Strategies for Preparing Infringement and Validity Opinions

By Matthew Epstein
April 13, 2019

“Arguably most important, the company should have a written policy in place stating that any research and development managers and managing executives are not permitted to have a role of any kind in writing the opinion.”

https://depositphotos.com/76365141/stock-photo-opinions-wanted.htmlA company must be strategic in any business decision it makes in order to ensure that it takes the necessary measures to avoid liability for its actions. With respect to patent infringement, and specifically willful patent infringement, the different approaches to determining which measures to take and when to take such measures have been repeatedly challenged in light of a number of court decisions in recent years.

How to Avoid Willful Infringement

To set the scene, the Federal Circuit held in Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (1983) that a potential infringer has an affirmative duty to exercise due care to determine whether or not he or she is infringing. This placed the burden on the potential infringer to seek competent counsel and obtain either a non-infringement opinion or invalidity opinion prior to undertaking the possible infringing activities. This would prevent a finding of willful infringement and treble damages.

The decision in Underwater Devices put an extremely heavy emphasis on obtaining non-infringement opinions and/or invalidity opinions in order to ensure that a court could not hold that any infringement was willful. However, in 2007, the Federal Circuit n In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) reversed its previous holding in Underwater Devices and adopted an “objective recklessness” standard. This standard removed the affirmative duty of the infringer to obtain an opinion from counsel. As a result of the decision in In re Seagate, the bar was dramatically lowered for an infringer to demonstrate that the infringement was not willful by allowing any argument of non-infringement or invalidity to be presented well after the infringing activities.

This standard remained in effect until the Supreme Court decided in Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016) that the In re Seagate decision was overly rigid. Thus, the Court shifted the pendulum back in the opposite direction toward Underwater Devices by disregarding the objective standard in In re Seagate and, instead, adopting a “subjective recklessness” standard. This encourages the Court to analyze the “particular circumstances” of each case on a case-by-case basis. While this decision does not put an absolute burden back on the potential infringer to provide an infringement opinion or validity opinion, as provided in Underwater Devices, it breathes life back into the importance of obtaining an infringement opinion at the outset of undertaking any potentially infringing actions instead of waiting to present such arguments at trial.

As a result of the Halo decision in 2016, it is critical that companies seek competent counsel and obtain these types of opinions sooner than later to rebut any claims of willful infringement. Often, companies may seek such an opinion from a competent in-house employee due to his or her familiarity with the potentially infringing product, such as legal counsel, patent attorney or other, patent agents, or engineers. The critical question though is whether such an opinion may be successfully relied upon in court to prove non-willful infringement or whether the opinion may be deemed to be self-serving and unreliable when prepared by an in-house employee, especially one that is not a qualified patent attorney.

With respect to opinions written by in-house non-patent related counsel, it was held in Underwater Devices that obtaining legal advice from a company’s own in-house counsel who is not a patent attorney is only one factor to be weighed when determining lack of good faith. Therefore, just because an attorney is in-house counsel does not mean that the attorney’s opinions are necessarily suspect. The Federal Circuit held in Radio Steel & Mfg. Co. v. MTD Products, Inc., 788 F.2d 1554, 1559 (Fed.Cir.1986) that an oral opinion by non-patent counsel was sufficient to form the basis of a defendant’s good-faith belief. Similarly, the court in Western Electric Co., Inc. v. Stewart–Wagner Corp., 631 F.2d 333, 337 (4th Cir.1980) held that reliance on an opinion prepared by in-house counsel was reasonable. It should be noted, however, that the opinion provided by the in-house counsel in Underwater Devices contained only unsupported conclusions regarding the validity of the patent and infringement without a thorough review of the file histories of the patents at issue. Therefore, it cannot be said that an attorney must be an experienced patent attorney to be considered competent in preparing an infringement or validity opinion. Instead, the attorney is held to the same standard and expected to provide the same level of due diligence that would be expected of any patent attorney.

