Damages, Infringement

What do you do when a rival sends you a cease and desist letter accusing you of patent infringement? If you said, “nothing,” that was the wrong answer. If you are eventually sued for infringement and you made no effort to investigate their claim and, if necessary, remedy your infringement, you could be found to have willfully infringed. Patent infringement is ordinarily a strict liability offense, meaning no knowledge of the patent or intent need be shown to establish infringement. In a willfulness case, the court has the discretion to enhance the damages awarded against you to a maximum of three times the patent holder’s actual damages.

The law of willfulness has gone through a significant evolution in the last 20 years. When Hansen IP Law opened its doors, a common strategy for avoiding a willfulness finding was to obtain an “opinion of counsel,” which is a lengthy and formal written opinion from a patent lawyer that a patent is not infringed, invalid, or both. These opinions are typically expensive because they include detailed legal analyses of the accused product, the patent claims, specification and file history as well as claim construction. A non-infringement opinion would cover both literal infringement and infringement under the doctrine of equivalents.

Before 2007 if you did not get an opinion of counsel after being notified of infringement, the risk that you would be found liable for willfulness was significant. The cases imposed a duty of care to avoid infringement, which was generally understood to require obtaining an opinion of counsel, and judges could tell a jury to presume the opinion would have been negative had one not been obtained. In that year, the Federal Circuit changed the rules so that you could avoid a finding of willfulness if you raised a substantial question as to validity or infringement even if you lost and regardless of what your actual intent was in committing the ultimately infringing acts. However, in 2016 the Supreme Court overruled the Federal Circuit in Halo Electronics v. Pulse Electronics and held that willfulness turns on the intent of the infringer at the time they infringed, not on defenses they may later assert.

While Halo made it harder to avoid a finding of willfulness, Congress made it easier a few years earlier. In the America Invents Act, Congress statutorily prevented courts from finding willfulness based on the absence of an opinion in 35 U.S.C. § 298. As a result of Halo and Section 298, a good-faith belief in non-infringement or invalidity remains highly relevant, but it no longer has to take the form of a formal written opinion.

So the short answer to the question “do I need an opinion of counsel?” is: not necessarily. The risk of doing nothing is still significant, but whether you need a full-blown, formal opinion is a more nuanced issue.

The Quality of What You Have Still Matters

While a formal opinion is not required to avoid a willfulness finding, that does not mean that it is advisable to rely on casual, conclusory opinions. Courts have admitted less formal analyses — internal memoranda, counsel’s oral advice, emails from patent attorneys addressing infringement risk — as evidence bearing on willfulness. The threshold for admissibility is lower than it once was. But admissibility and persuasiveness are different things.

A meaningful non-infringement opinion works through the asserted claims limitation by limitation, analyzes the specification and prosecution history to establish how the claims should be construed, and addresses the doctrine of equivalents — because a conclusion that your product does not literally infringe a claim is worth considerably less if you have not also addressed whether it infringes under the doctrine of equivalents. That is the analysis a jury or court will expect to see if you are relying on the opinion to defeat a willfulness charge. The thinner the analysis, the more likely it is to be discounted.

More importantly, if the positions taken in an informal or cursory analysis diverge from the claim construction and infringement arguments that were actually litigated, the opinion may be harmful and suggestive of bad faith.

The takeaway: Informal advice may be admissible, but a full analysis of the claims, specification, prosecution history, and doctrine of equivalents is what gives an opinion its teeth.

The Need for Reliance

Regardless of its length or thoroughness, an opinion is meaningless if you cannot establish that it was actually considered in making the decision to pursue or continue conduct that is ultimately found to infringe. It is important to document the review of the opinion and to be able to show that the decision to pursue that conduct was made in reliance on the opinion. Otherwise, it will look like the opinion was merely obtained as “cover” and not a good faith effort to avoid infringement.

The Hidden Benefit to Obtaining a Favorable Opinion

In some cases, the issue of willfulness will be bifurcated (usually as part of damages) and tried separately from infringement and invalidity. In that scenario, the opinion does exactly what it was intended to do — it is presented in the damages phase to negate willfulness, without the liability jury ever seeing it. However, if there is no bifurcation, an additional benefit materializes: the jury may get to see the opinion during the liability phase. Although intent is not relevant to liability, and although the judge may instruct the jury not to consider the opinion for purposes of infringement and invalidity, the jury will not be able to “unsee” the opinion, and it may have a strong persuasive effect even where the law dictates otherwise.

The decision whether to obtain an opinion can involve a difficult risk assessment and cost-benefit analysis. If your company operates in a litigious and patent-heavy space, it may not be practical to get opinions every time a potential infringement issue arises. Unless a relatively painless design-around or licensing option is available, the safest course of action is to obtain a detailed and thorough opinion concluding that no claim in the asserted patent is both infringed and valid.