By Ray Lupo, Brian Ferguson, Paul Devinsky and Mary Boyle

The U.S. Court of Appeals for the Federal Circuit, sitting en banc, has held that willful patent infringement requires a minimum showing of "objective recklessness," in stark contrast to the now overruled Underwater Devices Inc. v. Morrison-Knudsen Co. "duty of due care" standard. This change in the law raises the bar for patentees claiming enhanced patent damages for willful infringement and lowers the costs of defending against such claims. The Court also held that the assertion of an advice-of-counsel defense to willful infringement does not waive privilege for trial counsel communications or work product. Thus, a patent defendant is no longer faced with the threat of forfeiting all privilege for trial counsel or communications as the price for reliance on an opinion by independent opinion counsel.

Because the Federal Circuit took the case en banc, it was positioned to reconsider and overrule its prior willfulness precedent as well as to address the privilege waiver issue of first impression. The unanimous Federal Circuit decision, issued on August 20, 2007, in In re Seagate Technology, LLC, fundamentally rewrites the law of willful patent infringement. The matter came to the Federal Circuit on a privilege-waiver issue arising from Seagate’s assertion of an advice-of-counsel defense to willful infringement. Seagate petitioned for a writ of mandamus to vacate district court orders granting discovery of Seagate’s privileged communications with its trial counsel concerning infringement, validity and unenforceability of the patents-in-suit. The Federal Circuit, sua sponte, ordered en banc review of the petition and took the opportunity to create a sea change in its jurisprudence regarding willful infringement.

The en banc order set forth the following questions:

1. Should a party’s assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party’s trial counsel?

2. What is the effect of any such waiver on work-product immunity?

3. Given the impact of the statutory duty of care standard announced in Underwater Devices v. Morrison-Knudsen, on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself?

Willfulness

Starting its analysis by addressing the willfulness issue, the Court overruled its seminal 1983 decision in Underwater Devices Inc. v. Morrison-Knudsen Co., thus eliminating the duty of due care mandated by that decision in order to avoid a charge of willful infringement.

Under Underwater Devices and its progeny, willfulness was evaluated based on a potential infringer’s affirmative duty to determine whether or not he was infringing, which included "the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity." A failure to seek and obtain legal advice, or a refusal to disclose the advice, was grounds for an adverse inference that the advice would have been or was unfavorable to the accused infringer. Patent law was unique in the law in allowing an adverse inference to be drawn from a refusal to waive attorney-client privilege. The court noted that t