There are many reasons why it is important for companies to get opinions from counsel addressing patents of particular concern to the companies’ products. Some reasons include helping identify design changes to avoid potential infringement issues, to provide comfort to investors that competitor patents do not raise material risks, and even as a prerequisite to obtaining patent infringement insurance.
In the litigation context, a proper opinion of counsel can provide evidence critical to avoiding treble damages if infringement is found. Under U.S. patent law, a company that has been found to infringe a patent can be ordered by the court to pay money damages and, if the infringement is found to be willful, the court can treble the damages. A willful infringer is also more likely to be required to pay the patent owner’s attorney fees for the litigation. A competently written opinion from patent counsel explaining why a patent is invalid or not infringed can be strong evidence that infringement was not willful. The litigation benefit of an opinion is maximized when the company is proactive and obtains the opinions when new products are released and a company knows of a particularly risky patent, or at the time it learns of such a patent later on. In contrast, opinions issued on the eve of litigation may be given little weight by the court or ignored entirely.
The importance in a litigation willfulness analysis of when an opinion was received has varied over the years. From 2007 until 2016, one of the factors courts considered in a willful infringement analysis was the strength of infringement defenses presented at trial. As a result, an opinion of counsel that was not issued until after a lawsuit was filed could still be effective to defeat willfulness. Many companies thus deferred obtaining patent opinions, even to address patents that they knew could be an issue, until litigation was certain. In June 2016, the U.S. Supreme Court issued its decision in Halo Electronics, Inc. v. Pulse Electronics, Inc. shifting the focus of willfulness from the merits of litigation generated defenses to the infringer’s state of mind when the infringing activities first started and it was reasonable for the company to know of the patent. For more information, click here to see our prior article on this decision.
As recent court cases show, one clear effect of the Halo decision is to firmly establish that an early opinion from patent counsel can be a key piece of evidence to show the state of mind of the company and defeat willfulness while an opinion issued at the last minute is likely to be given no weight.
In one recent case, Omega Patents v. CalAmp. Corp., Omega won an infringement jury verdict and sought enhanced damages due to willful infringement. CalAmp raised various defenses to willfulness, including producing opinions from outside patent counsel concluding that the asserted patents were invalid or not infringed. However, the opinions were not written until after litigation started. While CalAmp claimed that it had received oral opinions much earlier, the court did not give this weight in assessing CalAmp’s state of mind at the time the infringing activity started. The court explained, for example, that without a written opinion that set forth a reasoned basis for invalidity there was no evidence that CalAmp had any knowledge at that time of the later presented invalidity defenses. The court, after considering a number of other factors not favorable to CalAmp, ruled that the infringement was willful and awarded trebled damages of nearly $9 million.
In contrast, in a patent litigation that straddled the Halo decision (Greatbatch Ltd v. AVX), a jury found several patents infringed and awarded substantial damages. Under the pre-Halo rules, the Court held there was no willful infringement by AVX. After Halo changed the rules, Greatbatch asked the court to reconsider the issue, contending that AVX’s relied on arguments developed during the litigation to show no willful infringement. On reconsideration, the court again held that there was no willful infringement. The court specifically noted that for one patent, AVX had obtained an early written opinion of counsel concluding the patent was invalid and that the opinion (albeit later proved wrong) was at least competent and reasonable. For a second patent, the court noted that AVX had obtained a non-infringement opinion in 1998 for an older product and that in 2008, it reviewed the opinion in the context of a similar but new product (the one accused of infringement in this case), consulted with its patent counsel, and confirmed that that the same non-infringement argument still applied. These documents helped established that AVX, while knowing about the patents, had a good faith belief at the time the products came out that they did not infringe and, equally important, why.
Apart from being good practice generally, patent infringement issues should be considered early in product lifecycles, and getting written opinions from counsel addressing high-risk patents should be treated as part of the general process of product development. A written and thorough opinion from patent counsel can establish a solid defense to willful infringement by documenting the company’s state of mind when the product was released. It is equally important to periodically reevaluate older opinions as new and modified products are developed and as other patents become relevant over time. As one court recently stated, “[o]ngoing consultation with a patent lawyer remains a consideration [in a willfulness analysis] and is ‘highly probative evidence of good faith.’” (Loggerhead Tools, LLC v. Sears Holding Corporation) (citing an earlier appellate court case).
By being proactive, working with patent counsel to address issues up front rather than ignoring or avoiding knowledge of high-risk patents, companies can protect themselves from claims of willful infringement and the increased risk of large financial penalties that come with that.