Seagate II

In Seagate, the CAFC raised the burden of proof for enhanced damages — Enhanced damages are now only available for willful patent infringement that is at least “objectively reckless.”  And, as a consequence, “there is no affirmative obligation to obtain opinion of consel” to avoid a willfulness charge.  This essentially moves potential treble damages from a negligence standard of due care to a more stringent standard. (See pair of graphs below).

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The question now on the minds of many patent attorneys: What role, if any, is there for the thick, formal opinions explaining in detail why a particular patent is invalid, unenforceable, and/or not infringed?

23 thoughts on “Seagate II

  1. How can there be a “good opinion” if the first part of the test was met? Was it printed on nice quality paper with losts of details of the law, facts, prosecution history, etc? If such opinion was in fact actually “good” then you would have won the case, or at least it would have been a close enough call call that your non-infringement and/or invalidity positions were not “objectively reckless”.

    Seems to me that if your infringement case was so poor that, in hindsight, you were “objectively reckless” without your state of mind even coming into the picture, than any opinion you received to the contrary was also “objectively reckless”.

    Everyone is wed to “opinions” because that’s how things have been for so long they cannot picture the patent litigation process with out them. Even the CAFC is reluctant to say they don’t matter at all (at least pre-filing opinions), as pointed out in previous post, but then give us this new standard including a “clear and convincing evidence” part for which they don’t matter.

  2. Moody: Okay, you weren’t clear before about whether you were arguing whether opinions will continue to have some relevance (clearly Fed. Cir. thinks so because they wouldn’t have addressed Trial v. Opinion counsel issue), or whether they are sufficient (clearly not since Knorr-Bremse). U

    Under Seagate, there is a two-step test for willfulness:
    1) “[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. [citation]. The state of mind of the accused infringer is not relevant to this objective inquiry.”
    2) “[T]he 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.”

    Under 1, the failure to get an opinion clearly can’t hurt you, because “[t]he state of mind of the accused infringer is not relevant.” Therefore there is no inference under 1 for someone infringing without knowledge about the degree of harm, because knowledge only comes into 2. It can help you because it is, theoretically, objective independent evidence of whether or not it was reasonable to believe that it was not infringement of a valid patent (much like a credible expert opinion at trial).

    Under 2, an opinion can certainly be relevant, but likely not as relevant as before. If you got a good opinion saying infringement/validity and infringed anyway (unlikely), you wouldn’t disclose it under Knorr-Bremse. If you got a good opinion saying no infringement/validity and infringed , then it rebuts an inference that they “knew” and goes some way against proving they “should have known.” Only if, like before, if you get an obviously bad opinion that you should have known was bad (i.e. obviously did not evaluate important things like procedural history or prior art) will it hurt you.

    If you don’t get an opinion, the question of whether you “should have known” is going to have to be proven using “standards of commerce” that you really should have done more to know about it, given the particular facts of the case other than the issue of the opinion.

  3. “You do understand that for some patents it does not take very long for an intelligent attorney to conclude that it’s invalid junk, don’t you? I sure do hope you understand that.”

    Go back and read my post again. Then come back here and post an intelligent response (assuming you are able to do so).

  4. “What you’re really going to see post-Seagate are hundreds of attorneys trying desparately to convince their clients that they still need a $30,000 opinion.”

    LOL. No, I don’t think I’ll need to convince any of my clients about that. I think instead I’ll just talk to them about the case and when they come to me with a patent, I’ll look at the patent and let them know if they need a $30,000 opinion to tell them that the patent is junk.

    You do understand that for some patents it does not take very long for an intelligent attorney to conclude that it’s invalid junk, don’t you? I sure do hope you understand that.

  5. If the defense to “objectively reckless” requires that the infringer had previously (prior to undertaking the infringing activity, or thereafter upon learning of the patent) obtained a written opinion from patent counsel that the activity did not infringe a valid patent; and if proving “objectively reckless” by “clear and convincing evidence” includes pointing out that the infringer failed to rely on a pre-litigation opinion, then nothing has changed.

    I don’t know what the “objectively reckless” standard will turn out to be, or if it will even be around beyond the 2008 USSC term, but to the extent it is around, I don’t think the CAFC is telling the district courts that pre-litigation opinions are what matter.

