Center for Advanced Study & Research on Innovation Policy


CASRIP Newsletter - Fall 1997, Volume 4, Issue 3

Willful Infringement Requires Substantive Evaluation of Attorney Opinion Letters

In SRI International, Inc. v. Advanced Technology Laboratories, Inc.,1 the Court of Appeals for the Federal Circuit (the Federal Circuit) affirmed an award of treble damages for willful infringement upon determining that the infringer's reliance on advice of counsel was not reasonably justified. Although the infringer submitted into evidence written opinions of three lawyers regarding noninfringement and invalidity of the patent at issue, the court found each letter insufficient to meet the standard of due care appropriate to serve as an exculpatory opinion.

The plaintiff, SRI International Inc., owns a patent for a method and apparatus of ultrasonic imaging. In 1986, SRI's patent counsel sent a letter notifying the defendant, Advanced Technology Laboratories, Inc. ("ATL"), of possible infringement of its patent and expressed its willingness to license the patent to ATL. Over the next five years, SRI and ATL engaged in correspondences with one another regarding the alleged infringement. ATL continuously rejected SRI's offers of a patent license, relying on separate opinions of three ATL lawyers that the company's activity was non-infringing or that the SRI patent was invalid. At trial, the District Court found the SRI patent to be valid, enforceable and infringed. In finding that ATL's infringement was willful, the District Court trebled the damages pursuant to 35 U.S.C. 284. ATL subsequently appealed.

The Federal Circuit affirmed the District Court's decision. First, the Federal Circuit acknowledged that reliance on legal advice was one factor to be considered in analyzing whether an infringement was willful. In cases where this defense is raised, the Federal Circuit emphasized the appropriateness of considering "the nature of the advice, the thoroughness and competence of the legal opinion presented, and its objectivity," in order to ascertain whether the advice of noninfringement, invalidity or unenforceability could have been relied upon. Moreover, because willful infringement is a question of fact, the Federal Circuit stated that a finding of willful infringement should be sustained unless the reviewing court has a definite and firm conviction that the trier of fact erred.

The Federal Circuit then proceeded to evaluate the District Court's findings on the opinions of the three attorneys. The first letter, dated June 30, 1986, was a response from in-house counsel for products used in a technology different from that claimed in SRI's patent. The Federal Circuit affirmed the District Court's conclusion that the June 30, 1986 letter was "conclusory and woefully incomplete as an opinion of counsel, lacking both legal and factual analysis," and thus insufficient to serve as an exculpatory opinion of counsel.

The court next evaluated an opinion of outside counsel dated December 13, 1988 which advised ATL that ATL's product may infringe the SRI patent, but that the SRI patent was invalid for obviousness and unenforceable for inequitable conduct. The letter's conclusion of invalidity was based on a patent which SRI had presented to the Patent Office with an earlier request for reexamination, and upon which the patent examiner had reconfirmed the validity of the SRI patent. Because the December 13, 1988 letter had simply repeated the patent examiner's arguments concerning the prior art patent, which had already been resolved in SRI's favor during the reexamination, the Federal Circuit affirmed the district court's finding that the letter's conclusion of invalidity was lacking in both substance and analysis. Thus, the December 13, 1988 letter was inadequate to support a good faith belief by ATL in the invalidity or unenforceability of the SRI patent.

The third letter evaluated by the Federal Circuit was an opinion dated July 15,1991, written by ATL's in-house counsel. The July 15th opinion, which concluded that the SRI patent was invalid based on a prior art patent, was sent to ATL two days before SRI's infringement suit was filed. The Federal Circuit upheld the decision of the District Court which had found the opinion to be "too little, too late, coming seven years after ATL began infringing" the SRI patent. Moreover, the opinion was found to be "not objective" since it appeared to have been produced as a "protective device" in preparation for litigation, rather than as a "genuine effort to determine before infringing whether the patent was invalid."

Because each of the letters were deficient in significant ways, the Federal Circuit concluded that ATL did not have an adequate basis for believing that it had the right to practice the invention covered by the SRI patent. As a result, ATL's reliance on such letters was not reasonably justified and thus, ATL did not exercise due care to avoid infringing a valid and enforceable patent.

In view of the fact that an opinion of counsel is the most important piece of evidence in defending against a charge of willful infringement, the SRI International decision has resounding practical implications within the legal community. According to SRI International, an alleged infringer's state of mind is not the only thing at issue, but rather the opinion itself will be scrutinized to determine whether it was sufficient to justify reliance. Thus, the judgment places upon alleged infringers the burden of determining the competence of the legal advice upon which they rely. In making this evaluation, counsel should ensure that the legal opinion contains more than mere conclusory statements, and should also include both legal and factual analyses. The timeliness of the opinion is also an important factor to consider. Although the court refrained from setting a rigid deadline as to when a potential infringer should seek legal advice, an opinion obtained promptly after notice of the possible infringement would more likely indicate a "genuine effort" to determine infringement or validity of the patent, and would less likely seem as a "protective device" in anticipation of litigation.

-- Maria Trinidad Arriola. Ms. Arriola is an associate at Fenwick & WestLLP in Palo Alto, California.

1 1997 U.S. App. LEXIS 29098 (Fed. Cir. 1997)

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