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The Value of Non-infringement and Invalidity Opinions, Part 2

 

Patent Attorney

Raleigh: 4801 Glenwood Avenue, Suite 200, Raleigh, NC 27612.  

(919) 825-3309  

Email 

Albert Minn is a patent attorney with 10 years of experience practicing before the United States Patent and Trademark Office.  

 

Opinions by In-house Counsel

As we discussed in our previous post about non-infringement and invalidity opinions, Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (1983) stated that whether an opinion is prepared by in-house business counsel or by outside third-party counsel is only one factor to consider when determining whether an opinion was obtained in good faith.  Another factor the court considered was whether or not the in-house legal counsel was a qualified patent attorney

Yet, just because an attorney is also employed by the business as in-house counsel does not necessarily mean that the opinion is automatically suspect.  For example, the Federal Circuit held in Radio Steel & Mfg. Co. v. MTD Products, Inc., 788 F.2d 1554 (Fed. Cir. 1986) that an oral opinion by non-patent counsel was sufficient to form the basis of the defendant’s good-faith belief.  Likewise, the 4th Circuit Court of Appeals held in Western Elec. Co. v. Stewart-Warner Corp., 631 F.2d 333 (4th Cir. 1980) that reliance on an in-house counsel prepared opinion was reasonable.  Although it cannot be said that an attorney must be an experienced patent attorney to provide a valid non-infringement or invalidity opinion, the attorney must be held to the same standard and be expected to provide the same due diligence that would be expected of any patent attorney.

 

Opinions by Non-Patent Attorneys and Non-Attorney Employees

Some courts have outright dismissed non-infringement or invalidity opinions provided by in-house patent agents as being reasonable to avoid willful infringement.  For example, the U.S. District Court in the Western District of Texas held in Signtech USA, Ltd vs. Vutek, Inc. that a patent agent not licensed to practice law was incompetent to provide a valid opinion.  On appeal, the Federal Circuit Court of Appeals held that no valid opinion from competent counsel was obtained, and thus, the defendant did not have a reasonable, good faith belief their product did not infringe the patent in question.  As such, a finding of willful infringement and the trebling of damages was upheld.  

Another point to consider is that any business obtaining an opinion from a non-attorney employee runs the risk of the author being subpoenaed as a witness during litigation.  Thus, the non-attorney employee could be deposed with respect to the opinion’s origins or motivations, as well as any other related subjects such as the company’s intellectual property or patent strategies.  However, an opinion prepared by outside patent counsel, and any work product associated with the opinion, would be protected by attorney-client privilege.  

 

Strategies and Best Practices to Consider

Regardless of whether the opinion was prepared by in-house counsel, a patent agent, or an engineer employee, a business can take some actions to help ensure the author’s impartiality.  First, the author of the opinion should be certain to give an accurate and verifiable accounting of all the facts.  Additionally, the business should have a written policy stating that any research and development managers and/or managing executives are forbidden to have any role in preparing and/or writing the opinion.  Having such a policy ensures the opinion author is free to arrive at an independent opinion without interference from a supervisor.  Further, the written policy may help prove the opinion was based solely on the author’s own professional judgment without any undue influence.

Yet, in view of courts’ decisions and overall attitude towards non-patent counsel, patent agents, and other non-attorney employees preparing non-infringement and/or invalidity opinions, it is probably best to have outside, third-party patent attorneys prepare those opinions.  Hiring outside counsel provides the greatest assurance that the author is not influenced by any internal business interests.  Additionally, obtaining an opinion from outside counsel will avoid any unnecessary risks if litigation were ever to arise, such as waivers of privilege or confidentiality. 

If you have other questions or need to speak with a patent attorney about non-infringement or invalidity opinions, give Grell & Watson a call at (919) 825-3309!

 

 

The Value of Non-infringement and Invalidity Opinions

 

Patent Attorney

Raleigh: 4801 Glenwood Avenue, Suite 200, Raleigh, NC 27612.  

(919) 825-3309  

Email 

Albert Minn is a patent attorney with 10 years of experience practicing before the United States Patent and Trademark Office.  

 

Protecting Business Activities with Opinions

Every business decision a company makes must be strategic and ensure that necessary measures and precautions are taken to minimize or avoid liability for its actions.  When the decision involves potential patent infringement, and more specifically willful patent infringement, court decisions in the past several years have shifted the paradigms that determine which measures to take, and when to take them. 

How to Avoid Willful Infringement

The Federal Circuit held in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (1983) that a potential infringer has an affirmative duty to exercise due care to determine whether or not he or she is infringing a patent.  This placed the burden on the potential infringer to seek competent counsel and obtain either a non-infringement opinion or an invalidity opinion prior to undertaking any possible infringing actions.  This would prevent a finding of willful infringement and treble damages.

The decision in Underwater Devices put an extremely heavy emphasis on obtaining non-infringement opinions and/or invalidity opinions in order to ensure that a court could not hold that any infringement was willful.  However, in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), the Federal Circuit reversed its previous holding in Underwater Devices by adopting an “objective recklessness” standard, which discarded the potential infringer’s affirmative duty to obtain an opinion from counsel.  As a result of the decision in In re Seagate, the burden of proof for demonstrating that the infringement was not willful was drastically and allowed for any argument of non-infringement or invalidity to be presented well after the infringing activities.

This standard remained in effect until the United States Supreme Court decided in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016) that the In re Seagate decision was overly rigid.  In doing so, the Court swung the pendulum back towards Underwater Devices by disregarding the Federal Circuit’s “objective recklessness” standard established in In re Seagate and by adopting a “subjective recklessness” standard.  This encourages the Court to analyze the “particular circumstances” of each case on a case-by-case basis.  While this decision does not put an absolute burden back on the potential infringer to provide an infringement opinion or validity opinion, as provided in Underwater Devices, it breathes life back into the importance of obtaining an infringement opinion at the outset of undertaking any potentially infringing activities instead of waiting to present such arguments at trial.

As a result of the Halo decision, it is critical for businesses to seek competent counsel and obtain a non-infringement and/or invalidity opinion sooner rather than later to successfully rebut any claims of willful infringement.  But what about using competent in-house employees, such as legal counsel, patent attorney or other, patent agents, or engineers, to furnish such an opinion?  Could it save costs?  Is it self-serving and unreliable?  Check back to see the answers to these questions and other best practices.  

If you have other questions about patent infringement or the patent process, give Grell & Watson a call at (919) 825-3309 to talk to a patent attorney today!