    Clear and convincing evidence of “objectively reckless” is required, and the state of mind of infringer does not matter for this test. That’s what the decision says. Maybe “objectively reckless” means the district court judge thinks the infringer’s case stunk; the infringer was slaughtered at Markman and produced no interesting prior art for invalidity, etc. Even if he produces an opinion of counsel under those circumstances, the opinion obviously stunk it up, too, or their case would have been better. Again, they lost, or this does not matter. How is producing a wrong (and obviously bad) opinion help you UNLESS your state of mind is what matters (“but, the lawyer told me we were OK”).

    This does not mean that companies will not seek advice of patent attorneys to assess risk. In this regard, opinions will still matter; they just won’t be presented as evidence of the state of mind of the infringer.

  6. What you’re really going to see post-Seagate are hundreds of attorneys trying desparately to convince their clients that they still need a $30,000 opinion. Because for most of these folks, no need for an opinion = no more work.

    Featherbedding at its worst – and we’re already starting to see that reflected in the comments above.

  7. “Failure to get an opinion is not evidence of anything if there is no afirmative duty to get one.”

    Huh?

    I don’t have an affirmative duty to open my glove compartment and take a pep pill.

    But if I stay awake for 36 hours, get behind the wheel, fall asleep and plow down a little kid, the fact that I didn’t take my pep pill is going to be used against me, and rightfully so. My defense that I had no “affirmative duty” to take the pill ain’t going to hold water.

    If you’re an infringer and someone’s waving a patent at you and explaining to you why you infringe and can’t come up with a quick and sensible reason why you shouldn’t care, then you should consider getting a legal opinion before you decide to keep infringing while waiting for the patentee to “go away.”

  8. A patentee must now prove by clear and convincing evidence that the infringer was objectively reckless. Failure to get an opinion is not evidence of anything if there is no afirmative duty to get one. On the other hand, having an opinion should not help the infringer unless that is part of the objective recklessnes test (which is to-be-named-later), in which case companies are still stuck with the expense of obtaining formal (made for litigation) opinons, and little has changed.

    This is not about whether analyzing patents and risk management is a good thing. Of course it is. This is about the need for creating a formal, carefully worded litigation document. The extra expense (and everything else) that comes with making and relying on these opinons is not trivial, especially when you consider how it impacts on the litigation process – for example look what happened in this case!

    No one wants to say opinions don’t matter, since everyone is so used to them. We routinely expect opinions of counsel to be produced, and local rules make provisions for them. But, the body of law on opinions is from cases in which the opinion was wrong. If the opinion was right, we don’t care, since there was no infringement of a valid patent. So, does the existence of a WRONG opinion make an infringer’s actions not objectively reckless?

  9. My view is that companies should continue to obtain opinions, at least until there is clarity on the Patent Reform Act. The Act, if enacted as currently proposed, would effectively overrule the “objectively reckless” standard of Seagate in favor or a subjective reasonableness test (one indication of which would be relying on advice of counsel).

  10. “However, some companies may feel that the $30,000 opinion is no longer warranted – a cheaper version will do.”

    Many companies already felt that way, i.e., smaller companies without a lot of cash. However, a $30,000 opinion regarding a thoughtfully prosecuted patent with more than a handful of relevant claims is still “cheap.” If that patent has a lengthy prosecution history (several continuations and CIPs in the chain)*, then $30,000 is dirt cheap and the opinion is surely not all that that it could be. But it may be all that it needs to be. It’s arguably safer to parachute with two backup chutes but it’s not reckless to jump with only one.

    *Of course, such patents will become more rare as time passes, won’t they?

  11. My initial reaction to Seagate is that companies will still obtain opinions of counsel. For starters, those opinions often are not obtained solely to avoid willful infringement. However, some companies may feel that the $30,000 opinion is no longer warranted – a cheaper version will do.

    It is also curious that the Seagate opinion indicates that enhanced damages for “post-filing conduct” are only available if the patentee moves for a preliminary injunction. But what if the patentee has no reasonable basis for asserting irreparable harm, yet is certain that the ongoing, post-filing infringement is “objectively reckless”? File for a PI anyway?

  12. “Everyone agrees that the mere absence of an opinion is *insufficient* in and of itself to create a presumption of willfullness.”

