Obtaining an Opinion of Counsel May Mitigate the Risk of a Finding of Willful Infringement

October 11th, 2018

Summary: To defend against a claim of willful patent infringement, a timely and competent opinion of counsel may be utilized to establish a good faith belief of non-infringement or invalidity of an asserted patent.

The United States District Court for the Eastern District of Texas concluded that a reasonable jury could find a defendant willfully infringed a plaintiff’s patent by failing to timely procure an opinion of counsel when the defendant sold products and was aware of the risk of infringement. See Geodynamics, Inc. v. DynaEnergetics US, Inc., No. 2:17-CV-00371-RSP, slip op. at 5-6 (E.D. Tex. Sept. 17, 2018).

Section 284 of the Patent Act states that “[u]pon finding for the claimant the court shall award the claimant damages,” and “the court may increase the damages up to three times the amount found or assessed.” 35 U.S.C. § 284 (2012).  While awarding enhanced damages is at the court’s discretion, courts have generally reserved such damages for “egregious cases typified by willful misconduct.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1933-34 (2016).  For instance, “[a] finding of willful infringement is generally reserved for ‘egregious infringement behavior’ or conduct that is ‘willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or . . . characteristic of a pirate.’” Geodynamics, slip op. at 3 (quoting Halo Elecs., 136 S. Ct. at 1932).

In Halo, the Supreme Court did not endorse a “precise rule or formula” for finding willful infringement and awarding enhanced damages. 136 S. Ct. at 1932 (quoting Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1756 (2014)).  At a minimum, the infringing party must know about the patent at issue. Geodynamics, slip op. at 3 (citing WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1341 (Fed. Cir. 2016); State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985)).  In addition, “the risk of infringement must either be ‘known or so obvious that it should have been known to the accused infringer.’” Id. (quoting In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc); WCM Indus., Inc. v. IPS Corp., 721 F. App’x 959, 969 (Fed. Cir. 2018)).  Further, “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.” Polara Eng’g Inc. v. Campbell Co., 894 F.3d 1339, 1355 (Fed. Cir. 2018) (quoting Halo, 136 S. Ct. at 1933).

Turning back to Geodynamics, Geodynamics, Inc. (“GEOD”) accused DynaEnergetics US, Inc. (“DYNA”) of willfully infringing U.S. Patent No. 8,220,394 (“the ’394 patent”). Geodynamics, slip op. at 3 (citation omitted).  In response, DYNA moved for summary judgment on the issue of willful infringement. Id., slip op. at 1 (citation omitted).  The court concluded that, upon considering the totality of the circumstances, a “reasonable jury could find that DYNA willfully infringed by being aware of a risk of infringement, selling products, and failing to procure an opinion of counsel.” Id., slip op. at 4-6 (citations omitted).

First, based on DYNA’s admission, the court found that DYNA knew of the ’394 patent as early as August 2014, almost three years before GEOD filed suit. Id., slip op. at 2, 5 (citation omitted).  In fact, the Vice President (“VP”) of DYNA “conceded that GEOD may have approached him around April of 2009 to make DYNA aware of GEOD’s licenses to the ’394 [p]atent, which was then owned by [another company].” Id., slip op. at 2 (citation omitted).

Second, the court found that DYNA was aware of the risk of infringement of the ’394 patent. Id., slip op. at 5.  For instance, key employees of DYNA discussed GEOD and the technology involved in the ’394 patent as early as April 2009, when the VP of DYNA asked an employee to prepare documentation indicating that they had “prior usage or prior art” on the technology in case of problems with GEOD. Id., slip op. at 2 (citation omitted).  After DYNA began selling its products and in response to the VP’s inquiry about GEOD patents, an employee responded that “DYNA was monitoring the [’394] patent application and that, while the patent would stop third parties from entering the market, [it] did not ‘have the possibility of stopping [DYNA] from using the patented technology.’” Id. (citations omitted) (alteration in original).  Subsequently, DYNA sought to improve its technology, but in a project brief, “employees within DYNA’s R&D Department assessed a probability of 15% that DYNA was infringing others’ patents and acknowledged existing patents as a constraint.” Id., slip op. at 3 (citations omitted).  As such, the court found a reasonable jury could conclude that DYNA “actively monitored the progress of the ‘394 [p]atent application and that DYNA was aware of a risk of infringement once the patent was granted.” Id., slip op. at 5.

Based on the above, the court further found that a reasonable jury could determine that DYNA engaged in willful infringement of the ’394 patent and therefore denied DYNA’s motion for partial summary judgment. Id., slip op. at 6.

Notably, the court stated that even though there is no affirmative obligation to obtain opinion of counsel, the failure to produce an opinion is relevant in determining willfulness. Id., slip op. at 4 (citing Broadcom Corp. v. Qualcomm, Inc., 543 F.3d 683, 699 (Fed. Cir. 2008)).  In Geodynamics, although DYNA had knowledge of the ’394 patent and was aware of the risk of infringement, DYNA never even sought an opinion of counsel regarding its defenses. Id., slip op. at 5-6 (citations omitted).  In view of the above analysis, the court concluded that a reasonable jury could find that “DYNA took actions that were willful, deliberate, and consciously wrongful in the face of a known risk of infringement.” Id., slip op. at 6.  Thus, even though DYNA may have conducted an internal analysis and prepared documentation regarding their technology and the ’394 patent, the court suggested that DYNA’s actions may not be sufficient to establish a good faith belief of non-infringement or invalidity of the ’394 patent. See id., slip op. at 2, 5-6 (citation omitted); see also Dominion Res. Inc. v. Alstom Grid, Inc., No. 15-224, 2016 U.S. Dist. LEXIS 136728, at *63-64 (E.D. Pa. Oct. 3, 2016) (finding that the defendant did not have a good faith belief in non-infringement or invalidity because the defendant’s belief was based on “the opinion of people without expertise in reading patent claims”).

Other recent cases further demonstrate that obtaining the opinion of counsel in good faith can be a crucial factor when determining whether a defendant has willfully infringed.  For example, in Barry v. Medtronic, Inc., the court found Medtronic, Inc. failed to obtain an opinion of counsel at the time of the infringing activity, which was prior to the lawsuit, and thus “could not have formed a good-faith belief that the patents were invalid.” 250 F. Supp. 3d 107, 115-16 (E.D. Tex. Apr. 20, 2017) (citation omitted).  In Arctic Cat Inc. v. Bombardier Recreational Products. Inc., the court upheld a denial of the defendant’s motion for judgment as a matter of law on willfulness because the defendant “knew about the patents before they issued, conducted only a cursory analysis of the patents, and waited years before seeking advice of qualified and competent counsel.” 876 F.3d 1350, 1371 (Fed. Cir. 2017).

Accordingly, potential infringers should consider taking steps to protect against a finding of willful infringement.  In particular, it may be important to timely seek in good faith a competent opinion of counsel regarding non-infringement and/or invalidity of any patents at issue. Geodynamics, slip op. at 4, 6.