FAQ: willful infringement: a new decision highlights a key step companies need to take in order to avoid infringing--willfully--on existing patents.

Increasingly, new research asserts, patent infringement cases that make it to court are being tried by juries. And these juries appear more likely to find that infringement has taken place--and to call the infringement "willful," potentially subjecting defendants to multiple damages and attorneys' fees. A recent decision changed some key assumptions--and put the question of willful infringement under a more powerful microscope. [19 Business asked some experts what this really means.

Q: What are the findings of the Knorr-Bremse decision, and how do they affect businesses in terms of both IP and the outcome of infringement cases?

Companies used to face almost a Hobson's choice when it came to disclosing legal opinions they'd received in infringement cases. If they were to disclose the "exculpatory opinion" they'd received from counsel, an opinion that in essence indicated that counsel felt there was no infringement, they would then be forced to reveal sensitive information within the opinion that might otherwise be considered protected by attorney-client privilege. If, on the other hand, they didn't disclose the exculpatory opinion, the judge was able to instruct the jury that this nondisclosure could be considered to imply that either the company didn't get an opinion or the opinion was negative. Hearing this, the jury was more likely to determine that infringement was willful. The Knorr-Bremse decision says that such an adverse inference is unjustified and that judges can no longer instruct juries that they may draw this adverse inference when an opinion was not disclosed or obtained.

Q: Does this mean that it's no longer necessary for companies to get an "exculpatory opinion," especially it they're sure they haven't infringed?

"In certain circumstances Knorr-Bremse may diminish the need to get legal advice," notes Scott Alter, a partner in Wilmer Cutler Pickering Hale and Dorr's Intellectual Property Department. After all, if not having obtained an opinion can no longer be held against a defendant in an infringement proceeding, a company could decide to take its chances, rather than spend the $25,000 to $100,000 that a typical opinion costs. However, Alter cautions, "we can't stick our heads in the sand over an infringement claim." There is still, he notes, what's known as a "duty of care," which requires that companies take steps to avoid impinging on the known patent rights of others to avoid charges of willful infringement. Moreover, adds Peter Dichiara, a partner in Wilmer Cutler Picketing Hale and Dorr's Intellectual Property Department and chair of the firm's Nanotechnology Practice Group, in many ways the Knorr-Bremse decision may work to strengthen the substance of the opinions that companies get. Because companies and their attorneys--feared the breach of attorney-client privilege that assumptions of adverse inference fostered, exculpatory opinions had become increasingly sanitized and watered down, stripped of the level of detail that, while valuable to the company, was also potentially harmful if released in court. If companies no longer need to worry about sharing the contents of their opinions with a broader audience, those opinions, Dichiara notes, are more likely to be more thorough, meaningful and analytical, something companies can use as a decision-making tool in developing and marketing a product.

Q: Without the exculpatory opinion to hang their hats on, what else will judges and juries look at to determine that an infringement was willful, rather than unintentional?

Of course, even after Knorr-Bremse, notes Alter, "A trial lawyer may still get up there and ask, 'Did you get a legal opinion?' and then say, accusingly and incredulously, 'No? You didn't?' They can still play those games." However, adds Dichiara, "there will probably be a more balanced viewing of the factors that are considered willful instead of gravitating to the idea that people are hiding something." Among those factors, he notes, are such questions as whether there appears to have been deliberate copying as well as whether the defendant, based on the evidence, clearly tried to conceal its activities. In addition, juries pay close attention to "litigation conduct." Is the defendant taking the patent holder's rights seriously or simply brushing off the issue? Does the defendant appear open about its activities or, as Dichiara puts it, "like they're hiding the bali." And there's also the question of how long the alleged infringement went on and--what remedial action the defendant took once it found out that infringement may have taken place.

Q: What kind of damages can result from a finding of willful infringement?

If a company is found guilty of willful infringement (rather than guilty of just basic infringement), it could be liable for up to three times the amount of damages otherwise assesed as well as the plaintiff's attorney fees--which can add tens of millions of dollars to the cost of defeat.

Q: How common are findings of willful infringement--and how can a company decrease the odds of such a verdict?

Findings of willful infringement are increasingly common. Recent studies have shown that while a smaller percentage of infringement cases are going to trial (they're being settled out of court), those that do are more likely to be tried by juries. And when those juries decide there has been infringement, more than 70 percent of the time the verdict is that the infringement was willful. The key to avoiding such a verdict is proving that, if there was infringement, due care was taken to avoid it. An exculpatory opinion, especially post Knorr-Bremse, may prove critical in this effort.