Willful Infringement and Enhanced Damages

Following the 2007 Federal Circuit decision In re Seagate Technology, LLC, some businesses decided that the need to obtain opinion letters from counsel in order to avoid findings of willful infringement was reduced. In other words, the bar for proving willful infringement was raised by Seagate. Recently, in separate concurring opinions, some judges from the Federal Circuit have made the case for revisiting the willful infringement standard set forth in Seagate.

For many years, a controlling standard for determining willful infringement was that set forth by the Federal Circuit in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 (Fed. Cir.1983). In Underwater Devices, the Court held that, “(w)here . . . a potential infringer has actual notice of another's patent rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing. Such an affirmative duty includes, inter alia, the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity.” Faced with this affirmative duty, potential alleged infringers were well served, in an effort to avoid a finding of willful infringement and attendant enhanced damages, to document the obtainment of such legal advice via opinion letters. This affirmative duty survived for more than 25 years until the Federal Circuit expressly overruled itself in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007).

In Seagate, the Federal Circuit set forth a two-pronged analysis that must be met in order for willful infringement to be found. First, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” Second, “the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” The Federal Circuit also made explicitly clear in Seagate that the affirmative duty set forth in Underwater Devices was no longer applicable.

Seagate’s rejection of an affirmative duty was subsequently codified by passage of the 2011 Leahy-Smith American Invents Act. Section 298 of title 35 of the U.S. Code, effective September 16, 2012, states that, “(t)he failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent..”

However, concurring (i.e., nonbinding) opinions in two recent Federal Circuit cases have signaled that other aspects of the willfulness standard may be revisited in a future court decision. For example, a few months ago, in a concurring opinion in Halo Electronics, Inc. v. Pulse Electronics, Inc., Judge O’Malley of the Federal Circuit made the case that the “clear and convincing” evidence requirement of the willfulness analysis should be revisited by the en banc Federal Circuit to determine whether a lower standard such as “preponderance of the evidence” should instead apply. Further, on January 13, 2015, in a concurring opinion in Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates., Judge Hughes of the Federal Circuit made the case that district courts should be given more deference in willfulness determinations. Many observers construe these concurrences as a signal that the willfulness standard may be reviewed again by the en banc Federal Circuit in the near future.

Accordingly, those doing business in the United States should continue to be vigilant about competitors’ patents and take precautions to avoid any findings of willful infringement.