US Court Decision (6) SUMMARY, In re Seagate

Facts

Convolve, Inc. (Convolve) sued Seagate Technology, LLC (Seagate) for patent infringement. Convolve also alleged that Seagate willfully infringed its patents. Seagate obtained written advice-of-counsel opinions on Convolve’s patents. In each of the opinions, the opinion counsel concluded many of the claims of Convolve’s patents were invalid or unenforceable, and that Seagate’s products did not infringe. During this time, Seagate notified Convolve of its intent to rely on its opinion counsel’s letters in defending against willful infringement; i.e. “the advice-of-counsel defense”. Seagate disclosed all of the opinion counsel’s work product and made the opinion counsel available for deposition. Seagate also retained trial counsel. Trial counsel operated separately and independently of opinion counsel. The trial counsel communicated with Seagate and generated work product concerning the subject matter of the opinion counsel’s letters. Convolve argued that Seagate’s assertion of the advice-of-counsel defense waived the attorney-client privilege and work product protection with respect to trial counsel, and thus moved to compel discovery of the trial counsel’s communications and work product.

The Court of Appeals for the Federal Circuit (CAFC), sitting en banc, opined on three issues, each of which are discussed in turn below.

I. Willful Infringement.

The CAFC first addressed the willful infringement standard. Importantly, it expressly overruled its prior decision, Underwater Devices. Underwater Devices basically held that if an accused infringer exercises an “affirmative duty of due care” after being notified of infringement, then it would not be held for enhanced-damages willful infringement. The CAFC observed that the Underwater Device’s standard set the threshold too low (i.e. more akin to negligence), which is inconsistent with the general understanding of willfulness in other fields of law (i.e. objective recklessness). On this premise, the CAFC raised the threshold for proving willful infringement. In Seagate, the CAFC held that “proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness.”
The CAFC then announced a two-part test in order to establish willful infringement:
First, “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.” The court noted that “the state of mind of the accused infringer is not relevant to this objective inquiry.”
Second, “If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.”
The CAFC left it “to future cases to further develop the application of this standard.”
In addressing the willfulness standard, the CAFC also reemphasized that there is no affirmative obligation to obtain opinion of counsel, but that a favorable opinion of counsel is an important factor in avoiding a willfulness determination.

II. Attorney-client Privilege.

The CAFC next addressed the scope of waiver of the attorney-client privilege resulting from an advice-of-counsel defense asserted in response to a charge of willful infringement. With respect to the facts of the Seagate case, the issue is: does Seagate’s raising the advice-of-counsel defense waive the attorney-client privilege as to not only communications between Seagate and its opinion counsel, but also as to communications between Seagate and its trial counsel? The court noted the different functions served by opinion counsel and trial counsel. Opinion counsel serves to provide an objective assessment for making informed business decisions, whereas trial counsel is engaged in an adversarial process and focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker. The CAFC concluded that, because opinion counsel and trial counsel server significantly different functions, the waiver of attorney-client privilege as to communications with opinion counsel should generally not extend to trial counsel communications as well. The CAFC held, “as a general proposition, that asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute waiver of the attorney-client privilege for communications with trial counsel.” The court indicated, however, that this is not “an absolute rule,” and that trial courts can exercise their discretion in appropriate circumstances to extend waiver to trial counsel communications, for example, when “a party or counsel engages in chicanery.”

III. Work Product Protection.

The third issue the CAFC addressed was the scope of waiver of work product protection resulting from an advice-of-counsel defense asserted in response to a charge of willful infringement. With respect to the facts of the Seagate case, the issue is: does Seagate’s raising the advice-of-counsel defense waive the work product protection as to not only opinion counsel’s work product, but also as to trial counsel’s work product? The CAFC first noted that it was leaving untouched the general principles of work product protection: factual work product can be discovered without waiver upon a showing of substantial need and undue hardship, whereas mental process work product (attorney plans, strategies, tactics, and impressions) is given nearly absolute protection. With regard to limitations on waiver, the CAFC said the same rationale that limits waiver of attorney-client privilege applies with even greater force to limiting waiver of work product. The CAFC reasoned that protection of work product is important for a strong adversarial system. The CAFC held, “as a general proposition, relying on opinion counsel’s work product does not waive” work product protection with respect to trial counsel. As with waiver of attorney-client privilege, the court indicated, however, that a trial court has discretion to extend waiver of opinion counsel work product to trial counsel work product in instances where for example a party or counsel engages in chicanery.