The Return of Opinions of Counsel in Patent Cases: How Recent Judicial Decisions Have Made Them Relevant Once More


What should a prudent corporate executive do when he or she becomes aware that the corporation's activities might be alleged to be infringing a United States patent? Some recent Supreme Court decisions have led to a revival of the old practice of obtaining formal written opinions of counsel. In this post, we explore the reasons for this shift.

For more than two decades, companies that thought themselves to be potential targets of patent infringement actions were given unequivocal advice on how to protect themselves and limit their potential liability: obtain a formal written opinion of counsel confirming that the company's activities did not infringe a valid claim of the patent in question. The reason for this advice was straightforward. In its 1983 Underwater Devices Inc. v. Morrison-Knudsen Co. decision, the Federal Circuit Court of Appeals imposed on companies an affirmative obligation to "exercise due care" to avoid infringing valid patents. [1] Failing to exercise such care could expose the company to a charge of "willful" infringement, subjecting it to treble damages and attorney fees. As a practical matter, "due care" meant obtaining a formal opinion of counsel because, under other Federal Circuit precedents, patent juries were entitled to draw adverse inferences against accused infringers who failed to produce an exculpatory opinion at trial.[2]

In more recent years, the use of written opinions of counsel as a litigation defense tactic has somewhat fallen out of vogue. First, in 2004, the Federal Circuit ruled that juries could no longer be instructed to draw adverse inferences from a defendant's failure to present an opinion of counsel.[3] Then, in 2007, the Federal Circuit issued its decision in In re Seagate, which dramatically narrowed the circumstances under which an accused infringer could be found to have willfully infringed. Most significantly, Seagate announced a rule that precluded a finding of willful infringement unless the infringer acted despite "an objectively high likelihood that its actions constituted infringement of a valid patent."[4] Since an objectively reasonable defense presented at trial could, by itself, negate the possibility of a willfulness finding, obtaining a formal written opinion in advance, and then placing it into evidence at trial, no longer provided much of an advantage. Moreover, because a party who relied on an opinion of counsel defense at trial waived the attorney-client privilege, any marginal benefit of relying on an opinion was outweighed by the risk that other, less helpful, attorney-client communications would also make their way into evidence.[5]

Two recent Supreme Court cases have, however, shifted the legal landscape once again, and produced a renewed interest in obtaining opinions of counsel as an important shield against patent infringement liability.

First, in Halo Electronics, Inc. v. Pulse Electronics, the Supreme Court overruled the Seagate test for willfulness, and in particular its threshold requirement that the defendant lack objectively reasonable litigation defenses.[6] Instead of focusing on the objective strength of a defendant's case at trial, the Court's opinion explained, the proper focus of a willfulness inquiry was on the infringer's understanding of its actions at the time of infringement.[7] Under Halo, a defendant who acted with intentional or reckless disregard of the plaintiff's patent rights could be found to be a willful infringer even if it later developed plausible trial defenses. By eliminating the objective aspect of the Seagate test, the Court shifted the focus of the willfulness inquiry to what it had been before Seagate what an accused infringer knew (or should have known) at the time of the alleged infringement.

Second, in Global-Tech Appliances, Inc. v. SEB S.A., the Supreme Court announced an additional way in which the subjective understanding of the accused infringer could be relevant to liability at trial.[8] Global-Tech addressed liability for "induced" infringement, in which the accused infringer is alleged to have caused someone else (typically a customer) to practice the claimed invention. Unlike the case of "direct" patent infringement, in which there can be liability even for a defendant wholly ignorant of their infringement, the Court in Global-Tech explained that liability for induced infringement applies only where the defendant had knowledge that the induced activity constituted patent infringement or where the defendant was "willfully blind"[9] to that possibility.[10]

