actually encourage more concise, lucid, and honest opinions, as well as (and partially as a result of) more frank disclosure by clients--not voluminous documents that contain a discussion of every possible legal issue, whether necessary or not; whether relevant or not; or whether material or not.
In summary, I propose that we dispense with the current standard (the "competence prong") and in its place just ask whether the circumstances surrounding the creation of the opinion suffice to establish a genuine desire to avoid infringement. This is a purely objective inquiry, it redirects the focus away from the technical minutiae of the opinion (as well as the really unfortunate fiction that the infringer's state of mind is formed by the contents of the opinion) and towards the circumstances surrounding its creation--i.e., why was it obtained, when, by whom, and based on what information. Not only is this standard far easier to administer--it will conserve judicial resources and lower enforcement costs to patent owners--but it ought to produce a much lower error rate. Finally maybe the most obvious shortcoming of this legal rule is that it forces a firm to choose between waiving its attorney-client privilege (and the work-product doctrine) and risking exposure to enhanced damages. And even more seriously, that rule negatively influences what information clients furnish to their lawyers. The rule I propose eliminates this dilemma. If the opinion's substance is no longer a central issue, then the entire opinion need not be disclosed to the plaintiff-patent owner.(41) In other words, we can have an objective way to resolve the willfulness inquiry at the same preserving the sanctity of the attorney-client privilege.
PART IV
I don't think there is any question that the current rule need fixing--most easily by eliminating the competence prong from the legal rule. The competence inquiry--the opinion's technical detail--is at best only modestly probative of the infringer's state of mind; because of that, the rule is susceptible to very large error; it does not encourage honest, lucid, thoughtful opinions (but rather obscure, voluminous ones); it is far too difficult to administer, it is contrary to the large body of authority under which it is subsumed, and perhaps most importantly, it requires that the firm waive its attorney-privilege if it wishes to actually rely on the opinion at trial.
Under the present rule (comprised of a competence inquiry at its center), a firm finds itself caught between the scylla of enhanced damages the charabdis of waiver of its attorney-client privilege. So the present rule no doubt discourages the frank exchange of information between the lawyer and the client. How can it not? Because to invoke the advice-of-counsel defense, a firm must hand over the written opinion--as well as most other materials in connection with that opinion--to the plaintiff-patent owner.(42) Under the present rule, there is no way out of this dilemma since the opinion's substance is usually the epicenter of the dispute.
But if we redirect the focus of the inquiry away from the opinion's substance and towards the circumstances surrounding its creation, where it belongs, then we can allow firms to invoke the advice-of-counsel defense without waiver of the sacred attorney-client privilege.(43) Aside from aligning this legal standard with just about every other one (that does not require waiver of attorney-client privilege to avoid punitive damages) the rule urged here will no doubt allow lawyers to provide their clients with better advice, because the client no longer has a good reason to withhold crucial information to his lawyer.
Written opinions from counsel are scrutinized in such detail and with such focus by trial courts and the Federal Circuit that they have lost sight of the broader question under which that analysis is ostensibly subsumed.(44) Put another way, with the possible exception of the attorney-client privilege issue I just discussed, the most obvious shortcoming of the current legal standard to determine willful infringement is the peculiar way in which courts seeks to discern the infringer's state of mind. Right now they do it by scrutinizing the technical quality of the attorney's written opinion.
The Federal Circuit has upheld willfulness findings on the ground that the opinion from counsel was not "competent"--competence judged by compliance with the most technical criteria, apparent only to the attorney skilled in patent law, and certainly not to the client, whose state of mind is at issue. Consider these grounds upon which the Federal Circuit has relied upon to judge the opinion not sufficient to shield the infringer from punitive damages:
[T]he [opinion] letter…failed to set out a standard for one of ordinary skill in the art, failed to consider secondary considerations in determining obviousness, mischaracterized prior art, and failed to perform a proper best mode analysis.(45)
Had [the memorandum] contained within its four corners a patent validity analysis, properly and explicitly predicated on a review of the file histories, of the patents at issue, and an infringement analysis, that, inter alia, compared and contrasted the potentially infringing method or apparatus with the patented inventions, the opinion may have contained sufficient internal indicia of credibility to remove any doubt that [the infringer] in fact received a competent opinion."(46)
In short, the attorney's advice…based solely on file history prior art does not by itself raise an inference of good faith substantial enough to convince us that the trial court's determination of willful infringement was clearly erroneous.(47)
Though each of the opinions (from which these excerpts are taken) was prepared by competent patent counsel and each concluded by saying that the company could continue its commercial activity without infringing, the law is very clear: seeking out the advice of qualified patent counsel and relying upon that advice is not enough to form a good faith belief of non-infringement. Instead, the law requires the company to put aside the opinion's conclusion and carefully scrutinize the reasons for that conclusion. In other words, the company is forced to assess the opinion's competence itself, which means reviewing the opinion's reasoning (both what appears in the opinion and what does not but ought to) and developing the non-infringement conclusion essentially independent of the lawyer who drafted the opinion.
In any event, from these very technical defects in the attorneys' written opinions, the courts inferred that the company did not have a good faith belief of non-infringement. It's just inconceivable that a typical company officer would ever catch these errors, or if by some chance he did, that he would understand their significance. Short of forcing him to hire a second patent attorney to review the work of the first, this duty to exercise due care must end somewhere--as I have said, perhaps it ought to end when the business manger identifies his competitor's patent through a diligent search, hires qualified counsel to study it after providing counsel with all information relevant to prepare an opinion, then relies upon that opinion.(48)
Again, the ultimate question that these remarks relate back to is the infringer's state of mind--i.e., "Whether, under all the circumstances, a reasonable person would prudently conduct himself with any confidence that a court might hold the patent invalid or not infringed."(49) On one hand the law allows a firm to rely upon the advice of qualified patent counsel, and yet requires that firm to critically evaluate the technical detail of that opinion--not just whether the conclusion is plausible, and not just whether the reasons given in support of the conclusion are accurate, but also whether all possible grounds for the conclusion are present in the opinion. To infer that the infringer lacked a good faith belief that he was not infringing his competitor's patent, just because the opinion he obtained from his outside counsel failed to include a particular legal theory that bears on validity or infringement, is just absurd. Really it amounts to nothing less than a rule requiring a firm to obtain an opinion from qualified counsel and then obtain another opinion from a second lawyer to evaluate the first one.(50) What's even worse is that a firm is entitled to rely upon the advice of counsel--and whatever rely means, it cannot mean that the firm must conduct a plenary review of the document. To "rely" on the document's conclusion means to trust it. To say that trust is not justified--i.e., it was not reasonable to rely upon the advice of counsel--based upon information (or lack of it) contained in that document doesn't make a whole lot of sense--i.e., either the firm is permitted to rely upon that opinion or it isn't; and if it is, then that permission can't mean anything other than it ought not be required to conduct an independent review of the document. To say that reliance (or permission to trust to document's contents) was not justified, as evidenced by some defect within the document itself, is a self-contradictory rule.
But I am not so sure the rule I urge here is inconsistent with Federal Circuit authority. Actually, I would say this authority is internally inconsistent--e.g., try and reconcile these two positions:
[The opinion] ignores entirely the question of infringement under the doctrine of equivalents. Further, an opinion on equivalents…would have been impossible, [the infringer's] attorneys having never ordered let alone consulted, the [patent's] prosecution history before rendering their opinion.(51)
The most important consideration, [in determining whether the opinion suffices to establish a good faith belief of non-infringement] is that nothing in Valiquet's [the attorney's] letter would alert a client to reject the letter as an obviously bad opinion.(52) (emphasis added)
The first is exemplary of the majority position taken in the bulk of Federal Circuit decisions. The second is from Read Corp. v. Portec, interestingly enough, probably the leading case on the role of the written opinion from counsel in reviewing willfulness findings. I think the Read Corp. panel (speaking through Judge Nies) had it just exactly right. Again, here's what it says: "[N]othing in Valiquet's letter would alert a client to reject the letter as an obviously bad opinion."(53) And the opinion doesn't just mention this as a factor in its analysis but prefaces the remark by saying that it's "The most important consideration."(54) What is more, the trial court held that the written opinion at issue was defective not just for failure to discuss a particular legal theory or whatnot, but because the attorney who drafted the opinion "[p]erformed no specific legal research."(55) But according to Judge Nies, whether the attorney performed legal research, how much he performed, or what was its quality, had very little to do with the infringer's belief regarding whether it deliberately infringed the patent. Instead, the fact that the infringer sought the advice of outside counsel, furnished counsel all relevant material, received then relied upon their written opinion--an opinion which contained nothing to alert a reasonable firm that its conclusion was wrong. Due regard for whether the particular defect is actually discernible to the person within the company charged with receiving and reviewing the opinion, like in Read Corp., is evidenced in the a noteworthy trial court decision, Johns Hopkins v. CellPro: "While this deficiency [lack of detail in some prior art references relied upon by the opinion's drafter to support his argument of invalidity] might not have been obvious to the investors or to others on the Board, it should have been obvious to Kiley [a registered patent attorney, legal counsel/board member of the infringer, and reviewer of the written opinion] ."(56)
But let's assume common sense is not the only benchmark with which to a legal rule. Viewed outside the insular context of patent law, one might find these grounds (just recited) for nullifying the opinion, hence finding the infringement willful, and therefore, subjecting the infringer to punitive damages, unusual to say the least.