Opinions by Non-Patent Attorneys

With respect to in-house patent agents, some courts have outright dismissed these types of opinions. For example, the U.S. District Court in the Western District of Texas held in Signatech USA, Ltd. v. Vutek, Inc. that any opinion given by a patent agent not yet licensed to practice law was incompetent. No. CIV.A. SA-95-CA-0226, 1997 WL 745034, at *10 (WD Tex September 30, 1997), aff’d in part, rev’d in part 174 F3d 1352 (Fed Cir 1999). As a result, the Court held that no opinion from competent counsel concerning its potential patent infringement was ever obtained and, therefore, the company did not have a reasonable, good faith belief that it did not infringe the patent in question. This resulted in a finding of willful infringement and warranted an award of treble damages.

Additionally, companies having these types of opinions prepared by in-house patent agents and/or engineers run the risk of the author of the opinion becoming a witness during any litigation concerning the scope of the opinion. This can lead to the author of the opinion being deposed with respect to the opinion, as well as any related subjects such as the company’s technologies, its patent strategies, and litigation concerns. To the contrary, outside patent counsel would not be subject to this same line of questioning due to its attorney-client privilege.

The Federal Circuit addressed a patent-agent privilege when those agents are acting within the agent’s authorized practice of law. However, the Federal Circuit held in In re Queen’s Univ. at Kingston, 820 F3d 1287, 1301 (Fed Cir 2016) that an opinion provided by a patent agent with regard to the validity or infringement of another party’s patent in contemplation of litigation or for the sale or purchase of a patent are not “reasonably necessary and incident to the preparation and prosecution of patent applications or other proceeding before the Patent Office.” Thus, providing these types of opinions likely fall outside the scope of authorized practice of law and would not be subject to any privilege.

Strategies to Follow

Regardless of whether the opinion was prepared by in-house counsel, a patent agent, or an engineer, there are a few strategies that a company should put in place in order to help ensure the author’s impartiality. First and foremost, the author of the opinion should be certain to give an accurate and verifiable accounting of all the facts. Additionally, and arguably most important, the company should have a written policy in place stating that any research and development managers and managing executives are not permitted to have a role of any kind in writing the opinion. Doing so ensures that the author of the opinion was free to think without a supervisor dictating what should be written. This will also help to prove that the opinion was based solely on the author’s own professional judgment without any undue influence.

Therefore, in view of the courts’ decisions and overall attitude toward non-infringement opinions and invalidity opinions prepared by non-patent counsel, patent agents, and engineers, specifically those in-house, it is best practice to have outside patent counsel prepare these types of opinions. Doing so provides the greatest assurance that the author is not persuaded by any corporate influences. Furthermore, obtaining an opinion from outside counsel will avoid any unnecessary risks if litigation were to arise, such as waivers of privilege, as opposed to if the opinion was prepared by an in-house patent agent or engineer.

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The Author

Matthew Epstein

Matthew Epstein is a patent attorney at LeClairRyan’s Detroit office. He counsels clients on how to protect their inventions by providing patentability and infringement analyses and drafting and prosecuting both U.S. and foreign patent applications. He focuses on patent prosecution in the electro-mechanical industry, including automotive components, precision work piece processing systems, security display cases, consumer products, and augmented reality applications, among other fields. In addition, Mr. Epstein also has experience handling trademark prosecution and copyright protection matters. While in law school, Mr. Epstein was involved with Michigan State University's Intellectual Property Clinic where he helped local entrepreneurs protect their intellectual property.

For more information or to contact Matthew, please visit his Firm Profile Page.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments.

  1. Josh Malone April 13, 2019 7:44 pm

    This just says that lawyers can get away with lying and non-lawyers will be punished even when telling the truth. What corruption. You should not be advising infringers to have outside counsel fabricate a non-infringement opinion. Infringers know good and well when they are stealing patented technology that does not belong to them, and you should advise them to not do it. Likewise a legitimate design around shouldn’t need a bogus stamp of approval by a lawyer who knows nothing about the technology. Let’s reconsider this strategy rather than spreading it.

  2. Paul Morinville April 14, 2019 6:31 am

    Patents are published. Patent infringement is illegal. Anyone in business has the duty to identify patents in the space in which the do business to avoid illegal activity.

    If this is not the case, patents should not be published.

  3. Michael Soldavini April 14, 2019 9:53 am

    As an inventor, I agree with Josh. “Efficient Infringement” is unlawful and those enabling infringement (efficient or otherwise) are equally culpable, They should be prosecuted to the fullest extent, under the law. Why is it that attorneys are not being sanctioned for this type of behavior/advice?

