note a guide to waiver after echostar and seagate - UW Law School

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BELDEN - FINAL 11/29/2007 4:08 PM 942 WISCONSIN LAW REVIEW evaluating willfulness, courts consider the totality of the circumstances 77 reflecting the alleged infringer’s intent and reasonable beliefs. 78 The Federal Circuit has outlined several factors that are germane to the determination of willfulness. 79 The Federal Circuit has consistently emphasized that an alleged infringer who has notice of another’s patent rights has an “affirmative duty to exercise due care to determine whether or not he is infringing.” 80 Due to the significant potential monetary benefit, plaintiffs in actions for patent infringement almost always include an allegation of willfulness in their complaints. 81 One defense alleged infringers commonly use to rebut an allegation of willfulness is reliance on the advice of counsel. 82 An alleged infringer raising this defense claims that it sought out the advice of counsel and, due to the advice received, it reasonably believed either damages); 35 U.S.C. § 285 (authorizing courts to award attorneys’ fees in exceptional cases). 77. See, e.g., Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 510 (Fed. Cir. 1990). 78. See, e.g., Ortho Pharm. Corp. v. Smith, 959 F.2d 936, 944 (Fed. Cir. 1992). 79. See, e.g., Rolls-Royce Ltd. v. GTE Valeron Corp., 800 F.2d 1101, 1110 (Fed. Cir. 1986); Read Corp., 970 F.2d at 826–27. The following factors cited in Read Corp. are frequently utilized by courts to evaluate allegations of willfulness: (1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew 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; . . . (3) the infringer’s behavior as a party to the litigation. . . . (4) Defendant’s size and financial condition. . . . (5) Closeness of the case. . . . (6) Duration of defendant’s misconduct. . . . (7) Remedial action by the defendant. . . . (8) Defendant’s motivation for harm. . . . (9) Whether defendant attempted to conceal its misconduct. Id. 80. Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389 (Fed. Cir. 1983), quoted in Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1343 (Fed. Cir. 2004). It should be noted that the Federal Circuit has overruled the duty-of-due-care standard of Underwater Devices in favor of a “recklessness” standard. In re Seagate Tech., LLC, No. 06-M830, slip op. at 11–12 (Fed. Cir. Aug. 20, 2007). While this change has the potential to significantly impact willfulness, this standard is outside the focus of this Note. 81. One recent empirical study found that willfulness was alleged in 92.3% of the patent infringement cases studied. See Moore, supra note 9, at 232. 82. See EPSTEIN, supra note 10, at 347–48, 351, 625.
BELDEN - FINAL 11/29/2007 4:08 PM 2007:933 A Guide to Waiver After EchoStar and Seagate 943 that the plaintiff’s patent was invalid or unenforceable or that the alleged infringer’s conduct did not infringe the plaintiff’s patent rights. 83 Therefore, whether the defense is effective depends not on the legal correctness of the opinion, but rather on whether the opinion is complete enough, under the totality of the circumstances, to instill in the alleged infringer a reasonable belief that the patent is invalid, unenforceable, or not infringed. 84 This is consistent with the courts’ focus on the alleged infringer’s state of mind in determining the presence or absence of willfulness. While the advice-of-counsel defense can be an effective tool for an alleged infringer in rebutting an allegation of willfulness, the alleged infringer also subjects itself to certain risks. By raising the defense, the alleged infringer necessarily puts at issue not only its own beliefs regarding the invalidity, unenforceability, and/or noninfringement of the patent but also any communications it had with counsel that might have influenced its beliefs. 85 Therefore, the alleged infringer asserting the defense waives the attorney-client privilege with respect to certain communications with counsel regarding infringement and possibly waives protection of certain attorney work product as well. 86 As a result, the alleged infringer faces a difficult decision. On one hand, it can forego the advice-of-counsel defense and maintain attorneyclient privilege and work-product protection. By doing so, however, it will risk a potentially disastrous finding of willfulness. On the other hand, it can assert the advice-of-counsel defense and possibly shield itself from a finding of willfulness. By choosing this option, however, it will waive attorney-client privilege and work-product protection and reveal to the opposition many documents and communications that would otherwise be protected. 87 The fact that the scope of the waiver of 83. See Ortho Pharm. Corp., 959 F.2d at 944. 84. Id. 85. See discussion infra Part II.B. 86. See discussion infra Part II.B. 87. The decision to assert or forgo the defense used to be even more complicated. In Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565, 1580 (Fed. Cir. 1986), the alleged infringer did not assert the advice-of-counsel defense but rather was silent as to whether or not it had ever sought out advice of counsel regarding its potential infringement. The court held that the alleged infringer’s “silence on the subject, in alleged reliance on the attorney-client privilege, would warrant the conclusion that it either obtained no advice of counsel or did so and was advised that its [conduct] would be an infringement of valid U.S. patents.” Id. This “adverse inference” continued to be recognized by the Federal Circuit until 2004, when the court finally decided to eliminate the adverse inference, citing its detrimental effect on the attorney-client relationship. Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1343–44 (Fed. Cir. 2004). Yet even though the adverse inference has been eliminated, the advice-of-counsel defense still plays a large role in
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