Center for Advanced Study & Research on Intellectual Property

 

CASRIP Newsletter - Fall/Winter 2009, Volume 16, Issue 1

Impact of Seagates (Inducement and Counsel’s Opinion):

Broadcom Corp. v. Qualcomm, Inc., 543 F.3d 683 (Fed. Cir. 2008)

By Elena Torgan1

I. Introduction

The United States Court of Appeals for the Federal Circuit has addressed the necessity for an accused infringer to obtain a counsel opinion in patent infringement cases several times and, finally, indicated that opinion letters may still be relevant in inducement cases.2 The Federal Circuit’s 2007 decision in In Re Seagate Technologies3 changed the way companies defended patent lawsuits.4 In that case, the Federal Circuit held that there was no affirmative obligation to obtain opinion of counsel when willful infringement is asserted.5 After Seagate, companies did not seek counsels’ opinions as often.6 In 2008 decision Broadcom Corp. v. Qualcomm, Inc., however, the court suggests that counsel opinions may be considered among other factors in indirect infringement actions.7

II. Procedural History

Broadcom Corporation, an owner of several patents relating to wireless voice and data communications on cellular telephone networks found in third-generation baseband processor chips, brought an infringement action against a competitor, Qualcomm Incorporated.8 A jury found infringement of Broadcom’s three patents, and the United States District Court for the Central District of California entered a permanent injunction against Qualcomm.9 Qualcomm appealed to the Federal Circuit. The Federal Circuit invalidated one of the patents, but affirmed the judgment and the injunction pertaining to the other two patents, finding Qualcomm liable for direct infringement and inducement.10

III. Background

Because patent infringement is a strict liability offense, the nature of the offense [and “willfullness” of it] is only relevant in determining whether enhanced damages are warranted.11 A court may increase the damages up to three times the amount found or assessed.12 In addition, the court in exceptional cases may award reasonable attorney’s fees to the prevailing party.13 The concept of “willful infringement” is a statement that patent infringement, like other civil wrongs, is disfavored and intentional disregard of legal rights warrants deterrence.14

Before Seagate, when a potential infringer had actual notice of another’s patent rights, he had an affirmative duty to exercise due care to determine whether or not he was infringing, including the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity.15 In light of the duty of due care, the accused infringer commonly asserted an advice of counsel defense and aimed to establish that due to reasonable reliance on advice from counsel, its continued accused activities were done in good faith.16 In Knorr-Bremse, the court held that there is not “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.”17 In Seagate, the court abandoned the affirmative duty of due care and emphasized that there is no affirmative obligation to obtain opinion of counsel.18

IV. Analysis

The Broadcom case addressed the relevance of a counsel opinion in inducement cases. Under patent law, “whoever actively induces infringement of a patent shall be liable as an infringer.”19 Like willfulness, inducing infringement requires proof of culpability.20 In order to prevail on an inducement claim, the patentee must establish:21

1. There has been direct infringement, and

2. The alleged infringer knowingly induced infringement and possessed specific intent to encourage another’s infringement.

The standard for establishing the intent element of inducement was clarified by the Federal Circuit in Broadcom as: “[t]he defendant must have intended to cause the acts that constitute the direct infringement and must have known or should have known tha[t] its action would cause the direct infringement.”22 In earlier case, DSU Med. Corp. v. JMS Co., the Federal Circuit held that the accused infringer had no specific intent to infringe the patent because it had obtained opinions from its counsel that its product did not infringe the patent.23

In Broadcom, Qualcomm argued that:24

  • The pre-Seagate jury instructions prompted the district court to set aside the willfulness verdict based essentially on Qualcomm’s not having obtained non-infringement opinion letters;
  • The jury instructions also require the Federal Circuit to overturn the indirect infringement verdicts predicated on specific intent necessary to find inducement;
  • The indirect infringement verdicts are unsupported by substantial evidence.

