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Federal Circuit Rewrites Law on 'Advice of Counsel' Defense to Willful Infringement
The Federal Circuit Court of Appeals has just issued an opinion that changes precedent in U.S. patent law, namely, Knorr-Bremse Systeme Fuer Nutzfahrzeuge GMBH v. Haldex, __ F.3d __ (Fed. Cir. 2004). Previously, for a company that was accused of patent infringement, the general law was that the company had “an affirmative duty to exercise due care” to avoid infringement, including “the duty to obtain competent legal advice from counsel before initiation of any possible infringing activity.” Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 (Fed. Cir. 1983). Failure to obtain such legal advice was considered a key factor in determining whether infringement is willful. A finding of willful infringement can be devastating, as it can subject a defendant to enhanced damages (up to three times actual damages) and/or the payment of the plaintiff's attorneys' fees. 35 U.S.C. ”284 and 285.
To comply with the duty of due care, companies would typically obtain a written opinion of patent counsel advising the company, hopefully, that there is no infringement. If the company was later sued for patent infringement, the company would frequently disclose to the plaintiff the written opinion of non-infringement as a defense to willful infringement. The company would also argue to the fact-finder (judge or jury) that it could not have willfully infringed the patent because it reasonably relied upon the opinion of its counsel that it was not infringing. Thus the opinion of counsel often acted as a “shield” to a claim by the plaintiff of willful patent infringement. On the other hand, if no opinion was obtained by the company, or if an opinion was obtained but the company decided not to introduce it in evidence to the fact-finder, the judge or jury could be free to infer that either no opinion was obtained or, if an opinion was obtained, that it was unfavorable to the company. Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 2565 (Fed. Cir. 1986); Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568 (Fed. Cir. 1988). This adverse inference substantially increased the possibility of an enhanced damages or attorneys' fees award against those companies that were sued for infringement but did not obtain a solid opinion of non-infringement. It also placed those defendants that did obtain an opinion of counsel in the difficult position of either producing the opinion ' and waiving the attorney-client privilege as to the opinion and related documents ' or risking the impact of the adverse inference.
The DOJ's Corporate Enforcement Policy: One Year Later
The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
The DOJ's New Parameters for Evaluating Corporate Compliance Programs
The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.
Use of Deferred Prosecution Agreements In White Collar Investigations
This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.