Beyond question, the general law relating to reliance of advice of counsel is far more liberal than in the patent context; indeed, it wisely distinguishes a requirement for an independent investigation from cautious (but necessary) reliance:
Reliance on a lawyer's opinion is not a safe harbor is a reasonable man would know that the opinion does not reflect a prudent lawyer's serious efforts to ascertain the applicable law on the subject of the opinion.(57)
And in employment law for instance, a written policy is a total bar to punitive damages in ADA litigation--the substance of that policy is not scrutinized (other than perhaps facially); instead what is important is that the defendant-company went to the trouble to hire competent experts to craft the policy, and if those experts messed up, it's certainly unfair to punish the company.(58)
Likewise, in the other two major Federal statutory areas of intellectual property law, trademark and copyright law, a written opinion from counsel is not required (or even expressly preferred) to insulate the infringer against punitive damages. And while an opinion from counsel would certainly evidence the infringer's good faith belief, beyond question, it would not be subjected to anything like the same level of scrutiny as in patent law.
The poor relationship between the opinion's substance and the infringer's state of mind no doubt exposes the present legal rule to very large error. When assessing whether the opinion immunizes the client against willful infringement, we ask whether the opinion is sufficient to have created in the mind of the infringer, a good faith belief of non-infringement. This is a subjective question--i.e., what the infringer thought at a particular moment in time--which we try to answer by looking to objective factors, namely the substance of the written opinion from counsel, if there one.
As I have said, the genuinely innocent infringer who timely seeks advice of outside counsel he reasonably believes to be qualified, furnishes him with all relevant material, and relies on the opinion rendered from counsel, is nonetheless exposed to punitive damages if his lawyer writes a technically flawed opinion, though the flaws may be completely un-apparent to the non-lawyer, no matter how carefully he read the opinion.
At the same time, consider the infringer who requests the oral advice of his in-house counsel about a competitor patent, and his counsel promptly informs him that their present commercial product will certainly infringe that patent. The infringer then approaches outside counsel and requests an "aggressive" opinion solely for purpose of limiting his exposure to his lost profits; the opinion states that "more likely than not, the patent is invalid or the product does not infringe." Quite often, one might imagine that the circumstances surrounding the preparation of this opinion will be invisible to the judge and jury, particularly given the fixation on the opinion itself--which, as you might imagine, is technically flawless, i.e., it complies with every minute criteria for competence enumerated in Federal Circuit authority--hence no punitive damages.
So, with the present legal rule, we can expect a fair number of false positives as well as false negatives. In my first scenario, the innocent infringer was penalized for his lawyer's errors; in the second the deliberate infringer was immunized by bureaucratic compliance with a very nieve legal standard--a legal standard misaligned with the conduct it's designed to influence.(59) The reason for the error rate is not just that we are trying to ascertain the infringer's state of mind--something that's very hard to do anyway--at a given moment in time, long ago, but because we try to do it inferentially, by looking for technical flaws (largely invisible to the client) in the opinion from counsel. I don't think we ought to bother--not only is the infringer's state of mind far too difficult to determine, but the way we currently do it addresses the question only obliquely, and as I suspect, with substantial error.
Also, what always strikes me is how very difficult to apply is the legal standard for willfulness, and in particular, the competence. For instance, Federal Circuit panels have no choice but to listen to the parties' tedious arguments over whether the written opinion's close attention to the patented device (and/or the patent itself) during design of the infringing device evidences the infringer's careful attempt to design around the patent, or whether it evidences pure imitation;(60) whether the fact that the infringer obtained more than one legal opinion is evidence of "opinion shopping" or extraordinary diligence (as well as the fact that the two were obtained independent of each other);(61) whether the infringer's delay in commercializing the accused product is probative of its belief that it would infringe or simply extra caution to ensure that it avoids infringement;(62) similarly, while the infringer offers evidence of continuous on-going discussions with patent counsel as evidence of serious intent to avoid infringement, the patent owner scrutinizes evidence of those discussions for any inconsistency that might mitigate any firm belief in non-infringement;(63) and while the patent owner may argue that an opinion's frank, equivocal character vitiates any good faith belief in non-infringement (i.e., how can someone rely on an ambiguous opinion), the infringer points to the same thing as evidence of the opinion's frank engagement of complex issues and an attempt to be thorough and present the best available arguments on both sides;(64) while the infringer points to that fact that he filed a declaratory judgment action (rather than wait to be sued by the patent owner) which evidences a good faith belief in non-infringement and a clear intent to resolve the dispute rather than evade it, the patent owner argues that the declaratory judgment action was a frivolous suit probative of willful infringement.(65) One might also imagine a dispute over the thoroughness of an opinion--the infringer urging that because his opinion considered in excruciating detail, essentially every remotely plausible issue, that is clear evidence of his intent to avoid infringement; on the other hand, the plaintiff argues that the 100-page opinion was in fact strategically designed to avoid enhanced damages, rather than provide the infringer with straightforward information about whether it can sell its product.(66),(67)
I am also concerned that our current rule actually discourages lawyers from giving the most frank, honest advice to their clients (which I shall assume is the form in which we prefer that the advice be given). There's three reasons for this. The first one, which has to do with the required waiver of attorney-client privilege to invoke the advice-of-counsel defense, I have already discussed. Another reason is that the current rule encourages lawyers to draft an opinion in accord with a rather strict and exhaustive template, created from Federal Circuit authority.(68),(69) This kind of document, may be evidence of the attorney's own due diligence, but it is certainly not the best form for the attorney to communicate with his client regarding the threat of patent infringement
Here is a second reason why the current rule may perversely encourage a lawyer to prepare an opinion the delivers less than the most frank, clear advice to his client. The competence prong of the good faith defense (the other prong is reliance) is in turn comprised of two sub-prongs: the qualifications of the drafter and the opinion's "thoroughness." Generally speaking, thoroughness might mean two slightly different things--one, it could refer to whether the opinion discusses all issues that might reasonably bear on validity, infringement, and unenforceability. So therefore, if the drafter failed to discuss the possibility that the patent might be held unenforceable (e.g., due to patent misuse or inequitable conduct)--even though the outcome of that analysis would not have affected the opinion's final conclusion--then he would have failed to have been thorough under this definition. Here's a second definition: thoroughness with respect to each issue--or at least the outcome determinative one. So for instance, if the drafter based his conclusion upon an invalidity argument under § 103(a), but failed to discuss objective factors (e.g., commercial success) then we would say his opinion was not thorough with respect to this second definition. The distinction is small but it is not insignificant. Why must an opinion be thorough in that first sense?(70)
So while competence is one requirement, reliance is another, and a lengthy opinion that considers all possible theories, references, and facts is more difficult for the company to digest and therefore rely upon. Federal Circuit authority--as well as attorneys who draft opinions--ought to account for this.
