The Law Firm of
Louis Ventre, Jr.
Registered Patent Attorney
| Patent Infringement. Patent infringement is a
civil wrong causing commercial harm. It results when someone breaches a
duty to exercise due care to avoid making, using, selling, offering for
sale, or importing a patented invention without the consent of the
patentee during the lifetime of a valid patent. Damages can be
awarded for infringement. Triple damages can be awarded when there
is willful infringement.
Willful Infringement. When someone gets a notice of another's patent (a Notice Letter), the person notified cannot be held liable for willful infringement permitting enhanced damages unless there is at least a showing of objective recklessness. This means that 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. In re Seagate Technology, LLC, Miscellaneous Docket No. 830 (Fed. Cir. 2007).
While there is no affirmative obligation to obtain opinion of counsel, the Federal Circuit has stated, in an en banc holding, that opinion counsel serves to provide an objective assessment for making informed business decisions. In re Seagate Technology, LLC.
Secondly, lack of an opinion of counsel can be used as circumstantial evidence of an intent to infringe if charged with inducing infringement. The Federal Circuit held on September 24, 2008 that "Because opinion-of-counsel evidence, along with other factors, may reflect whether the accused infringer "knew or should have known" that its actions would cause another to directly infringe, we hold that such evidence remains relevant to the second prong of the intent analysis. Moreover, we disagree with Qualcomm's argument and further hold that the failure to procure such an opinion may be probative of intent in this context. It would be manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function . . . and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe." Broadcom Corp. v. Qualcomm Inc., 2008-1199, -1271, -1272 (Fed. Cir. 2008).
Thus, an opinion by independent counsel is a prudent business decision and wise course of action to establish good faith in attempting to avoid willful infringement.
Additionally, willful infringement must find its basis in pre-litigation conduct. So, one should seek opinion counsel before litigation is commenced. In the Seagate case, opinion counsel provided an opinion after litigation was commenced and the court observed that "the opinions of Seagate’s opinion counsel, received after suit was commenced, appear to be of similarly marginal value. . . reliance on the opinions after litigation was commenced will likely be of little significance."
The Seagate court said, "Although an infringer’s reliance on favorable advice of counsel, or conversely his failure to proffer any favorable advice, is not dispositive of the willfulness inquiry, it is crucial to the analysis."
If a person recklessly disregards the possibility of infringement, a penalty of up to three times the actual damages and attorneys fees may be assessed. See the Damages page for more information on this issue and the drug infringement discussion for infringement issues on importing pharmaceuticals from Canada and other countries.
Patent Infringement Representation. A Notice Letter is often a precursor to a law suit. If you receive a notice letter alleging infringement of someone's patent or simply bringing your attention to an existing patent, contact Attorney Louis Ventre, Jr. to help with your legal representation to respond, to avoid litigation whenever possible, and to prepare an independent written opinion on infringement.
The written opinion may be important, as noted above, because a company should avoid treating the letter of infringement in a manner that might show "objective recklessness." This means taking steps that tends to negate evidence that the company dismissed the letter despite an objectively high likelihood that its actions constituted infringement of a valid patent. In some instances a defensive declaratory judgment suit could be the best tactic and this Law Firm can help you decide on that.
Sometimes a patent holder will institute suit (many times in Texas)
against a potential infringer, but not serve notice on the
defendant. This is a legal tactic that seeks to maintain future
control over where (in what jurisdiction) the litigation will
proceed. The filing of a suit does not necessarily mean that
litigation in that jurisdiction will be taken to the next step, or that
you need litigation counsel. Most probably, the plaintiff will
decide on this based on whether or not there are good reasons to believe
that you are not an infringer. So, in that case, an independent
opinion of counsel would be the means to show good faith in avoiding
infringement and could be a means to convince a plaintiff that there are
insufficient grounds of infringement and also raise the stakes by enabling
the defendant to seek of attorney fees if the plaintiff is
unsuccessful. But, if there is infringement, it can also give you an
opinion on you whether you have a legal defense that the patent is
invalid. A prudent course of action is to plan a defense in two steps by
obtaining: 1) an infringement opinion; and, (2) if infringement is
likely, then a patent validity opinion.
