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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.
In Knorr-Bremse, the Federal Circuit has changed the foregoing law, at least to the point of ruling that the fact-finder may not infer that an opinion was or would have been unfavorable due to the company's failure to obtain or produce an exculpatory opinion of counsel. Although the Federal Circuit held that “there continues to be an affirmative duty of care to avoid infringement of the known patent rights of others,” Knorr-Bremse, __ F.3d at __, the failure to obtain an exculpatory opinion of counsel shall no longer provide an adverse inference or evidentiary presumption that such an opinion was unfavorable. However, the court left open the issue of whether a fact-finder can be informed that counsel was consulted (without any inference as to the nature of the advice received) in determining the question of willful infringement. Nor did the Federal Circuit address how the affirmative duty of due care can be satisfied without obtaining an opinion.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
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The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.