In the wake of Halo and Global-Tech's renewed focus on an infringer's subjective state of mind, opinions of counsel have gained newfound relevance. Although the absence of an opinion no longer justifies an automatic adverse inference,[11] having a written opinion of counsel, provided at the time of notice to a relevant business decision-maker who actually relied on it, allows a defendant to tell a compelling exculpatory story.[12] The opinion is concrete evidence that the defendant did not simply ignore the plaintiff's patent, but instead sought out competent legal advice, and attempted to do the right thing.[13] Ultimately, it shows the judge and jury that the defendant had good reason to believe that it was justified in continuing to use or sell the accused product or method, thus negating a required element of both willfulness and induced infringement.[14] Since the Supreme Court's Halo decision, district courts have noted that opinions of counsel, while not dispositive, are "highly probative evidence" and may serve to provide evidence of the subjective belief of an accused infringer.[15] Similarly, courts have held that an opinion of counsel is admissible to show that a defendant lacked the state of mind required for induced infringement.[16]

Still, reliance on an opinion of counsel at trial is not without risk, since it requires the defendant to waive the attorney-client privilege regarding the subject matter of the opinion, at least with respect to the counsel who provided it. One way to minimize this risk is to use different law firms as litigation and opinion counsel.[17] Moreover, the decision whether to rely on an opinion of counsel should be made at the time of trial, taking into account the relative strength of the defendant's trial defenses, the complexity of the technology, and the likelihood that other privileged communications could be harmful to the case.

[1] 717 F.2d 1380, 1389 (Fed. Cir. 1983).

[2] Knorr-Bremse Systeme Fuer Nutzfahrzeuge GMBH v. Dana Corp., 383 F.3d 1337, 1343 (Fed. Cir. 2004) (en banc).

[3] Id. at 1344.

[4] 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc).

[5] Of course companies continued to obtain legal advice from their patent counsel, but such advice, given orally, or through other informal means, may not have been in a form that would be useful to admit into evidence at trial.

[6] 136 S.Ct. 1923, 1933 (2016).

[7] Id.

[8] 563 U.S. 754, 766 (2011)

[9] "Willful blindness" occurs when the defendant subjectively believes that there is a high likelihood that their actions are causing infringement, but takes deliberate steps to avoid finding out. Id. at 769.

[10] Id. at 766.

[11] Knorr-Bremse, 383 F.3d at 1345-46.

[12] The strength of the defendants' story will depend, of course, not only on the quality of the opinion itself, but also on evidence that the opinion was actually used by the party receiving it to guide its conduct. Thus, it may be important for the recipient of the opinion to document when, and by whom, it was reviewed, and any relevant decisions informed by it.

[13] For this reason, a written opinion of counsel should ideally do more than merely state a legal conclusion. It should also document the opining attorney's factual and legal analysis, thus demonstrating that the opinion writer had an accurate understanding of the facts and competently applied the relevant law.

[14] Though non-infringement opinions may be used to negate both willful and induced infringement, an opinion that a patent is invalid is only relevant to willfulness. See Commil USA, LLC v. Cisco Sys., 135 S. Ct. 1920, 1928 (2015) (holding that a defendant's belief that a patent was invalid was not relevant to the question of whether the defendant knowingly induced others to infringe.).

[15] Loggerhead Tools, LLC v. Sears Holding Corp., No. 12-cv-9033, 2016 WL 6778881, at *2 (N.D. Ill. Nov. 15, 2016); see also Greatbatch Ltd. v. AVX Corp., No. 13-723-LPS, 2016 WL 7217625, at *4 (D. Del. Dec. 13, 2016); Good Tech. Corp. v. MobileIron, Inc., No. 5:12-cv-05826-PSG, 2015 WL 3980940, at *5 (N.D. Cal. June 30, 2015).

[16] Bettcher Indus. v. Bunzl USA, Inc., 661 F.3d 629, 648-649 (Fed. Cir. 2011).

[17] See Seagate, 497 F.3d at 1373 (holding that waiver of privilege with respect to opinion counsel should not extend to cover communications with trial counsel from a different firm that operated independently of opinion counsel); Tyco Healthcare Grp. LP v. E-Z-EM, Inc., No. 2:07-CV-262 (TJW), 2010 WL 2079920, at *3 (E.D. Tex. May 24, 2010) (holding that a waiver should extend to trial counsel where "trial counsel and opinion counsel belong to the same law firm and opinion counsel is an active member of the trial team.").

Authors: Lawrence Kolodney, Daniel Sternberg