According to the American Intellectual Property Law Association 2009 Economic Survey, the median charge in 2008 for a validity/invalidity only opinion per patent is $12,000; for an infringement/non-infringement opinion per patent is $10,000; and for a combination validity and infringement per patent of $18,000.
My Company Just Bought a Machine, I Cannot be Liable, Can I? You may be surprised to learn that you may be liable for infringement even if you are only using a patented invention. For example, suppose you purchased a car and it incorporates someone else's patented part (such as a patented convertible top) as one component of car: you are liable to the patent owner. This is a famous Supreme Court case involving Ford Motor Company making convertible tops for its cars without a license from the patent owner. The court explained,
"Ford lacking authority to make and sell, it could by its sale of the cars confer on the purchasers no implied license to use, and their use of the patented structures was thus 'without authority' and infringing under 271 (a). Not only does that provision explicitly regard an unauthorized user of a patented invention as an infringer, but it has often and clearly been held that unauthorized use, without more, constitutes infringement." Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476, 484 [141 USPQ 681] (1964) (citations omitted).
When the patented feature motivates the demand for the unpatented products, a court will award damages based on the sales price of the entire machine, rather than on just the price of the infringing component. In this type of situation, you may be able to pass the buck if you are smart enough and a little lucky. Sometimes the Uniform Commercial Code's warranty of non-infringement (§2.312(3)) applies.
However, the "entire market value rule" applies only in limited circumstances when “the patent related feature is the basis for customer demand.” Imonex Servs. v. W.H. Munzprufer Dietmar Trenner G.m.b.H., 408 F.3d 1374, 1379, 80 (Fed. Cir. 2005). This is a very difficult basis to prove and requires giving specific evidence that consumer demand for the overall product is driven by the patented feature or component.
In most cases where the patented item is only one of many features in
an infringing product, damages are first based on a valuation of the
patented invention and then on an assessment on what the parties would
have agreed to in terms of compensation in the hypothetical reasonable
The American Intellectual Property Law Association reported that the median cost of taking a patent infringement suit through trial in 2008 was about $650,000 when the amount at risk was less than $1 million. This increased to about $5.5 million when more than $25 million was at risk.
A lawsuit, which has a likelihood of loss and an award of damages for
lost profits, reasonable royalty, and interest and costs, could be
devastating. For example, in 2003 Cordis Corp. v. Guidant Corp.
resulted in an award of $425 million.
Combination Invalidity and Non-infringement
Opinion. A combination
invalidity and non-infringement opinion will typically cost $12,000.
In comparison and according to the American Intellectual Property Law
Association 2009 Economic Survey, the median charge in 2008 for a
combination invalidity and non-infringement opinion per patent is $18,000.
A best practice would involve more. The same court observed in a recent decision, after citing the Knorr decision, that where the defendant actually obtained an opinion of counsel after receiving the complaint from the plaintiff, "early receipt of legal advice would have strengthened the defendants’ argument that they had not willfully infringed. . . ." (Imonex Services, Inc. v. W. H. Munzprufer Dietmar Trenner GMBH, nos. 04-122,-1290, May 23, 2005). So, when the facts are in dispute, having an early opinion letter, i.e., one that is done before a lawsuit is instituted, is better than having one prepared after receiving the complaint, and it is, therefore, inescapable that it is better to have an early opinion letter, than not having an opinion letter at all.
