Hot on the heels of uncharacteristic agreement in Congress concerning pending legislation to enact a number of tech manufacturer- and publisher-friendly reforms to the nation’s patent laws (more on that here), Seagate Technology has secured a victory in the Federal Circuit Court of Appeals that likely will give those same industry groups even more reason to celebrate. In re Seagate Technology, LLC, --- F.3d ----, 2007 WL 2358677 (C.A. Fed. (N.Y.), August 20, 2007), originated with Seagate’s petition for writ of mandamus to reverse the N.Y. Southern District trial court’s order compelling Seagate to submit to discovery of that part of its trial counsel’s work product, as well as communications with its trial counsel, related to the work of Seagate’s opinion counsel. Seagate had independently retained and designated opinion counsel both to refute the claims of willful patent infringement by plaintiffs Convolve, Inc. and the Massachusetts Institute of Technology as well as to support Seagate’s asserted advise of counsel defense. Following oral argument and the Federal Circuit’s review of the nearly two dozen party and amicus briefs that were submitted for and against the petition, the court, sitting en banc of its own accord, not only reversed the discovery order, but also fundamentally changed the controlling standard for a finding of willful patent infringement.
The trial court relied on the Federal Circuit’s prior precedent, which held: (1) that a potential patent infringer with actual notice of another’s patent rights had an affirmative duty to exercise due care to determine whether he is infringing those rights, and that failure to exercise such due care would give rise to a claim of willful infringement (and, thus, enhanced monetary damages), and (2) that assertion of an advice of counsel defense (under which the accused infringer raises advice received from his attorneys that he was not infringing as evidence of due care taken), in most cases functioned as a waiver of both the attorney-client privilege and the work product privilege, so that the validity of the defense could be tested. In interpreting the latter holding, trial courts had adopted differing approaches regarding the scope of that waiver, with some courts holding that it extended to all communications and work product of trial counsel, other courts holding that it extended to no such communications or work product, and still others holding that it extended only to such communications or work product that contradicted or cast doubt on the opinions used to support the advice of counsel defense.
In Seagate, the Federal Circuit attempted to eliminate that confusion. Before it did so, however, it first did away with the “affirmative duty” standard, which the court stated set a threshold for willful infringement that amounted to mere negligence, thereby placing an improper burden on the numerous attorney-client relationships affected by assertion of the advice of counsel defense. In its place, the court held that for claims of willful infringement, a recklessness standard would now control, under which patentees “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.” Thus, the court shifted the burden from defendants to claimants to prove the existence, rather than the absence, of willful infringement, thereby eliminating much of the need for the advice of counsel defense in the first place. In addition, though, the court explicitly limited the scope of the privilege waiver, absent extraordinary circumstances, to communications with or work product of trial counsel.
It will be interesting in coming weeks and months to see the extent to which this very important opinion informs the congressional debate over proposed patent reforms.
You can read the Federal Circuit’s Seagate opinion here.