(A very brief digression.) The previous discussion--regarding the competing desires of thoroughness and frankness--raises the question whether the best opinion (to comply with the current legal rule) ought to be "honest/frank" or unequivocal. Two cases in particular deserve front-and-center attention here.(71) The first is Read v. Portec--perhaps the leading Federal Circuit decision on the issue of willfulness.(72) In this case, the trial court awarded the plaintiff, Read, enhanced damages based on a willfulness finding, which was based in part upon the opinion's slightly skeptical conclusion. The Federal Circuit reversed, in an opinion that contained this footnote:
An opinion of counsel, of course, need not unequivocally state that the client will not be held liable for infringement. An honest opinion is more likely to speak of probabilities than uncertainties.(73)
Westvaco is a similar case.(74) There, the trial court awarded treble damages based upon a willfulness finding--a finding premised in part upon the "equivocal" nature of the written opinions. Like Read, the Federal Circuit reversed, citing Read for the proposition that "[t]he district court's finding that the opinion letters were 'equivocal' also does not require a finding of willfulness."(75)
So, should an opinion be more frank or should it present its conclusions in starched, right-angle, unequivocal terms? I believe the former is probably best.(76) For one thing, Federal Circuit authority, if it hasn't placed its imprimatur on such opinions, has at least expressed a modest preference for them (more on this in a moment). Second, a frank opinion is more consonant with the "thoroughness" requirement (which along with the qualifications of the opinion drafter, are the two requirements that comprise the competence prong). The thoroughness prong does not require that the drafter consider every plausible legal issue--e.g., doctrine of equivalents, secondary factors, and so forth--but failure to consider any issue, particularly if it turns out to be outcome determinative, never favors the infringer. And so thoroughness, at least in one sense, tends to coincide with frankness.(77)
But like everything lawyers do, balance is the key here. Cases in which equivocal opinions are criticized, tend find the opinions objectionable not for lack of competence, but more on the ground that an opinion that is too equivocal cannot or should not be relied upon--in other words, if the advice is too ambiguous, then it cannot furnish the requisite good faith belief at all.(78)
So, maybe the best thing to do: having considered the issue upon which your client ultimately lost, and having presented the patent owner's most likely rejoinder, then concluded that "though the issue is arguably somewhat close, I believe that in the event of litigation my client is more likely than not to prevail, given the weight of the Federal Circuit authority--though the authority is not uniform and the outcome is necessarily dependent upon factual determinations by a jury…." In other words, write the opinion with due regard for the only scenario in which it will ever be read in court--your client loses. And if your client loses, then you want the opinion to reflect that you considered the ground upon which he lost and did indeed conclude that the patent owner had a colorable argument, and that a definite outcome could not be predicted due to the uneven Federal Circuit authority, the random underpinnings of factual determinations (e.g., witness credibility) and so forth.
But the competence requirement ought to be done away with for another, more insidious reason--which leads me to another brief, though not unrelated digression on the relative weight given to written opinion's prepared by in-house attorneys versus outside ones. The Federal Circuit has said this: "[T]here is no absolute rule excluding reliance on in-house counsel opinions."(79) And yet, there is extensive and quite consistent dicta in other Federal Circuit decisions to suggest that in-house opinions are given less weight than those prepared by outside counsel, e.g.: "[The infringer] knew that the attorney from whom it sought advice was its own in-house counsel.(80) While this fact alone does not demonstrate M-K's lack of good faith, it is a factor to be weighed."(81) The source of this bias is fairly obvious:
It is not believed that the Federal Circuit meant to suggest that in-house counsel is less competent than outside counsel. Instead, the case reasoning appears to reflect the idea that the party rendering the advice is closely tied to the company and may feel undue pressure to recommend in favor or against any particular patent.(82)
But that's not the whole story.
Consider that an opinion from outside counsel is really nothing more than just that lawyer's own biased estimate of his or her chances of successfully defending his client against a charge of patent infringement--part hubris-driven prognostication, part sales pitch.(83) Let's say that patent infringement lawsuits come in three varieties: (1) clear winners ("slam dunks"); (2) pretty certain losers (like summary judgement); and (3) cases in between these two. And let's assume that most lawyers behave more or less ethically, so when confronted with a case in category (1) or (2), they'll say so. Type (3) cases--which probably comprise the majority of cases, and which no doubt comprise by far the largest category of litigated disputes--are the most subject to this hidden institutional bias I am talking about, which isn't dishonesty or unethical behavior, but just the lawyer's genuine though concealed prediction about the outcome of the dispute; his own estimate of his chances of winning for his client. Granted, the analysis may be thorough--or as thorough as the lawyer thinks it needs to be--but every word of it is directed to the same predictable (but invisible) conclusion: "This case is winnable with exceptional lawyering; I am an exceptional lawyer, therefore your chances of winning are very good."
Indeed, the question of bias in ostensibly independent review (e.g., financial audits) has been investigated, and the problem of lack of objectivity well documented in the business literature.(84) The point I wish to make is that the in-house lawyer has probably the opposite bias--not only does he not profit from litigation, but his job is in jeopardy the closer he gets his employer to the courthouse. He has a very strong incentive to avoid drafting a litigation-promoting opinion. That doesn't mean the in-house lawyer will prepare a better opinion, just a different kind of opinion, which reflects the different incentives he faces.(85),(86)
So to the extent that the infringer's state of mind is indeed formed by the substance of the opinion (the fiction that underlies the legal rule), I would argue that the attorney who drafts the opinion has his or own desire to influence his client's state of mind, apart from an accurate assessment of validity, enforceability, and infringement. As I have said, an opinion from outside counsel is nothing more than that lawyer's own biased estimate of his or her chances of successfully defending his client against a charge of patent infringement. It is not a neutral document, nor are its conclusions empirically verifiable (e.g., like a financial audit)--instead, it is the opinion of a person financially interested in the subject matter, writing on a topic subject to almost no objective verification, and who obviously intends to mask that bias from his client. What is the significance of this? For one thing, we ought to think twice about forcing the client to pay the penalty of that deliberately hidden bias; in other words, if the conclusions are not supportable by the facts and legal authority then not only should the client not be held accountable, but that fault may have been concealed or at least camouflaged from the client through the "persuasive" character of the document.
1 Intellectual Property Counsel, Oslo Technology Center, (Schlumberger), Oslo, Norway. I am grateful for the
careful and insightful review of Steve Christian.
2 Predictions, from Days of Open Hand, A&M Records, 1990.
3 35 U.S.C. § 284.
4 Ryco, Inc. v. Ag-Bag Corp., 857 F.2d 1418 [8 USPQ 2d 1323] (Fed. Cir. 1988).
5 Id.
6 See, e.g., Central Soya Co., Inc. v. Geo. A. Hormel & Co., 723 F.2d 1573 [220 USPQ 490] (Fed. Cir. 1983).
7 Bott v. Four Star Corp., 807 F.2d 1567, 1572 [1 USPQ 2d 1210] (Fed. Cir. 1986).
8 A few years later, the Court in Read Corp. v. Portec, expanded upon the Bott Factors. "In addition, other
circumstances which courts appropriately have considered, particularly in deciding on the extent of enhancement, are
(4) Defendant's size and financial condition; (5) [c]loseness of the case; (6) [d]uration of defendant's misconduct; (7)
[r]emedial action by the defendant; (8) [d]efendant's motivation for harm; [and ] (9) [w]hether defendant attempted to
conceal its misconduct." Read Corp. v. Portec, Inc., 970 F.2d 816 [23 USPQ 2d 1426) (Fed. Cir. 1992).
9 Comark Communications, Inc. v. Harris Corporation, 156 F.3d 1182, 1191 [48 USPQ 2d 1001] (Fed. Cir. 1998).
10 I am speaking generally here--I have seen some very creative damage models.
11 See, e.g., William M. Landes, An Economic Analysis of the Courts, 14 J. Law & Econ. 61 (1971).
12 This can be shown by a simple example. Let x represent the plaintiff's own estimate of that he will prevail and
recover damages in, say the amount of $1,000,000 (e.g., a reasonable royalty). Now let y represent the defendant's
estimate that he will prevail. Let's say that each party's attorneys' fees are $300,000, hence the plaintiff's expected
recover is ($1,000,000) * x - $300,000; and the defendant's expected payout is, -(($1,000,000) * (1 - y) + $300,000).
