Tuesday, September 14, 2004

FEDERAL CIRCUIT EN BANC DECISION: In Knorr-Bremse v. Dana, the federal circuit ruled that no adverse inference that an opinion of counsel was or would have been unfavorable flows from an alleged infringer's failure to obtain or produce an exculpatory opinion of counsel. Precedent to the contrary is overruled.

Instead, the court determined that willful infringement should be examined under the totality of circumstances where numerous factors, such as evidence of direct copying, are brought into play. The three questions answered in the en banc decision are as follows:

(1) When the attorney-client privilege and/or work-product privilege is invoked by a defendant in an infringement suit, is it appropriate for the trier of fact to draw an adverse inference with respect to willful infringement?
  • The answer is "no." Although the duty to respect the law is undiminished, no adverse inference shall arise from invocation of the attorney-client and/or work product privilege.

(2) When the defendant had not obtained legal advice, is it appropriate to draw an adverse inference with respect to willful infringement?

  • The answer, again, is "no." The issue here is not of privilege, but whether there is a legal duty upon a potential infringer to consult with counsel, such that failure to do so will provide an inference or evidentiary presumption that such opinion would have been negative

(3) If the court concludes that the law should be changed, and the adverse inference withdrawn as applied to this case, what are the consequences for this case?

  • The district court based its willfulness determination on several factors in addition to the adverse inference arising from the assertion of attorney-client privilege by Haldex and the failure of Dana to obtain legal advice. This court has explained that "there are no hard and fast per se rules" with respect to willfulness of infringement. Precedent illustrates various factors, some weighing on the side of culpability and some that are mitigating or ameliorating. Because elimination of the adverse inference as drawn by the district court is a material change in the totality of the circumstances, a fresh weighing of the evidence is required to determine whether the defendants committed willful infringement.

(4) Should the existence of a substantial defense to infringement be sufficient to defeat liability for willful infringement even if no legal advice has been secured?

  • The answer is "no." Precedent includes this factor with others to be considered among the totality of circumstances, stressing the "theme of whether a prudent person would have sound reason to believe that the patent was not infringed or was invalid or unenforceable, and would be so held if litigated." However, precedent also authorizes the trier of fact to accord each factor the weight warranted by its strength in the particular case. We deem this approach preferable to abstracting any factor for per se treatment, for this greater flexibility enables the trier of fact to fit the decision to all of the circumstances. We thus decline to adopt a per se rule

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