Limbo, Limbo

In re Seagate Technology

It looks like shimmying under the willfulness bar just got easier with the Federal Circuit's decision In re Seagate Technology. Seagate, an en banc decision, overturns the prevailing willfulness test and establishes a new, higher standard for assessing a potential infringer's liability for enhanced damages.  Don't dust off your Chubby Checker records just yet---the parameters of the test still need to be developed and it remains to be seen exactly how low should you go.

Until Seagate, willful infringement claims danced to the tune set by the Federal Circuit's decision in Underwater Devices v. Morrison-Knudsen Co. Underwater Devices imposed an affirmative duty on potential infringers with actual notice of a patent holder's rights to exercise due care to determine whether or not their conduct constituted infringement.  While time and case law evolved a "totality of the circumstances" test to evaluate willfulness claims, the affirmative duty remained.

Breach of the duty entitled patent holders to seek the treble damages allowed under the patent statute-an otherwise strict liability statute to determine infringement.  Willfulness allegations proliferated. Alleged infringers often asserted an advice of counsel defense in response to willfulness claims.  Typically, that advice of counsel came in the form of an opinion that concluded that the patent in question was invalid, unenforceable and/or not infringed. Proffering that opinion clearly waived some portion of the primary privileges associated with the retention of counsel-the attorney/client and work product privileges-but the extent of the waiver had received inconsistent treatment in the district courts. 

Then came Seagate.

There, the patent holder claimed that the alleged infringer's assertion of the advice of counsel defense constituted a waiver of the attorney client and work product privileges of all relevant counsel-including Seagate's separate trial counsel.  The district court agreed and granted an order compelling Seagate's patent litigation counsel to make themselves and their work product available for discovery. Granting Seagate's writ of mandamus, the Federal Circuit overruled the longstanding standard of proof for willfulness, and addressed the scope of the waiver of privileges when an advice of counsel defense is raised.

First, the court overturned Underwater Devices.  It held that proof of willful infringement now requires a showing of objective recklessness.  The patent holder must offer clear and convincing evidence that the infringer acted "despite an objectively high likelihood that its actions constituted infringement of a valid patent."   Once satisfying that threshold, the patentee must also show that the objective risk was either known or so obvious that it should have been known.

Second, Seagate clarified the scope of the waiver of privilege if the potential infringer asserts an opinion of counsel.  Should a potential infringer choose to pursue an advice of counsel defense, in most cases that defense will not serve to waive separate trial counsel's attorney/client or work product privileges.  The rule's not absolute. If the trial court determines that there's been "chicanery," it retains the discretion to extend privilege waivers to trial counsel.

There's no question Seagate makes big changes-but without the clarity the patent litigation bar might have wished for.  How should courts and litigants determine what constitutes objective recklessness?  How should they apply this new standard of proof's requirements? 

The Seagate majority says that's for future cases to decide.

Until then, right or wrong, the burden of establishing willfulness appears to have shifted to the patent holder. Patent holders will want to look to firms (like ours) that have experience establishing recklessness in other practice areas such as mass tort.

Seagate may also encourage patent holders to file for preliminary injunctions, in order to set up a willfulness case for post-filing conduct.  Though it can put patent validity into play, a preliminary injunction effort can curb willful infringement activities that start after the commencement of litigation or pave the way for treble damages later. 

Seagate will also impact pre-litigation tactics. The notice letter a patent holder used to send to establish willfulness probably won't be enough to meet the higher standard of proof-but it may be enough to establish a sufficient controversy for the alleged infringer to bring a  declaratory judgment action under MedImmune and SanDisk.  So tread lightly.

That goes for counsel as well.  Seagate may have the unintended consequence of creating a whole new battlefield around allegations of trial counsel chicanery. We hope that such allegations won't be used as a way to get treble damages and a waiver of privilege.  With deceit at its heart, the doing or alleging of chicanery doesn't benefit any of the players in patent litigation.           

Eventually, the bar of Seagate's new, higher willfulness standard will settle into place. Time and case law will reveal what infringing conduct passes under the bar and what doesn't.  Regardless of where it finally lands, the cost of dislodging the willfulness bar remains the same for patent infringers-exposure for treble damages.  When that happens limbo becomes more than a patent holder's favorite dance; it transforms into the place where no infringer ever wants to be.

The articles on our Website include some of the publications and papers authored by our attorneys, both before and after they joined our firm. The content of these articles should not be taken as legal advice.