Knorr-Bremse V. Dana Corporation - Willful Patent Infringement May No Longer Be Inferred Either from the Failure to Seek Legal Advice or Invoking the Attorney-Client Privilege, According to the Federal Circuit

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I. INTRODUCTION

The U.S. Court of Appeals for the Federal Circuit decided en banc on September 13, 2004 that no adverse inference of willful infringement of a patent may be drawn either from the failure to obtain legal advice or the invocation of the attorney-client privilege concerning the advice sought. (1) This landmark case, Knorr-Bremse Systeme Fuer Nutzfahrzeuge GMBH v. Dana Corporation, (2) hereinafter Knorr-Bremse, overrules prior Federal Circuit precedent (3) and makes willful patent infringement (4) more difficult to prove, and thus treble damages (5) and attorneys' fees, (6) more difficult to obtain, in patent infringement suits.

This article will examine the historical precedent for an inference of willful patent infringement either from the failure to receive legal advice on the issue or the invocation of the attorney-client privilege concerning advice sought. This article will then analyze Knorr-Bremse, called one of the major appellate cases of 2004, (7) in which the Court of Appeals for the Federal Circuit overruled their own prior precedent to no longer allow such an inference. This article will conclude with implications arising from this landmark case.

II. INFERENCE OF WILLFUL PATENT INFRINGEMENT FROM EITHER FAILURE TO CONSULT LEGAL COUNSEL OR INVOKING THE ATTORNEY-CLIENT PRIVILEGE

The U.S. Patent Act defines a patent infringer as anyone who, "without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention" during the patent term. (8) A civil remedy is available for patent infringement. (9) These civil damages are to be adequate to compensate for the infringement, and, according to the Patent Act section 284, may be increased by the court to up to three times the amount found or assessed. (10) The court in exceptional cases, may also award reasonable attorney fees to the prevailing party, under the Patent Act section 285. (11)

The increase in damages authorized by section 284 may occur when the infringement is willful. (12) No statutory standard sets the circumstances under which the district court may find willfulness to enhance damages. (13) In determining willful infringement, the court must find by clear and convincing evidence in the totality of the circumstances (14) that the alleged infringer acted in disregard of the patent and lacked a reasonable basis for believing that he had the right to perform the infringing act. (15) The totality of the circumstances must be weighed by the district court. (16)

While there is no hard and fast per se rule for willfulness, (17) the Court of Appeals for the Federal Circuit, however, has recognized several factors which may be weighed in determining whether damages should be enhanced. (18) These factors include: (1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when the infringer knew of the patent holder's patent protection, investigated the issue and had a good faith belief that the patent was invalid or was not infringed; (3) the infringer's behavior as a party to the litigation; (4) the defendant's size and financial condition; (5) closeness of the case; (6) duration of the infringer's misconduct; (7) the infringer's motivation for harm; and (8) whether the defendant attempted to conceal his misconduct. (19)

Considering the second factor--investigating the issue and forming a good faith belief of non-infringement--the Court of Appeals for the Federal Circuit affirmed a finding of non-willful infringement and no enhanced damages when the alleged infringer had a copy of the invention not marked "Patent Pending," and no patent had been issued, when there was reasonable reliance on advice of counsel. (20) There are similar illustrative, but not exhaustive, decisions involving advice of patent counsel. For example, the Court of Appeals for the Federal Circuit reversed a finding of willfulness when a patent attorney evaluated the patent and advised the defendants that their competing invention did not infringe. …