Suppose the plaintiff's believes he has a 70% chance of winning, and the defendant, a 60% chance of winning. Then
the plaintiff's expected recovery is $400,000; and the defendant's expected payout is -$700,000. Obviously then, if the
parties are rational, then this case ought to settle, since the plaintiff believes he will recover less than the defendant
expects to lose. This range (from $400,000 to $700,000) is often referred to as the bargaining range, and as its name
suggests, it is what drives settlement. Obviously, it is closely tied to the parties' own estimates of success--two highly
optimistic parties are quite naturally unlikely to settle. Now, let's use the same simple heuristic, with precisely the same
assumptions except that the plaintiff (who is suing for patent infringement) believes that he stands a good chance of
recovering his attorneys' fees if he wins, let's say that he believes he stands an 80% chance of recovering his attorneys'
fees if he is successful. For simplicity sake, let's assume the defendant does not believes attorneys' fees will be
awarded, so his expected payout will remain the same at -$700,000. But now the plaintiff's expected recovery is
($1,000,000) * x - [($300,000) * (1 - x * y)], which equals $568,000. Hence, the numbers ($568,000 is more than
$400,00) confirm our intuition, the plaintiff's expected recovery has increased, which in turn narrows the bargaining
range, hence settlement is less likely than before. The prospect of enhanced damages will only narrow it further (unless
both parties are atypically pessimistic about their chances of prevailing).
13 The Federal Circuit has left itself wide latitude with respect to the willfulness inquiry, e.g., Spindelfabrik Suessen-Schurr v. Schubert & Salzer Maschinenfabrik AG, 829 F.2d 1075 [4 USPQ 2d 1044] (Fed. Cir. 1987) ("[I]n respect
of willfulness, there cannot be hard and fast per se rules….") One way to look at it is to imagine a three-tiered
hierarchy--step-wise application of these three sets of factors more or less describes the willfulness analysis. Level
One is a set of three factors generally referred as the Bott factors--roughly, direct imitation versus independent
development, the infringer's behavior during the litigation, and the presence of a competent, relied upon opinion (Bott
v. Four Star Corp., 807 F.2d 1567 [1 USPQ 2d 1210] (Fed. Cir. 1986)); Level Two is a set of six factors (borrowed from
punitive damages law) set forth in Read Corp.v. Portec, Inc., 970 F.2d 816 [23 USPQ 2d 1426] (Fed. Cir. 1992).
Finally, level three is just everything else, e.g., referred to in Spindelfabrik). The Read panel remarked that "Use of
these factors [what I call Level Two] in patent cases is in line with punitive damage considerations in other tort
contexts…."
14 Bott, 807 F.2d at ___.
15. 15 According to my review of Federal Circuit authority, the Circuit has never decided a case in which it found willful
infringement (or upheld a trial court's finding of willfulness or remanded a trial court's finding of non-willfulness) even
though the infringer proffered a competent, relied-upon opinion from counsel. ( Of course, see, e.g., Comark, 156 F.3d
1182, for a case in which the patent owner attacked the opinion not on one of these two prongs but upon the ground that
information crucial to the preparation of a competent opinion was deliberately withheld from counsel; see also,
Westvaco, in which the trial court found the infringement to be willful despite a competent, relied-upon opinion; the
Federal Circuit reversed). In any event, this conclusion certainly demonstrates the primacy of the (competent, relied-upon) opinion from counsel in the willfulness inquiry. Second, I have also reviewed (what I believe to be) all of the
Federal Circuit opinions reversing/remanding/vacating the trial court's willfulness finding (or lack of one). I identified
six cases in which the Federal Circuit reversed the trial court for failure to find willfulness, but 14 cases in which the
Circuit reversed the trial court's willfulness finding. (Hence, if the number of trial court decisions on willfulness were
equally distributed between willfulness and non-willfulness then we might conclude that Federal Circuit is roughly twice
as likely to reverse a willfulness determination from the trial court as it is a non-willfulness determination. Of the six
cases reversing a non-willfulness finding, the Federal Circuit identified the infringer's imitation as the key grounds for
reversal; in another two cases, the Federal observed that the infringer had not obtained an opinion, and only in one of
them (Datascope) did the Federal Circuit actually disagree with the trial court over the substance (competence) of the
opinion. In exactly half of the 14 cases in which the Federal Circuit reversed the trial court's willfulness finding, the
Circuit based its reversal on the ground that the infringer had not imitated/copied the patent owner's product but had
engaged in a fair amount of independent development. And in only one of those cases (just like in the former group)
did the Federal Circuit actually quarrel over the opinion's competence (Graco, 60 F.3d 785). (The other six cases in
this second group break down this way: (1) in three of them, the trial court applied the wrong legal standard; (2) in
another, the trial court misinterpreted a subsequent remedial measure; and (3) in the last one, the patent owner sued the
defendant on the same day the patent issued.) In summary, I offer these cases as evidence (but not proof) of the
centrality of infringer imitation to the willfulness inquiry.
16 See, e.g., Comark Communications, Inc. v. Harris Corporation, 156 F.3d 1182, 1191 [48 USPQ 2d 1001] (Fed.
Cir. 1998) ("It is well settled that an important factor in determining whether willful infringement has been shown
is whether or not the infringer obtained an opinion of counsel."), citing Ortho Pharm. Corp. v. Smith, 959 936, 944
[22 USPQ 2d 1119] (Fed. Cir. 1992).
17 Read Corp., 970 F.2d at 829 ("Those cases where willfull infringement is found despite the presence of an
opinion of counsel generally involve situations where opinions of counsel was either ignored or found to be
incompetent."). See also, In re Hayes Microcomputer Products, Inc. Patent Litigation (Ven-Tel, Inc. v. Hayes
Microcomputer Products, Inc.), 982 F.2d 1527 [25 USPQ 2d 1241] (Fed. Cir. 1992) ("[A]dvice of counsel alone
cannot be used as a shield irrespective of the nature and timing of that advice in the context of the surrounding
circumstances.") Regarding what I refer to as the "nascent third prong," see, Comark, 156 F.3d at 1191 ("Comark
does not challenge the legal competence of Sundheim's opinion, but rather challenges Harris's own actions in
direction the creation of an opinion as undermining any reasonably good faith belief of competency. According to
Comark, Sundheim's opinion cannot be relied upon by Harris because Harris intentionally withheld important
information that Harris believed would result in an unfavorable opinion.")
18 I am not sure there is a Federal Circuit opinion that states this proposition--explicitly anyway; however, it is an
unmistakable conclusion from reading the Federal Circuit decisions relating to competence. See, e.g., Spindelfabrik,
829 F.2d at ___ ("The master discounted the infringer's reliance upon a non-infringement opinion of counsel because
(a) the opinion was by 'inhouse counsel'; (b) the opinion consisted of 'mere conclusionary statements without analytical
backup'….) See also, Underwater Devices, Inc. v. Morrision-Knudsen Co., Inc., 717 F.2d 1380 [219 USPQ 569] (Fed.
Cir. 1983).
19 So for instance, suppose the opinion (prepared by outside counsel) is received by the company's chief patent counsel
(a registered patent attorney). Now, in all cases, the Federal Circuit applies the odd fiction that the infringer's state
of mind is somehow formed by the contents of the opinion. My point is that this fiction is more robust if the infringer's
representative who receives the opinion is a person knowledgeable in patent matters. The Johns Hopkins University
v. Cellpro, Inc., 152 F.2d 1342, 1364 [47 USPQ 2d 1705] (Fed. Cir. 1998) ("[K]iley, the CellPro representative who
procured the opinion letters from Bloomberg, was highly sophisticated in matters of patent law and in the involved
technology. Kiley had worked as a patent examiner and later was a partner at the law firm of….. [I]t is therefore
reasonable to conclude that Kiley should have been on notice concerning the opinion's obvious shortcomings and
accordingly the impropriety of CellPro's course of action." [citing, Underwater Devices, 717 F.2d at 1390)]). See also,
the trial court's opinion disposing of the motions on enhanced damages, 978 F. Supp. 184 (D. Del. 1997).
20 Amstar Corp. v. Envirotech Corp., 823 F.2d 1538 [3 USPQ 2d 1412] (Fed. Cir. 1987) ("Absence of an opinion of
counsel does not in every case require a finding of willful infringement…."); Rolls-Royce Ltd. v. GTE Valeron Corp.,
800 F.2d 1101 [231 USPQ 185] (Fed. Cir. 1986) ("That affirmative duty will normally entail the obtaining of
competent legal advice of counsel before infringing or continuing to infringe; that does not mean, however, that absence
of an opinion of counsel alone requires in every case a finding of willful infringement.")
