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Patent Non-Infringement and Freedom-To-Operate Opinions—why they still matter after AIA and Bard

By Michael R. Hull - September 30, 2013

A patent grants the right to exclude others from making, using, offering for sale, selling or importing the patented invention for a limited time.

Infringement of a patent is essentially an act of trespassing on the rights belonging to the patent owner as defined by the claims of the patent. A finding of willful infringement in patent litigation is every defendant’s nightmare because the patent law allows the judge, upon request by the patent owner, to increase the damages, up to three times the compensatory damages awarded by the fact finder, i.e., the jury or the judge in the case of a bench trial. 35 U.S.C. §284. An important issue for our clients and any competitor of a patent owner is not only how to avoid a finding of infringement, but how to avoid a finding of willful infringement. In this regard, the America Invents Act (AIA) is helpful to accused infringers.

The AIA provides that the failure of an accused infringer to obtain an opinion from counsel or the failure to present such an opinion to the court or jury may not be used to prove willfulness. Thus, the failure to obtain a non-infringement or freedom- to-operate (FTO) opinion cannot be used by the patent owner to prove that the accused infringer willfully infringed the patent or that the accused infringer intended to induce infringement of the patent. 35 U.S.C. § 298. In essence, the AIA codifies the holding from In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc), that “there is no affirmative obligation to obtain opinion of counsel.” While an opinion from your patent attorney may not be required to avoid a finding of willful infringement, the possibility of tripling the damages award remains disconcerting for most. Therefore, an understanding of what it takes to prove “willful infringement” is in order.

In 2007, the Federal Circuit created a two-prong test for proving willful infringement. First, the patent owner must prove by clear and convincing evidence that the alleged infringer acted despite “an objectively high likelihood that its actions constituted infringement of a valid patent.” Id. Thus, the first prong of this test is an objective question of fact and turns on whether the accused infringer’s defenses are reasonable. In the second prong, the patent owner must show that this objectively high likelihood was “either known or so obvious that it should have been known” to the accused infringer. Id. This second prong is a subjective question of fact and involves the accused infringer’s state of mind. Thus, under Seagate, the two-prong test for willful infringement is a two-part question of fact where the decision-maker for both prongs is the jury (or the judge if the case is a bench trial).

However, the Federal Circuit has changed the first prong, i.e., the “objectively high likelihood” prong of the Seagate test in its recent decision, Bard Peripheral Vascular,Inc.v.W.L.Gore & Assocs.,Inc., 682F.3d1003,1006-07(Fed.Cir.2012). In Bard, the Federal Circuit states that the “threshold determination of objective recklessness … is best decided by the judge as a question of law subject to de novo review.” Bard, 682 F.3d at 1006-07. The Federal Circuit explained that because a determination of objective recklessness is dependent on legal questions such as claim construction, such a determination should be made by the judge. Id. at 1007-08. The Federal Circuit further explained that where the threshold determination is based on fact questions such as anticipation or on legal questions dependent on underlying fact questions such as obviousness, the ultimate determination should still be made by the court, although the underlying fact questions may be sent to the jury. Id.

Thus, the Federal Circuit has now concluded that it was best for a judge, rather than a jury, to decide whether a patent infringement defense is reasonable or objectively reckless. Undoubtedly, future district court and Federal Circuit opinions will shed additional light on what types of defenses or non-infringement arguments are reasonable, merely unreasonable or objectively reckless. As a result, the Bard decision may help clients to obtain a better understanding of the range of possible damages before launching a potentially infringing product or service or before allowing a case to go to trial. Further, Bard gives judges greater discretion to keep issues of willfulness away from juries by ruling that the defendant’s reliance on an opinion from counsel was reasonable. In the short run, we are optimistic that defendants accused of willful infringement may fare better with a judge rather than a jury when the issue of “objective recklessness” is decided.

In codifying Seagate, the AIA prevents a patent owner from claiming the accused infringer was objectively reckless if the accused infringer either did not seek a non- infringement or FTO opinion. Bard also places the issue of objective recklessness with the judge. In short, we regard Bard and the AIA as making it harder to prove willful infringement, not easier.

Even though it may be harder to prove willful infringement, important reasons for seeking formal opinions from patent counsel still exist. For example, the Federal Circuit has previously found that an opinion of counsel concluding either non- infringement or invalidity “would provide a sufficient basis for [a potential infringer] to proceed without engaging in objectively reckless behavior….” Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 2008). The Federal Circuit has also described opinions of counsel as serving “to provide an objective assessment for making informed business decisions….” Seagate, 497 F.3d at 1373 (emphasis added).

In light of the Bard decision, judges have greater discretion to keep questions of willfulness out of the hands of a jury by determining as a matter of law that a defendant’s reliance on advice of counsel was reasonable. Thus, in our view, obtaining a competent non-infringement and/or invalidity opinion still remains the most effective insurance against a willfulness finding.

That said, a competent opinion of patent counsel that concludes either non- infringement or invalidity should be: (1) in writing, as oral opinions have been generally disfavored by the courts; (2) thorough and complete, which may require that the USPTO file history of a relevant patent be studied and with the prior art cited in the USPTO file history; and (3) accurate, especially in the description of the accused product or process and a clear comparison of the accused product or process against each limitation of each claim at issue. Often, it is helpful to break the claims down into chart format with the claim limitations in one column and the differences between the accused product or process clearly explained in an adjacent column.

If any of the foregoing raises any issues for you or your business, please let us know. The attorneys of Miller, Matthias & Hull LLP focus on patent prosecution and patent-related opinion work. We are often asked by our clients to evaluate their new products prior to the product launch for both patentability and non-infringement purposes. We routinely assist our clients in developing ideas regarding how to design around a patent or the claims of a published application. We would happy to counsel you with your new product plans as well. For more information, please call us at (312) 977-9902.