  4. anonymous April 15, 2019 9:23 am

    Everyone in the patent law industry knows an invalidity or non-infringement opinion is intended as an insurance policy against a finding of willful infringement, NOT a good-faith attempt to determine whether or not a patent is actually invalid and/or not infringed. Have you ever written an opinion advising the client a patent is valid and infringed? Of course not. You either don’t put that in writing or you deliver the news orally, forever obscuring any true risk assessment that actually occurs. Instead, you list potential infringement and invalidity defenses for the insurance against willfulness. Since any competent patent attorney can always conjure some reason a patent might be invalid or not infringed, you’re only beginning to litigate the case, not to provide objective advice.

    Can we be honest about these opinions? They provide patent attorneys with huge fees, but they aren’t used to truly guide any business decisions. They’re only evaluated to determine whether they’re good enough to convince a court that they could have been relied upon to guide a business decision. These opinions are insurance policies only. There’s vastly more willful infringement going on than we’re willing to admit publicly and more that courts ought to know about.

  5. Anon April 15, 2019 8:01 pm

    There is a certain level of (improper) “shoot the messenger” going on here in comments from Josh, Michael, and anonymous.

    What an attorney provides, even (or especially) here as a type of “protection” under the law is — not an item to attack the attorney providing the mechanism — when that mechanism is fully compliant with the law.

    I “get” that it is not liked what (or how) this mechanism comes into play. But those feelings are crowding out a reasoned approach as to what those mechanisms are, and (as the article illustrates) how those fully legal mechanisms may be most advantageously utilized.

    There is NO “getting away with lying” with these mechanisms Josh. To think so (based on feelings) is to allow your feelings to overcome critical thinking.

    To the extent that something IS “bogus,” then the complaint is NOT with the mechanism, but with the improper execution of the mechanism. Such may well happen, but such happenings are not in any way limited to – or caused by – the mechanism itself.

    Michael, you will find NO ONE more vocal against Efficient Infringers than myself. That does not change the fact that your expressed view is inimical to the practice of law itself. You align with a dangerous faction if you de facto condemn the attorney for practicing a fully legal mechanism just because of the recipient of that mechanism. Again, like Josh, you need to separate your emotion to allow for critical thinking. The article written here is worth another reading from you – once you place your animosity to the side. While I do NOT agree with all of the comments in the article, visceral reactions (like yours) will not help discuss any underlying issues that may exist.

    Not least, here, anonymous, your post is itself “not in good faith.” You cannot claim that (as you impliedly do) that the mechanism is merely some “racket” for attorneys to make money off of innovators. You contradict yourself with your accusation that an attorney “won’t put something in writing” at the same time claim that the work product “[isn’t] used to truly guide any business decisions.” You too act as if attorneys has some “free reign” to act unethically and that attorneys apparently routinely DO act unethically. Closer to the fact is that you merely do not like what IS legal and ethical under the law and want something different.

    Do not get me wrong – there is nothing wrong with wanting something different. But there is something wrong with getting on a high horse and preaching, when what you are preaching is not correct.

    As to any type of “not in writing” and other actions that you want to view as unethical, I would advise you to actually speak to an attorney in detail about what “ethical” means and what may and may not be unethical. Prudence in dealing with items NOT in writing is just that: prudence. Doing so is NOT some automatic ethical breach. You seem to not understand just what an attorney’s job is or what limits may be in place for any particular engagement, and where and how ethics is actually played out in these situations. Throwing about accusations of being unethical when YOU do not know what is means to BE unethical is itself unethical – leastwise, it is a sign that you are not to be taken seriously, no matter (and in most likelihood BECAUSE of) your emotional “charge.”

    Again, this is NOT to say that you do not have a reason to not like the current situation. But there is a very real difference between not liking the way things are and claiming that someone is acting unethical merely because you do not like the way things are.

    I urge you to continue wanting change – if that is your druthers. I also urge you that if you want to be taken seriously, then you do not give in to your emotions to such a degree that you show that you do not understand the situation that you may not like. You will be far more effective in arguing for change if you show critical thinking and keep emotion in check.