21 The leading case for this proposition is undoubtedly Read Corp. v. Portec, Inc., 970 F.2d 816 [23 USPQ 2d 1426]
(Fed. Cir. 1992) ("An honest opinion is more likely to speak in probabilities…"). Other cases expressing a preference
(even a slight one) for more honest, equivocal opinions are: Westvaco Corp. v. International Paper Corp. Co., 991
F.2d 735 [26 USPQ 2d 1353] (Fed. Cir. 1993), and Uniroyal, Inc. v. Rudkin-Wiley Corp., 939 F.2d 1540 [19 USPQ
2d 1432] (Fed. Cir. 1991). I have found only one Federal Circuit decision criticizing an equivocal opinion--see,
Central Soya Corp., Inc. v. Geo. A. Hormel & Co., 723 F.2d 1573 [220 USPQ 490] (Fed. Cir. 1983) (Nichols, S.J.,
concurring) ("My point is that this letter is far short of an unequivocal statement that if Hormel follows the writer's
guidelines, infringement will not result. Only, 'quite arguably,' will this be the case.")
22 Underwater Devices, Inc. v. Morrison-Knudsen Co., Inc., 717 F.2d 1380 [219 USPQ 569] (Fed. Cir. 1983) ("M-K
knew that the attorney from whom it sought advice was its own in-house counsel. While this fact alone does not
demonstrate M-K's lack of good faith, it is a fact to be weighed." citing, Western Electric Co. v. Stewart-Warner Corp.,
631 F.2d 333, 337 [208 USPQ 183] (4th Cir. 1980)). See also, SRI International, Inc. v. Advanced Technology
Laboratories, Inc., 127 F.3d 1462 [44 USPQ 2d] (Fed. Cir. 1997), and Minnesota Mining & Manufacturing Co. v.
Johnson & Johnson Orthopedics, Inc. 976 F.2d 1559 [24 USPQ 2d 1312] (Fed. Cir. 1992); but see, Studiengesellschaft
Kohle m.b.H v. Dart Industries, Inc., 862 F.2d 1564 [9 USPQ 1273] (Fed. Cir. 1988).
23 Minnesota Mining & Manufacturing Co. v. Johnson & Johnson Orthopedics, Inc., 976 F.2d 1559 [24 USPQ 2d 1321]
(Fed. Cir. 1992) ("[O]ral opinions are not favored…Such opinions carry less weight, for example, because they have
to be proved perhaps years after the event, based only on testimony which may be affected by faded memories and the
forces of contemporaneous litigation.")
24 Robert O. Bolan and William C. Rooklidge, Imputing Knowledge to Determine Willful Patent Infringement, 24
AIPLA Q. J. 157, 168 (1996) ("[N]o precedential case has applied liability for willful patent infringement on the basis
of implied or constructive knowledge, that is, that the infringer had reason to know or should have known of the
patent.")
25 See, e.g., Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 [16 USPQ 2d] (Fed. Cir. 1990) (imputing
knowledge by officer to corporation).
26 Shatterproof Glass Corp. v. Libbey-Owens Ford, 758 F.2d 613 [225 USPQ 634] (Fed. Cir. 1985) (declining to impute
knowledge of in-house patent staff who performed patent searches). Another Federal Circuit case reaching the opposite
results is American Medical Systems, Inc. v. Medical Engineering Corp., 6 F.3d 1523 [28 USPQ 2d 1321] (Fed. Cir.
1993) (imputing knowledge of in-house patent attorney); however this cases must be compared to Shatterproof Glass,
with care, since it appears to have been the opinion (which is probably very often the case) prepared by the attorney,
rather than his actual knowledge that gave rise to the imputation). In any event, Bolan and Rooklidge, Imputing
Knowledge, 24 AIPLA Q.J. at 179, state that "No willful patent infringement case has yet thoroughly addressed the issue
of when the knowledge of or notification to an employee of a corporation will be imputed to the corporation." They
then go on to argue for a legal standard based on traditional agency law principles--i.e., "[a]n employee's knowledge
of a patent should be imputed to the corporation only when that employee has acquired actual knowledge of the patent,
understands the importance of the patent, and has a duty to communicate his or her knowledge to the corporation."
27 Electro Medical Systems, S.A. v. Cooper Life Sciences, Inc., 34 1048 [32 USPQ 2d 1017] (Fed. Cir. 1994) ("[W]e
have held that when an infringer refuses to produce an exculpatory opinion of counsel in response to a charge of willful
infringement, an inference may be drawn that either no opinion was obtained or, if an opinion was obtained, it was
unfavorable.").
28 The Federal Circuit has not given us clear guidance on this issue. Macrovision Corp. v. VSA Ltd., 12 USPQ 2d 2011
(D. Or. 1989); McCormick-Morgan Inc. v. Teledyne Industries Inc., 21 USPQ 2d 1412 (N.D. Cal. 1991); Micron
Separations v. Pall Corp., 159 F.R.D. 361, 363 (D. Mass. 1995). One trial court has held that the defendant must
furnish all opinions from counsel--both favorable and unfavorable ones. Abbott Laboratories v. Baxter Travenol
Laboratories, Inc., 676 F. Supp. 831 [6 USPQ 2d 1398] (N.D. Ill. 1987). Another trial court held that a defendant who
wished to rely upon an opinion as evidence that it sought the advice of counsel (and therefore formed a good faith
belief) that the patent was invalid did not waive the privilege with respect to information relating to infringement. Saint-Gorbain/Norton Industrial Ceramics Corporation v. General Electric Company, 884 F. Supp. 31 [34 USPQ 2d 1728]
(D. Mass. 1995).
29 Board of Trustees of the Leland Stanford Junior Univ. v. Coulter Corp., 118 F.R.D. 532 (S.D. Fla. 1987); and, Thorn
EMI North America v. Micron Technology, 837 F. Supp. 616, 622 (D. Del. 1993)
30 Quantum Corp. v. Tandon Corp., 940 F.2d 642, 644 (Fed. Cir. 1991) ("Proper resolution of the dilemma of an
accused infringer who must choose between the lawful assertion of the attorney-client privilege and avoidance of a
willful finding if infringement is found, is of great importance not only to the parties but also to the fundamental values
sought to be preserved by the attorney-client privilege." The Federal Circuit goes on to say "An accused
infringer…should not, without the trial court's careful consideration, be forced to choose between waiving the privilege
in order to protect itself from a willfulness finding, in which case, it may risk prejudicing itself on the question of
liability, and maintaining the privilege, in which case it may risk being found to be a willful infringer if liability is
found.") One commentator--who presents case law in support of his assertion--remarks that trial courts have declined
to accept the Federal Circuit's invitation to routinely bifurcate liability and willfulness. Cox, Opinions of Counsel, 457
PLI/Pat at 239.
31 Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 370 [46 USPQ 2d 1169] (Fed. Cir. 1998) (en banc) ("A finding
of willfulness, however, does not mandate enhanced damages."); Delta-X Corp. v. Baker Hughes Production Tools, Inc.,
984 F.2d 410 [24 USPQ 2d 1447] (Fed. Cir. 1993) ("A showing of willful infringement or bad faith must support an
award of enhanced damages….") Read Corp. v. Portec, Inc., 970 F.2d 816 [23 USPQ 2d 1426] (Fed. Cir. 1992)
("Absent willful infringement…there is no basis in this case for enhanced damages." [W]hile dicta suggests that
infringement damages may be enhanced solely by reason of misconduct during litigation…this dicta is contrary to our
precedent that '[i]f infringement [is]…innocent, increased damages are not awardable for the infringement.) (citations
omitted).
32 Beatrice Foods Co. v. New England Printing & Lithographing Co., 923 F.2d 1576 [17 USPQ 2d 1553] (Fed. Cir.
1991). ("Damages cannot be enhanced to award the patentee additional compensation to rectify what the district court
views as an inadequacy in the actual damages awarded."); Delta-X Corp., 984 F.2d at ___ ("Enhanced damages are
punitive, not compensatory.")
