Copycats, Relax! the Federal Circuit Lightens Up on Willful Patent Infringement: In Re Seagate Technology, LLC

Article excerpt

I. INTRODUCTION

"Willful" infringement is alleged in over 90% of patent cases. (2) This is primarily because, under the Patent Act and Federal Circuit case law, a finding of willful infringement gives trial judges the discretion to award treble damages and attorney's fees to the patentee. (3) Given that patent infringement actions can carry litigation fees of two million dollars or more, an award of punitive damages is a serious threat to accused infringers. (4) A common and powerful defense to a willful infringement allegation is reasonable reliance on an opinion of counsel. (5) Using this defense, the accused infringer can prove he acted in good faith and in accordance with his duty of care because he reasonably relied on an attorney's opinion, usually in the form of an opinion letter, that he was not infringing. (6) However, in order to assert this defense, the plaintiff must disclose the relied upon opinion letter and waive attorney-client and work product privileges as to the subject matter of the opinion. (7) District courts differ widely as to the scope of this waiver, with some even holding that this waiver extends to the defendant's communications with trial counsel in addition to opinion counsel. (8) Thus, in these cases, accused patent infringers face a dilemma as to which to forego: a potentially powerful defense to a patentee's claim of willfulness or attorney-client and work product privileges, possibly even as to trial counsel. (9)

In In re Seagate Technology, the Federal Circuit was asked to vacate the rulings of the United States District Court for the Southern District of New York that allowed the patentee-plaintiff to obtain discovery of the work product of the defendant's trial counsel that was communicated to the defendant. (10) The Federal Circuit, sua sponte, ordered an en banc review of the petition and issued a general rule as to the scope of the waiver affected by the use of an opinion counsel. (11) The court stated that, ordinarily, the scope of the privilege waiver would only extend to opinion counsel, not to trial counsel. (12) The Federal Circuit then elected to overrule its own 24-year-old Underwater Devices decision and lightened the standard of care imposed on a potential infringer to determine whether he is infringing on another's patent. (13)

II. FACTS &HOLDING

Seagate Technology, Inc. ("Seagate") was one of the defendants in Convolve, Inc. v. Compaq Computer Corp. (14) In April of 1990, Convolve, Inc. ("Convolve") received two United States patents on their "Input Shaping" technology (the "'635 patent" and the "'267 patent") which reduces vibrations associated with machine movement and, thus, allows a machine to run more rapidly and quietly. (15) On November 6, 2001, a third patent was issued to Convolve (the "'473 patent") on its "Quick and Quiet" technology--a computer control panel application permitting users to choose between the fastest or the quietest performance for a system's disk drives. (16) According to Convolve, defendant Compaq Computer Corporation ("Compaq") entered negotiations with Convolve regarding a licensing agreement for the '635 patent. (17) However, because Compaq did not manufacture disk drives, it enlisted the aid of Seagate to evaluate the technology. (18) Convolve alleged that when Seagate began the evaluation of Convolve's technology, it had nothing that compared to Convolve's technology and that "Seagate saw the value of Convolve's pioneering technology, but, rather than pursuing a license, Seagate undertook to copy the technology and to pass it off as its own." (19) Convolve filed an initial complaint against Seagate and Compaq in July of 2000, alleging, among other things, theft of trade secrets and willful patent infringement of the '635 and '267 patents. (20)

Prior to the lawsuit, Seagate retained the services of attorney Gerald Sekimura to provide a legal opinion as to the validity of Convolve's patents; (21) although Seagate did not receive the first of these opinions until after Convolve's complaint was filed. …