In a rare, unanimous en banc decision issued August 20, 2007, the Federal Circuit made sweeping changes to its jurisprudence on willful infringement. The changes will make it significantly more difficult for patentees to prove willful infringement, a finding that permits a court to award enhanced damages and attorney’s fees. The changes include abandonment of the affirmative duty of due care in favor of a recklessness standard, moving away from a subjective state-of-mind standard to an objective standard based upon the merits of the claims and defenses, and all but removing the ability of a patentee to recover enhanced damages based solely on conduct after a suit is filed where a preliminary injunction is not sought. Under the new standard, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that it was infringing a valid patent. Slip, Op. at 12.
The issue in In re Seagate Technology, LLC, arose from a discovery dispute over the extent to which the attorney-client privilege and the work product doctrine are waived when an accused infringer responds to a willfulness allegation by asserting the affirmative defense of reliance upon the advice of counsel. The lower court had held that the waiver extended into communications between the accused infringer and its trial counsel. The Federal Circuit seized this opportunity to rewrite the law on willful infringement:
Accordingly, to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. . . . The state of mind of the accused infringer is not relevant to this objective inquiry. If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.
Slip Op. at 12.
In view of its newly defined willfulness standards, the Federal Circuit reversed, noting the "significantly different functions" of trial counsel and opinion counsel: "Whereas opinion counsel serves to provide an objective assessment for making informed business decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker." Id. at 15. The Court emphasized that there is no "affirmative obligation" to obtain an opinion of counsel, but by noting that sound opinions are a basis for making business decisions, proceeding without an opinion in the face of a known infringement issue remains risky.
The Federal Circuit also emphasized that willfulness ordinarily will depend upon an infringer’s pre-litigation conduct, stating that a patentee who does not try to stop an accused infringer’s activities by moving for a preliminary injunction "should not be allowed to accrue enhanced damages based solely on the infringer’s post-filing conduct." Id. at 17. By noting the patentee’s obligation under Rule 11 to have a good faith basis for alleging willful infringement, the decision may reduce the practice of alleging willful infringement as a matter of course.
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