33 National Presto Industries, Inc. v. West Bend Co., 76 F.3d 1185 [37 USPQ 2d 1685] (Fed. Cir. 1996) ("The wide
range of enhancement that is provided by the statute, up to threefold, permits the trial court to reflect the interest of
justice in adjusting the damage appropriate to the culpability of the acts of infringement."); Graco, Inc. v. Binks
Manufacturing Co., 60 F.3d 785 [35 USPQ 2d 1255] (Fed. Cir. 1995) ("the amount of enhancement must bear some
relationship to the level of culpability of the conduct."). See also, e.g., Crucible, Inc. v. Stora Kopparbergs Bergslags
AB, 701 F.Supp. 1157, 1164 [10 USPQ 2d 1190] (W.D. Pa. 1988) ("[B]ecause the court still considers the [willfulness]
question to be a close one…double, and not treble damages are appropriate."); Intra Corp. v. Hamar Laser
Instruments, Inc., 662 F.Supp. 1420, 1439 [4 USPQ 2d 1337] (D.D. Mich. 1987), aff'd without opinion, 862 F.2d 320
(Fed. Cir. 1988) (doubling rather than trebling damages since defendant "[v]oluntarily ceased manufacture and sale of
infringing systems during the pendancy of this litigation…."). See also, Read Corp., 970 F.2d at _____, (collecting
cases awarding enhanced damages by some amount less than the maximum amount).
34 While the two standards are in fact different, they do substantially overlap--as evidenced by the fact that enhanced
damages and attorneys' fees do in fact tend to be awarded together (i.e., if willfulness is found, then very often both
enhanced damages and attorneys' fees are awarded). See, S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d
198 [228 USPQ 367] (Fed. Cir. 1986) ("S.C. Johnson [plaintiff] points to the heavy weight of authority to the effect
that a finding of willful infringement and 'exceptional case' go hand in hand…. [D]istrict courts have tended to award
attorney fees when willful infringement has been proven, and this court has uniformly upheld such awards.") Section
285 limits attorneys' fees awards to "exceptional cases." Willful infringement is just one basis upon which a case may
be deemed exceptional, but there are others (i.e., a case can be exceptional without a willfulness finding). See, Rite-Hite
Corp. v. Kelly Co., 2 USPQ 2d 1915, 1919 (Fed. Cir. 1987) ("[W]illfulness is not the only basis on which the court may
find the case 'exceptional' in the words of section 285, and on which the court may exercise its discretion."). In other
words, a case may be "exceptional" under § 285, without an explicit willfulness finding (which again, is the predicate
for enhanced damages). At the same time, infringement may qualify as willful, enhanced damages awarded, yet no
attorneys' fees.
35 The patent owner-plaintiff must prove willful infringement by clear and convincing evidence (see, e.g., Therma-Tru
Corp. v. Peachtree Doors Inc., 44 F.3d 988 [33 USPQ 2d 1274] (Fed. Cir. 1995); the putative infringer has an
affirmative duty to exercise due care to avoid infringement. No doubt the putative infringer must prove that he has
discharged this duty (he clearly is in the best position to do so). I find these two statements--firmly grounded in Federal
Circuit authority--more than a little difficult to reconcile.
36 See, e.g., Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572 [38 USPQ 2d 1288] (Fed. Cir. 1996) ("Whether an infringer
acted willfully is a question of fact that rests on a determination of the infringer's state of mind.")
37 National Presto, 76 F.3d at ___ ("The enhancement of damages is a discretionary ruling of the court.")
38 Indeed, if an opinion is under review at all during an infringement dispute that's only because it was wrong, and yet
we allow "wrong" opinions to immunize infringer's against punitive damages.
39 Imagine that a large technology-based company hires a highly regarded patent attorney to advise the company on
whether it can proceed with its product development plans without infringing its competitors' patents. The attorney
gathers all relevant data, analyzes it, and after some prolonged circumspection, some weeks later calls up the
company's VP of Research, and tells him that more likely than not, the proposed new products will not infringe any
valid patents of their competitors. The VP then picks up the telephone, alerts manufacturing to begin full-scale
commercialization. Put aside for a moment our current legal rule. Did he have a good faith belief of non-infringement?
Objectively speaking, I would say he did--almost beyond question. He sought the advice of a competent patent
attorney, furnished him with all relevant information, received, understood, and implemented that advice; and the
attorney did nothing to undermine that good faith belief. But consider what that belief was based upon. It was based
upon the qualifications of the person who gave it, plain and simple. Would it have made a difference if the attorney had
given the VP a 50-page opinion to read? The person who provided the advice is the same, as are the conclusions--what
is different in this scenario is that the VP now has in front of him the reasons for the conclusion, which I argue that if
the VP were competent to assess whether they suffice to generate the conclusions rendered, then he would have little
need for the attorney. But the fact is, the law allows the firm's decision-maker to rely upon advice of counsel. "Rely
upon," whatever it means, certainly doesn't mean that the firm must form its own belief then seek corroboration from
its patent counsel, nor should it mean that the firm must hire a second lawyer to scrutinize the opinion written by the
first.
40 If we already assess the opinion's correctness ex post, do we also need to separately assess its "competence?"
41 as well as the ocean of related documents, e.g., prior drafts of the opinion, correspondence between the client and
attorney, and so forth.
42 Nobelpharma AB v. Implant Innovations, Inc., 23 USPQ 2d 1476, 1478 (N.D. Ill. 1992).
43 So I can imagine that a brief in camera review of the opinion--i.e., just to verify that one exists--would suffice under
the rule I propose. Other aspects of the opinion--i.e., why it was prepared (notice by the patent owner or independent
search), by whom (competent patent counsel or not), when it was prepared (sufficiently early to have been relied upon),
and what was its conclusion--can be determined without the plaintiff's access to the opinion.
44. 44 If a doctor prescribes a particular kind of medicine for me--I go and fill the prescription and dutifully follow the
dosage regimen; I don't ask whether he considered all possible types of medications as well other types of therapies,
when deciding on a treatment for my illness. I just assume he did. I don't ask to know what his reasons were, what
alternatives he considered then eliminated, why he eliminated them, what was his second-best choice, and so on. But
apparently that's what the firm who wishes to avoid punitive damages must do when receiving his lawyers advice.
45 In re Hayes Microcomputer Products, Inc. Patent Litigation (Ven-Tel, Inc. v. Hayes Microcomputer Products, Inc.),
982 F.2d 1527 [25 USPQ 2d 1241] (Fed. Cir. 1992).
46 Id.
47 Central Soya Co., Inc. v. Geo. A. Hormel & Co., 723 F.2d 1573 [220 USPQ 490] (Fed. Cir. 1983).
48 At least two experienced practicioner-commentators have observed/remarked that the Federal Circuit's level of
scrutiny applied to the opinion's substance has declined and/or is continuing to decline. I have no idea whether or not
this is true. Robert O. Bolan and William c. Rooklidge, Imputing Knowledge to Determine Willful Patent Infringement,
24 AIPLA Q. J. 157, 173 n. 58 (1996) ("The Federal Circuit, in its older cases, focused carefully on the competence
of the opinion of counsel, assessing these opinions with a very critical eye. [citing Central Soya Co. v. Hormel & Co.,
723 F.2d 1573, 1581 [220 USPQ 490] (Fed. Cir. 1983) (Nichols, S.J., concurring)]. Recently, the court's approach has
matured, recognizing that the opinion has to be wrong in order for the willful infringement issue to even arise [citing
Ortho Pharmaceutical Corp. v. Smith, 959 F.2d 936, 944 [22 USPQ 2d 1119] (Fed. Cir. 1992)"); Donald L. Cox,
Opinions of Counsel in Patent Litigation, 457 PLI/Pat 207, 224 (1996) ("[T]he Federal Circuit [in Graco, Inc. v. Binks
Mfg. Co., 60 F.3d 785, 793 [26 USPQ 2d 1353] (Fed. Cir. 1992)] appeared to be continuing its trend to focus not
entirely upon the content of the letter opinion but rather upon the effect that the opinion of counsel had upon the client.")
49 Ryco, Inc. v. Ag-Bag Corp., 857 F.2d 1418 [8 USPQ 2d 1323] (Fed. Cir. 1988).
50 And so for instance, would we never think of inferring anything about the testator's intent from the fact that his lawyer
failed to notarize the will, or failed to include some rhetorical flourish ordinarily found in such documents. We might
think those errors are evidence of the document's authenticity, but it would be absurd to infer anything about the
testator's intent from them.
