Willful patent infringement, advice of counsel, and bifurcation: a discussion of Federal Circuit precedent and District Court decisions.

The subject of willful patent infringement, obtaining and relying on advice of counsel, and procedural issues such as bifurcation and scope of waiver remain among the most discussed and debated topics in patent law. Indeed, on September 26, 2003, the Federal Circuit decided to hear en bane whether an adverse inference with respect to willful patent infringement may be properly drawn when an alleged infringer fails to obtain counsel's advice before undertaking a course of conduct that may infringe a United States patent or when the alleged infringer invokes the attorney-client privilege and attorney work-product doctrine during a willfulness inquiry. (1)

Because a charge of willful infringement is a routine adjunct to nearly every claim for patent infringement and carries with it the potential for treble damages, attorney fees, and costs, companies remain focused on effective strategies to avoid a finding of willfulness. It is essential, therefore, for patent practitioners to keep abreast of the latest developments and trends affecting willfulness such as the advice of counsel defense to a charge of willful patent infringement. Accordingly, this paper provides an overview of Federal Circuit precedent on willful patent infringement, advice of counsel, and bifurcation, and then discusses willful patent infringement, the advice of counsel defense, and bifurcation in the district courts.

Willful Patent Infringement

Enhanced Damages and Attorney Fees

Section 284 provides that a "court may increase ... damages up to three times the amount found or assessed[]" for the infringement of a US patent. (2) Although Section 284 does not specify the bases on which enhanced damages may be awarded, the Federal Circuit has stated that, under Section 284, a court may enhance damages when the infringement was "willful." (3) Additionally, a court may award attorney fees for willful patent infringement. (4) Indeed, when a court does not award enhanced damages, attorney fees, and costs following a finding of willful patent infringement, the court is required to provide reasons for the denial. (5)

Intent

Willfulness is a question of intent, i.e., actor culpability. (6) The primary consideration "is whether the infringer, acting in good faith and upon due inquiry, had sound reason to believe that it had the right to act in the manner that was found to be infringing." (7) A willfulness inquiry is, thus, "quintessentially" a question of fact to be determined upon consideration of the totality of the circumstances. (8)

Accordingly, the Federal Circuit has indicated that the relevancy and admissibility of evidence of willfulness lies with the district courts. (9) The Federal Circuit has stated, however, that one important factor to the issue of willfulness "is whether the adjudged infringer relied on legal advice." (10)

Advice of Counsel

Duty of Due Care

"The law imposes an affirmative duty of due care to avoid the infringement of the known patent rights of others." (11) This duty entails "seeking and obtaining competent legal advice" before undertaking a course of conduct that may infringe a US patent. (12) The duty arises upon "actual notice of a patentee's rights ..." (13)

Adequacy of Counsel's Advice

Counsel's advice need not be written, (14) and it need not be "legally" correct. (15) Nor must it address validity, infringement, and inequitable conduct at the same time. (16) Instead, counsel's advice is viewed objectively to determine whether it meets minimum requirements of competency. (17)

Factors to be considered include "the nature of the advice, the thoroughness and competence of the legal opinion presented, and its objectivity." (18) Additionally, the quality of the information underlying the opinion or supplied to form a basis for the opinion are relevant considerations. (19) The question is: Whether "counsel's opinion ... [is] thorough enough, as combined with other factors, to instill a belief in the [alleged] infringer that a court might reasonably hold the patent is invalid, not infringed, or unenforceable." (20) However, "defenses prepared for trial are not equivalent to the competent legal opinion of non-infringement or invalidity which qualify as 'due care' before undertaking any potentially infringing activity." (21)

Defense to Willfulness

An alleged infringer may rebut a charge of willful patent infringement by asserting good faith reliance on the advice of counsel. (22) The defense need not be raised; (23) however, a failure to raise the defense waives the right to do so on appeal. (24) Further, falling to raise the defense permits the inference that the alleged infringer did not seek counsel's advice or that any advice obtained reflected negatively on the alleged infringers conduct. (25) In Knorr-Bremse the Federal Circuit ordered en banc consideration of the following four questions: (26)

1. When the attorney-client privilege and/or work product privilege is invoked by a defendant in an infringement suit, is it appropriate for the trier of fact to draw an adverse inference with respect to willful infringement?

2. When the defendant has not obtained legal advice, is it appropriate to draw an adverse inference with respect to willful infringement?

3. If the court …