Nota Bene: Lack of an attorney non-infringement opinion still weighs in the analysis of whether infringement was willful, and may significantly influence a trial court's decision on whether to enhance damages should a jury find willful infringement. For example, in i4i Ltd. Partnership v. Microsoft Corp., 589 F.3d 1246, 1274-75 (Fed. Cir. Dec. 22, 2009), the Federal Circuit affirmed a 20% enhancement (amounting to $40 million) by the Eastern District of Texas court in the damage award where the district court found that the accused infringer, after learning of the patent, failed to obtain an opinion of counsel before continuing with its accused activity.
How Not to React to a Notice Letter. A February 2006 decision by the Court of Appeals for the Federal Circuit is a lesson in how not to behave. In that case, the infringer obtained two oral opinions in two and a half years after being notified of the patent and his alleged infringement. The infringer wanted to avoid paying attorney fees. The infringer told its attorney that "for 20 years or more, the whole industry has been making things like this." Based on that assertion, the attorney advised that there would be no infringement. However, both oral attorney opinions were not thorough in that they were not based on an examination of the file history of the patent, the accused infringing product or any prior art. The trial court found these opinions incompetent and in reckless disregard of the patent rights. Less than good faith attempt to avoid infringement had a devastating effect. The infringer could not simply await further details from the patent owner on exactly what was being infringed. The result was a finding of willful infringement, treble damages and attorneys fees against the infringer. The case was Golden Blount, Inc. v Robert H. Peterson Co., nos. 04-1609, 05-1141, -1202.
Why Outside Counsel? Despite the Knorr decision, a company would be well advised not to give opposing counsel the opportunity to argue that the company displayed objective recklessness in the method it chose to employ in evaluating an infringement claim. A company's technical expert might provide a first line of defense in the evaluation of infringement and clearly, a company counsel opinion is better than no opinion. However, the opposing counsel might well raise the suggestion that the use of in-house technical experts and counsel had an obvious conflict of interest and that the resulting opinion of no patent infringement was a self-serving attempt to simply avoid a willfulness determination.
There may be no adverse inference as a matter of law from failure to obtain an opinion of counsel, but being able to disclose an opinion of an independent counsel on patent infringement is one of the circumstances that might well tip the balance for a jury.
Waiver and Strategy. As your opinion counsel, this law firm would limit written documentation of a non-infringement opinion to the opinion memorandum. Work with in-house and litigation counsel would be based on refraining from writing documents on infringement beyond the opinion letter.
The reason for this is strategic legal protection for our
clients. The Federal Circuit in an opinion on May 3, 2006 clarified
the law of waiver of attorney-client privilege and work product.
When the advice- of-counsel defense to willful infringement is asserted by
an infringer, the infringer waives his right to keep confidential all
documents from any attorney (in-house, litigation or opinion counsel)
concerning infringement. This includes not only the traditional
opinion letter, but also includes any documents in the attorney's files
that memorialize an oral communication between attorney and client
concerning whether the patent is valid, enforceable and infringed but are
not themselves communications to or from the client. The waiver does
not extend to documents analyzing the law, facts, and trial strategy that
reflect the attorney’s mental impressions but were not given to the
re EchoStar Communications Corp., Misc. No. 803 (Fed. Cir. 2006).
Worse, if you are a patent licensing company, there may be little more than sending a letter needed to create federal court jurisdiction. This was made plain in Hewlett-Packard Co., v. Acceleron, LLC in which Acceleron, a patent holding company, sent a letter to HP saying in part that Acceleron wanted "to call your attention to the referenced patent" and asking for "an opportunity to discuss this patent with you." The Federal Circuit held, "there is declaratory judgment jurisdiction arising from a "definite and concrete" dispute between HP and Acceleron." (Fed. Cir. 2009-1283, 04-DEC-2009).
Your invention is a valuable commodity. Do not waste your investment by
ignoring patent infringing activity. The Law Firm of Louis Ventre, Jr. can
help with your representation on dealing with a patent infringer, or at
the very least going over your options to help you make an informed
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© 2004 Louis Ventre, Jr.
This file last modified 07/09/11.