51 Datascope Corp. v. SMEC, Inc., 879 F.2d 820 [11 USPQ 2d 1321] (Fed. Cir. 1989).
52 The Read Corp. Corp. v. Portec Inc, 970 F.2d 816 [23 USPQ 2d 1426] (Fed. Cir. 1992).
53 Id.
54 Id.
55 Id. at ____. (emphasis in original).
56 Johns Hopkins University v. CellPro, 978 F. Supp. 184, 194 (D. Del. 1997).
57 Mitchell v. Pidcock, 299 F.2d 281, 287 (5th Cir. 1962).
58 See, Kolstad v. American Dental Association, 119 S.Ct 2118 (1999); EEOC v. Wal-Mart Stores, Inc., (10th Cir.
1999).
59. 59 Actually, while I am suggesting that we eliminate the "competence" prong altogether, it appears that my proposed
standard and the extant one are not all that different from one another. In other words, the current standard asks
whether the infringer had a good faith belief of non-infringement. I suggest we ask whether he took all reasonable steps
to avoid infringement--yet one proves, inferentially, his good faith belief of non-infringement by showing that he took
reasonable steps to avoid it. So what I am really saying is just that we ought to remove a link or two from this
inferential chain, and so just ask directly whether the infringer took all steps reasonably necessary to avoid
infringement--let's not bother asking what the opinion said, what the infringer thought it said, whether he read it,
whether he understood it, and so on.
60 See, e.g., Warner-Jenkinson Co., Inc. v. Hilton Davis Chemical Co., 117 S.Ct. 1040 [41 USPQ 2d 1865] (1997), on
remand, 114 F.3d 1161 [43 USPQ 2d 1152] (Fed. Cir. 1997) ("[O]ne wonders how ever to distinguish between the
intentional copyist making minor changes to lower the risk of legal action, and the incremental innovator designing
around the claims, yet seeking to capture as much as permissible of the patented advance."); Westvaco Corp. v.
International Paper Co., 991 F.2d 735 [26 USPQ 2d 1353] (Fed. Cir. 1993) ("Although this attempt to design around
[the patentee's] product proved unsuccessful, as evidenced by the court's finding of infringement, [the infringer] should
not be found to have willfully infringed based on its attempt."); Read Corp. v. Portec, Inc., 970 F.2d 816 [23 USPQ 2d
1426] (Fed. Cir. 1992) ("Illicit 'copying' does not encompass using the patentee's commercial device to make a
competing device with 'changes deemed adequate by counsel to avoid infringement.'") (Read Corp. is of particular
significance on this question because willful infringement was found at trial in part due to "copying," yet based on the
very same evidence, the Federal Circuit reversed the finding of willfulness); but see, Critikon, Inc. v. Becton Dickinson
Vascular Access, Inc., 120 F.3d 1253 [43 USPQ 2d 1666] (Fed. Cir. 1997) ("It must be more than coincidence that [the
infringer] manages to commercialize its design by adopting features disclosed in the…patents soon after it became aware
of their existence.")
61 Read Corp. v. Portec, Inc., 970 F.2d 816 [23 USPQ 2d 1426] (Fed. Cir. 1992) ("[T]he district court criticized [the
infringer] for not giving Groff's opinion to Valiquet. None of these criticisms are justified. [T]he failure to give the
first lawyer's opinion to Valiquet [the second lawyer] is a plus, not a minus. Valiquet was not influenced thereby and
was able to make his own independent evaluation." (italics in original)).
62 Electro Medical Systems, S.A. v. Cooper Life Sciences Inc., 34 F.3d 1048 [32 USPQ 2d 1017] (Fed. Cir. 1994)
("However, the court erred because it failed to consider the evidence in its entirety and erroneously evaluated the
significance of EMS's [the infringer's] six-year delay in entering the market. The district court reasoned that EMS's
decision to wait six years before it sold the accused product supported the inference that EMS possessed an unfavorable
opinion of counsel.[E]ven if it had an unfavorable opinion of counsel, we agree with EMS that under the circumstances,
its decision to defer sale of the accused product was more consistent with satisfying its duty of due care to avoid or
minimize infringement than with willfulness.")
63 Compare, Braun Inc. v. Dynamics Corporation of America, 975 F.2d 815 [24 USPQ 2d 1121] (Fed. Cir. 1992) ("On-going consultation with a patent lawyer is highly probative evidence of good faith.") with Read Corp., 970 F.2d at 816
("[T]he district court criticized Valiquet's September 25, 1987 opinion because it was allegedly inconsistent with an
"opinion" given in February of 1987."). Also, compare the Federal Circuit's opinion in Read Corp. (reversing the trial
court's willfulness determination--which was based in part upon the infringer's two conflicting opinions) with Shiley,
Inc. v. Bentley Laboratories, Inc., 601 F. Supp. 964, 968 (C.D. Cal. 1985) (finding willful infringement in part, based
upon the infringer's two conflicting opinions).
64 Compare, Read Corp., 970 F.2d at 816 ("An opinion of counsel, of course, need not unequivocally state that the client
will not be held liable for infringement. An honest opinion is more likely to speak of probabilities than certainties.")
with Central Soya Co., Inc. v. Geo. A. Hormel & Co., 723 F.2d 1573 [220 USPQ 2d 490] (Fed. Cir. 1983) (Nichols,
J., concurring) ("My point is that this letter is far short of an unequivocal statement that if Hormel follows the writer's
guidelines, infringement will not result. Only 'quite arguably,' will be the case.")
65 See, Kaufman Company, Inc. v. Lantech, Inc., 807 F.2d 970 [1 USPQ 2d 1202] (Fed. Cir. 1986) ("The mere fact that
[the infringer] brought suit is not evidence that there was such a reasonable basis.")
66 See, e.g., In re Hayes Microcomputer Products, Inc. Patent Litigation (Ven-Tel, Inc. v. Hayes Microcomputer
Products, Inc.), 982 F.2d 1527 [25 USPQ 2d 1241] (Fed. Cir. 1992) ("the evidence shows that the advice of counsel
was more of a protective device than a genuine effort to determine before infringing whether the patent was invalid.")
67 And what about very brief opinions (e.g., just a single page)? The accused infringer might argue that his attorney
advised him that the infringing device was covered within the prior art; the opinion merely cited the pertinent prior art
reference, included a brief discussion of the relevant portions, and stopped right there--without a discussion of the
patent itself, the file history, doctrine of equivalents, and so forth. No knowledgeable attorney would disagree that this
is the most "competent" type of opinion in the sense that is the most reliable or most trustworthy. The patent owner
would of course argue that such an opinion is per se incompetent. And as unfair as this argument might seem, it stands
a good chance of winning. As I have said, the competence inquiry is directed primarily to the opinion's thoroughness.
(See my preceding notes.)
68 This has been suggested before. See, Donald L. Cox, Opinions of Counsel in Patent Litigation, 457 PLI/Pat 207, 232
(1996) ("The rule currently recognized by the Federal Circuit encourages the issuance of unrealistic 'clean' non-infringement or invalidity opinions. [T]he Court may be encouraging the drafting of opinion letters which do not
honestly reflect the attorney's thoughts and advice. Moreover, requiring such opinions to be subject to after-the-fact
litigation analysis will undoubtedly reduce the free exchange of ideas and advice between an attorney and his client.")
69 The Federal Circuit has also expressed its suspicion of certain opinions, for this reason. See, Therma-True Corp.
v. Peachtree Doors Inc., 44 F.3d 988 [33 USPQ 2d 1274] (Fed. Cir. 1995) ("A reasonable jury could have believed
that the attorney's letters were written in anticipation of litigation…."); Westvaco Corporation v. International Paper
Company, 991 F.2d 735 [26 USPQ 2d 1353] (Fed. Cir. 1993) (the trial court's finding of facts (the willfulness finding
was reversed): "Westvaco continued its EVOH activities, even after equivocal patent infringement opinions from
outside counsel. Its actions speak less of caution and good faith, than of efforts to justify blatant copying of patented
IP technology."); and, In re Hayes Microcomputer Products, Inc. Patent Litigation (Ven-Tel, Inc. v. Hayes
Microcomputer Products, Inc.), 982 F.2d 1527 [25 USPQ 2d 1241] (Fed. Cir. 1992) ("The evidence shows that the
advice of counsel was more of a protective device than a genuine effort to determine before infringing whether the
patent was invalid.""