Qualcomm argued that it did not obtain non-infringement opinions because it had procured invalidity opinions for each relevant patent, although it elected not to waive attorney-client privilege and rely on those opinions.25 However, the Federal Circuit rejected Qualcomm’s arguments and upheld the jury instructions in Broadcom, stating that when considering whether an accused infringer knew of should have known that the induced actions would constitute infringement, in the totality of the circumstances, a jury may consider all of the circumstances, including whether or not the defendant obtained the advice of a competent lawyer.26 In addition, in considering whether Qualcomm acted in good faith, a jury should consider all the circumstances, including whether or not a defendant obtained and followed the advice of a competent lawyer with regard to infringement.27 The absence of a lawyer’s opinion, by itself, is insufficient to support a finding of willfulness, and a jury may not assume that merely because a party did not obtain an opinion of counsel, the opinion would have been unfavorable; however, a jury may consider whether a defendant sought a legal opinion as one factor in assessing whether, under the totality of the circumstances, any infringement was willful.28 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, the court held that such evidence remains relevant to the second prong of the intent analysis.29 The failure to procure such an opinion may be probative of intent in the inducement context.30

V. Conclusion

Opinion letters from an outside counsel assuring a client it has not infringed a patent are expensive for a client and complicated for the attorneys when privilege may be waived to introduce the letters in court.31 The Federal Circuit Court of Appeals has lessened the need for such opinions in In re Seagate under willful infringement.32 However, in Broadcom, the court explicitly noted that opinion-of-counsel evidence is still relevant in determining the intent of an alleged infringer in the inducement context.33 This means that, as a practical matter, opinion of counsel may still be relevant in patent infringement disputes, especially in inducement cases.

End Notes

  1. Elena Torgan is an LL.M. candidate at the University of Washington School of Law.
  2. See, e.g. Underwater Devices, Inc., v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983), Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565 (Fed. Cir. 1986), Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568 (Fed. Cir. 1988), Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004), DSU Med. Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006), In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007).
  3. In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007).
  4. Zusha Elinson, Ruling in Qualcomm-Broadcom Fight Brings Back Opinion Letters for Patent Cases, The Recorder, available at http://www.law.com/jsp/article.jsp?id=1202424776945 (last visited Jan. 13, 2009).
  5. In re Seagate, 497 F.3d at 1371.
  6. Zusha Elinson, Ruling in Qualcomm-Broadcom Fight Brings Back Opinion Letters for Patent Cases, The Recorder, available at http://www.law.com/jsp/article.jsp?id=1202424776945 (last visited Jan. 13, 2009).
  7. Broadcom Corp. v. Qualcomm, Inc., 543 F.3d 683 (Fed. Cir. 2008).
  8. Id. at 686.
  9. Id. at 687.
  10. Id. at 686.
  11. In re Seagate, 497 F.3d at 1368.
  12. 35 U.S.C. § 284.
  13. 35 U.S.C. § 285.
  14. Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1342 (Fed. Cir. 2004).
  15. In re Seagate, 497 F.3d at 1368-1369 (citing Underwater Devices Inc. v. Morrison-Knudsen Co., 717 F.2d 1380, 1389-90 (Fed.Cir.1983)).
  16. Id. at 1369.
  17. Knorr-Bremse, 383 F.3d at 1345.
  18. In re Seagate, 497 F.3d at 1371.
  19. 35 U.S.C. § 271(b).
  20. Dennis Crouch, Federal Circuit: Failure to Obtain Non-Infringement Opinion May Serve As Evidence of Intent to Induce Infringement, Broadcom v. Qualcomm (Fed. Cir. 2008), available at http://www.patentlyo.com/patent/2008/09/federal-circu-1.html (last visited Jan. 13, 2009).
  21. ACCO Brands, Inc. v. ABA Locks Mfr. Co., 501 F.3d 1307, 1312 (Fed. Cir. 2007) (quoting Minn. Mining & Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1304-05 (Fed. Cir. 2002)).
  22. Broadcom, 543 F.3d at 698 (citing DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1305 (Fed. Cir. 2006)).
  23. DSU Med. Corp. v. JMS Co., 471 F.3d. 1293, 1307 (Fed. Cir. 2006).
  24. Broadcom, 543 F.3d at 697.
  25. Id.
  26. Broadcom, 543 F.3d at 698.
  27. Id.
  28. Id.
  29. Id. at 699.
  30. Id.
  31. Zusha Elinson, Ruling in Qualcomm-Broadcom Fight Brings Back Opinion Letters for Patent Cases, The Recorder, September 25, 2008, available at http://www.law.com/jsp/article.jsp?id=1202424776945 (last visited Jan. 13, 2009).
  32. Sanford E. Warren Jr. and Iris Mok, Opinion of Counsel after Broadcom v. Qualcomm, November 2008, http://www.irmi.com/Expert/Articles/2008/Warren11-intellectual-property-law.aspx (last visited Jan. 13, 2009).
  33. Broadcom, 543 F.3d at 699.

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