  13. “The Fed. Cir. clearly raised the standard, so no matter what (even if a complex patent & prosecution history), failure to obtain opinion of counsel is not willfulness.”

    Let me be more clear: there is nothing in any of these cases that precludes, as a matter of law, considering the absence of an opinion as a piece of evidence which could, taken together with other facts, show a pattern of recklessness on the part of the accused.

    Everyone agrees that the mere absence of an opinion is sufficient in and of itself to create a presumption of willfullness. But if you are arguing that an opinion of invalidity/non-infringement is irrelevant for determining whether an accused infringer is/was reckless, I believe that’s incorrect.

  14. “Pretty much all that’s left are first to file and mandatory publication, neither of which are important enough to get Congress’ attention these days.”

    Don’t forget about damages apportionment and, to a lesser extent, venue. The technology thieves won’t rest until either Congress or the Courts legislate those provisions into law.

  15. No, failure to obtain opinion of counsel is not willfulness. It hasn’t been since Knorr-Bremse. The Fed. Cir. clearly raised the standard, so no matter what (even if a complex patent & prosecution history), failure to obtain opinion of counsel is not willfulness. Post Knorr-Bremse, the real issues have been: what if they decide (unwisely) to anyways produce an opinion of counsel, what presumptions can be gained from attacking it and how far do those go? what other evidence is sufficient to prove willfulness?

    The core benefit of Seagate’s holding is the establishment of a “threshold objective standard” requiring “an objectively high likelihood that its actions constituted infringement of a valid patent.” Defendants will attempt to get summary judgment on this “threshold” question before turning to opnion of counsel and the “known or so obvious that it should have been known to the accused infringer” test.

    In many cases, the “threshold objective standard” will simply come down to how difficult was claim construction. A close call on claim construciton questions that would be dispositive on infringement and invalidity would imply no objecitvely high likelihood of infringement of a valid patent. In other cases, there may be similar close calls on inequitable conduct issues (presumably, Seagate did not specificially mention), 102(b) “public use” or “on sale” issues, 102(a)/(b) issues relating to “publication,” as well as infringement issues such as territoriality, joint/sole infringement, inducement/contributory infringement, DOE.

  16. “What role, if any, is there for the thick, formal opinions explaining in detail why a particular patent is invalid, unenforceable, and/or not infringed?”

    Their new role is thick, formal opinions explaining in detail why a particular patent is valid, enforceable, and/or infringed. And now obtained by the patentee, not the accused infringer.

  17. Seagate has two important implications. First, it means that when a patentee sends a “cheap” notice letter, willfulness won’t be triggered. Yet, under Medimmune/Sandisk, the cheap notice letter might trigger DJ jurisdiction. Second, it shifts the burden of proof from the accused infringer squarely to the patentee. Unless the patentee makes a prima facie case of obviousness in the complaint, it won’t be able to get discovery on the issue.

    Seagate also moots provisions in the bills now before Congress. The Supreme Court decisions (eBay, Medimmune, KSR, AT&T) moot other substantive provisions, either directly or indirectly. Pretty much all that’s left are first to file and mandatory publication, neither of which are important enough to get Congress’ attention these days.

  18. Even if the failure to secure opinion of counsel does not give rise to a permissible inference of willfulness, will not the production of such an opinion be compelling evidence that the accused’s conduct was not undertaken in the face of an “objectively high likelihood that his/her actions constituted infringement?”

  19. “What role, if any, is there for the thick, formal opinions explaining in detail why a particular patent is invalid, unenforceable, and/or not infringed?”

    Depends on the patent, of course. If the patent’s claims are complicated, the patent is part of a long chain of applications with lots of prosecution history and possibilities for estoppel issues to arise, and the patentee has explained to the accused infringer why it infringes, then the refusal of the accused infringer to obtain a legal opinion of non-infringement/invalidity could (theoretically) be found to constitute objectively “reckless” behavior.

    By the way, it’s interesting to read the case and get the history of this “willfulness” debacle. It seems to have started with the CAFC’s “Underwater Devices” opinion way back when. Who wrote that one?

  20. Wouldn’t you still want to get an Opinion of Counsel as proof that the risk was not so obvious that you should have known about it?

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