70. 70 For instance, suppose an attorney examines his client's potentially infringing device, conducts a search of the prior
art from which he identifies a paper published in a technical journal more than a year prior to the competitor's patent
and that completely describes his client's device. Based on this art reference, the attorney can say either that his client
is simply practicing the prior art--as he is entitled to do, since no patent can "re-capture" subject matter in the public
domain--or he can say that the competitor's patent is invalid. Suppose then that the attorney sends an e-mail message
to the client that says this: "based on the prior art reference attached to this message, either the patent at issue is
invalid or we are practicing the prior art (which we are legally entitled to do)." This brief message also contains a few
footnotes citing some Federal Circuit authority on what constitutes a proper § 102 reference and comparing that
authority with the reference (and concluding the reference is good § 102 art). But in any event, the opinion is about
250 words, tops. This "opinion" contains no discussion of infringement--either literal or doctrine of equivalents--or
enforceability, the patent's prosecution history was not even ordered. The client is then sued for patent infringement;
at trial, the client asserts that the patent is not valid on § 102 grounds relying primarily on the prior art reference cited
in the opinion. The client loses on infringement. The opinion is next examined to determine whether it suffices to form
a reasonable belief in the client's mind that he did not infringe a valid patent. Should this opinion--this 250-word e-mail message--be deemed competent?
71 Another Federal Circuit decision, upholding the trial court's no-willfulness finding, and that remarked on the
equivocal nature of the opinion, which I shall not discuss (other than in this footnote) is Uniroyal, Inc. v. Rudkin-Wiley
Corp., 939 F.2d 1540 [19 USPQ 2d 1432] (Fed. Cir. 1991).
72 Read Corp,, 970 F.2d 816.
73 Id.
74 Westvaco Corp. v. International Paper Co., 991 F.2d 735 [26 USPQ 2d 1353] (Fed. Cir. 1993).
75 Id. at 744.
76. 76 The obvious rejoinder to this is that it is the client's conduct that is under scrutiny, so therefore an infringer wants
an unequivocal conclusion to point to and say that based on that strong conclusion from qualified patent counsel, he
engaged in conduct that later turned out to infringe. Fine, but what then comes under attack is the opinion's
competence. Remember, as the law now stands, if the opinion is found to be not competent, then it cannot be relied
upon at all to establish the infringer's good faith belief.
77. 77 Consider two scenarios. In one, the patent attorney who prepares the opinion reaches a conclusion of no
infringement on the grounds that according to prosecution history estoppel, the claims in the patent do not cover
products having a polyurethane liner. And since the attorney's client's product has a polyurethane liner, then it does
not infringe. This attorney stops right there. In the second scenario, another patent attorney reaches the same
conclusion, but estimates that the probability of succeeding on that argument in litigation is about 80%, so he does not
stop there. In the opinion, he includes two more arguments after the first. Both of these arguments are weaker (e.g.,
60% and 50%) than the first, and he acknowledges this. Which is the better opinion? It might be the second. (although
both reach the same conclusion at the same level of confidence). If an opinion is being read by a judge--that's only
because it reached the wrong conclusion: The firm who relied upon the opinion was found liable for patent infringement
and now the judge is reading the opinion to determine whether it was competent (among other things). So, I can't
imagine anyone really wants a judge to read an opinion--moments after the firm was found liable for patent
infringement--that says "absolutely no chance in the world that our product infringes…?" Indeed, isn't it better to
have the judge read an opinion in which all plausible theories of patent infringement are considered and discussed?
No doubt the best scenario is that the opinion actually discussed the precise issue upon which the infringer lost (the
determinative issue) and reached the conclusion that, the infringer would prevail on that issue, but that it's frankly
close. And the best way to ensure that is to be thorough and to be frank.
78. 78 There is something to be said for this view, particularly at this level of abstraction--a thoughtful look at some of the
excessively prolix opinions we routinely see ought to remind patent attorneys that, at the end of the 50 or so pages of
factual recitation, citation of legal authority legal analysis, disclaimers, and so forth, we ought really to come to some
sort of conclusion in plain English which the client can actually read, understand, and then rely upon. While some
issues may have a less than certain answer, we are still being paid to give an opinion and not just present a summary
of the relevant legal authority; so I suggest that language like "more probable than not" should be used instead of "a
not insignificant probability," or things like that, which say next to nothing. Conclusions like "the client can certainly
make a strong argument of invalidity, though the outcome is uncertain," might be the most honest advice in the world,
but aside from not being the most useful, neither does it establish a good faith belief of non-infringement.
79 SRI International, Inc. v. Advanced Technology Laboratories, Inc., 127 F.3d 1462 [44 USPQ 2d 1422] (Fed. Cir.
1997), citing, Studiengesellschaft Kohle, m.b.H v. Dart Indus., Inc., 726 F.2d 724 [220 USPQ 841] (Fed. Cir. 1984) or
862 F.2d 1564 [9 USPQ 2d 1273] (Fed. Cir. 1988); and, Underwater Devices Inc. v. Morrison-Kundsen Co., Inc., 717
F.2d 1380 [219 USPQ 569] (Fed. Cir. 1983).
80 The scholarly commentary is aligned with this view. See, e.g., John L. Skenyon, et al., Patent Damages, 17 Corporate
Counsel Rev. 1, 45 (1998) ("[T]he opinion should be prepared by an outside, independent U.S. patent attorney….")
81 Underwater Devices, Inc. v. Morrison-Kundsen Co., Inc., 717 F.2d 1380 [219 USPQ 569] (Fed. Cir. 1983); citing,
Western Electric Co. v. Stewart-Warner Corp., 631 F.2d 333, 337 [208 USPQ 183] (4th Cir. 1980); see also, e.g.,
Minnesota Mining & Manufacturing Co. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559 [24 USPQ 2d 1321]
(Fed. Cir. 1992); Studiengesellschaft Kohle, m.b.H v. Dart Industries, Inc., 862 F.2d 1564 [9 USPQ 2d 1273] (Fed. Cir.
1988); Bott v. Four Star Corp., 807 F.2d 1567 [1USPQ 2d 1210] (Fed. Cir. 1986).
82 McDermott v. Omid International, Inc., 723 F. Supp. 1221 (S.D. Ohio 1988), aff'd, 833 USPQ 2d 1026 (Fed. Cir.
1989).
83 I have a particular type of outside counsel in mind here: the large, national litigation firm. Smaller intellectual
property boutiques quite often will prepare an opinion but have no interest in representing the client in infringement
litigation.
84 See, e.g., Max H. Bazerman, et al., The Impossibility of Auditor Independence, Sloan Management Rev., Summer
1997, 89, and references cited there.
85 I intended this section to make a point about hidden bias in a written opinion (from outside counsel) and what is the
significance of that bias to the rule regarding willful infringement. A subsidiary purpose is to suggest that opinions
from outside counsel may not be more reliable than those from in-house counsel. Here are some other reasons why
opinions from in-house counsel may be preferred:
86 Here are some other reasons why opinions from in-house counsel may be preferred. If the attorney drafting the
opinion did not receive all facts relevant to render a competent opinion, then assessing whether the opinion was
competent or relied upon is a complete waste of time (garbage in, garbage out). An in-house lawyer is far, far more
likely to have access to the relevant facts needed to prepare a competent opinion than is an outside lawyer. And aside
from superior access to information needed to prepare a competent opinion, in-house attorneys, particularly in-house
patent attorneys are generally far, far, more familiar with the technology at issue than a typical outside lawyer. By
"technology" I mean not just the naked technical subject matter, but the often intricate commercial context in which
the patented technology is practiced. Indeed, aside from the final written opinion, on-going consultation with qualified
patent counsel is highly probative of a good faith belief of non-infringement, according to the Federal Circuit. Braun
Inc. v. Dynamics Corporation of America, 975 F.2d 815 [24 USPQ 2d 1121] (Fed. Cir. 1992) ("On-going consultation
with a patent lawyer is highly probative evidence of good faith.") Additionally, an opinion from in-house counsel is
more likely to be relied upon--or put another way, in-house counsel is more able to insure compliance with the opinion,
than is outside counsel. Quite often, what is much more difficult than drafting a legal opinion is drafting a protocol
to manufacturing, etc. telling them in their own language, what they can and cannot do--i.e., the opinion's practical
effect on the firm's own commercial activity. This document must be extraordinarily concise, accurate--and written
in the company's peculiar vernacular.