A New Standard for Willful Infringement

Wealth of Ideas Newsletter, October 2004

Intellectual property law doesn't change quickly, so despite the wealth of patent infringement lawsuits filed each year, precedent-setting cases tend to be few and far between. (Perhaps that also explains why none of the lawyer dramas on television are about patent attorneys.)

So the IP world sat up and paid attention when, on September 13 of this year, the Court of Appeals for the Federal Circuit (the CAFC, which is the "patent court") handed down a decision creating a new standard for what constitutes willful infringement.

The case, Knorr-Bremse Systeme Fuer Nutzfahrzeuge GMBH v. Dana Corporation, et al., was originally in favor of the plaintiff. Although there were no damages because there had been no sales of the infringing product (a type of disc brake), partial attorneys’ fees were awarded. The defendants, Dana Corp., Haldex Brake Products Corporation, and Haldex Brake Products AB, appealed on the grounds that a negative inference should not have been drawn from Dana’s failure to obtain an infringement opinion and Haldex’s withholding of an opinion of counsel. In other words, the defendants argued that these actions did not necessarily mean that they had "something to hide".

The CAFC took the case en banc (in full court), requested additional briefing from the parties as well as amicus curiae briefs, and vacated their ruling of willful infringement, stating that "no adverse inference that an opinion of counsel was or would have been unfavorable flows from an alleged infringer's failure to obtain or produce an exculpatory opinion of counsel. Precedent to the contrary is overruled."

Previously, if a defendant failed to obtain an infringement opinion on a disputed patent or withheld the contents of an existing infringement opinion, the court would almost automatically infer from either of these actions an admission of willful infringement. There were at least two problems with this assumption, namely: 1) perhaps the defendant had a monetary reason for not seeking an opinion (an additional team of lawyers, after all, is not cheap); and 2) allowing the defendant to withhold the contents of an infringement opinion from the court helps to preserve attorney-client privilege.

As the IP world continues to buzz about this new precedent, patent attorneys debate the pros and cons of the CAFC’s ruling. Has the search for truth been subjugated to preserve the sanctity of attorney-client privilege? Or should it instead be considered positive that willful infringement must now be proved by direct evidence?

Either way, two things are certain: the new precedent is here to stay, and this is one case you won’t see on a TV courtroom drama.