En banc Federal Circuit scraps affirmative duty of care to avoid infringement

In a unanimous en banc decision issued late yesterday afternoon, the Federal Circuit granted a petition for mandamus requested by a party who was ordered by a district court to produce attorney-client privileged and work product protected material of its trial counsel, and to permit deposition of its trial counsel.  The order was entered after the defendant disclosed it would rely upon an opinion of counsel as a defense to willful infringement; the district court held that the waiver of attorney-client privilege and work product protection extended to the work trial counsel performed relevant to the opinions (a full recitation of the underlying facts can be found in this post.)

The Federal Circuit disagreed, and held that in most circumstances, such material will remain protected assuming trial counsel and opinion counsel are different.  The court went a step further, however, and decided to overrule its 1983 decision in Underwater Devices Inc. v. Morrison-Knudsen Co., which established that once a party had notice of a patentee's rights, that party had an affirmative duty of care to avoid infringement of the patent.  One way companies could comply with this duty was to obtain a competent opinion of counsel that the patent was either invalid or not infringed.

The Federal Circuit unanimously abrogated the affirmative duty of care.  The court adopted a recklessness standard for willful infringement, holding that to act "willfully," an infringer must act "despite an objectively high likelihood that its actions constituted infringement of a valid patent."  The risk must also be "known or so obvious that it should have been known to the accused infringer."

More detail of In re Seagate Tech., LLC after the jump.

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Thursday at the Federal Circuit: en banc arguments on the duty of care and waiver of privilege

This Thursday, the Federal Circuit will sit en banc to hear oral argument in In re Seagate Technology LLC, a mandamus case regarding a district court's order to produce certain attorney-client privileged materials.  (Update (6/7): the audio of the oral argument is now available online at this link.)  Like in many patent cases, one of the defendants, Seagate, chose to obtain an opinion from counsel regarding noninfringement and invalidity of the asserted patents in order to defend itself from a charge of willful infringement.  The district court, however, found that a subject matter waiver of attorney-client privilege occurred when the opinions were disclosed, and granted a motion to compel stating:

Seagate shall produce all documents, answers to interrogatories, and deposition testimony concerning communications between Seagate (or its in-house counsel) and any of its attorneys, including trial counsel, with respect to the subject matter of Mr. Sekimura's opinions, i.e., the infringement, validity, and enforcement of the '635, '267, and '473 patents.

(emphasis added).  The order further required that trial counsel's advice regarding infringement, validity, and enforceability "must be disclosed even if it [was] communicated in the context of trial preparation." Thus, the court essentially ordered Seagate to produce its trial strategy, if requested, because of the subject matter waiver of privilege.

This case is even more interesting because the court, sua sponte, raised the issue of whether the court should reconsider the duty of care established in the court's 1983 Underwater Devices decision in light of its effect on attorney-client privilege.

More thoughts on the upcoming argument after the jump.

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Federal Circuit to decide scope of attorney-client privilege waiver en banc

The Federal Circuit this afternoon agreed to hear a case to determine the scope of the waiver of attorney-client privilege when advice of counsel is used to defend against a charge of willful infringement. The order in In re Seagate Technology, LLC, which can be found here, invites the parties to brief the following questions:

(1) Should a party's assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party's trial counsel? See In re EchoStar Commc'n Corp., 448 F.3d 1294 (Fed. Cir. 2006).

(2) What is the effect of any such waiver on work-product immunity?

(3) Given the impact of the statutory duty of care standard announced in Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983), on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself?

The result of this case will have a direct impact on how companies seeking advice of counsel regarding potential patent infringement structure their communications with outside counsel. Briefing will be complete in early April, so no decision is likely for some time, but it will be a case to watch going forward.

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