Louis Ventre, Jr.

Registered Patent Attorney

INFRINGEMENT OPINIONS

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Willful Infringement.  The Supreme Court's Halo decision on 13-JUN-2016 relaxed the legal standard for obtaining enhanced damages. See Halo Electronics, Inc. v. Pulse Electronics, Inc. The Supreme Court gave far greater discretion to the district courts than the previous Seagate standard, saying that "[t]he subjective recklessness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless."

The impact of the Halo decision is that district courts may now place in the hands of the jury the issue of whether or not an accused infringer's conduct was sufficiently willful to merit enhanced damages without regard to whether or not the conduct was objectively reckless, as was the standard in the aforementioned Seagate standard. The Court explained, however, that a district court's discretion to award of enhanced damages is "generally reserved for egregious cases of culpable behavior."

Thus, the Supreme Court's Halo decision means that companies receiving a notice letter, a cease and desist letter or a letter alleging infringement should seek to obtain an opinion of counsel as soon as the threat of an infringement lawsuit arises. Under the new Halo standard, such an opinion will almost certainly be useful to help to show an accused infringer’s actions were not egregious, but were undertaken in a good faith belief that there was no infringement or that the asserted patent is invalid.

Every company should now be knowledgeable that an opinion by independent counsel is a prudent business decision and a wise course of action to establish good faith in attempting to avoid willful infringement.

Note also that "a good-faith belief of invalidity [of a patent] may negate the requisite intent for induced infringement." Commil USA v. Cisco Systems Inc., Fed. Cir., No. 2012-1042, 25-JUN-2013.

Additionally, willful infringement must find its basis in pre-litigation conduct.  So, one should seek opinion counsel before litigation is commenced.  In the Seagate case (rev'd on other grounds), opinion counsel provided an opinion after litigation was commenced and the court observed that "the opinions of Seagate’s opinion counsel, received after suit was commenced, appear to be of similarly marginal value. . . reliance on the opinions after litigation was commenced will likely be of little significance." In other words, culpability will be measured according to the infringer’s knowledge at the time of the accused unlawful conduct.

If a person recklessly disregards the possibility of infringement, a penalty of up to three times the actual damages and attorneys fees may be assessed.  See the Damages page for more information on this issue and the drug infringement discussion for infringement issues on importing pharmaceuticals from Canada and other countries.

Patent Infringement Representation. A Notice Letter is often a precursor to a law suit.  If you receive a notice letter alleging infringement of someone's patent or simply bringing your attention to an existing patent, contact Attorney Louis Ventre, Jr. to help with your legal representation to respond, to avoid litigation whenever possible, and to prepare an independent written opinion on infringement.

The written opinion may be important, as noted above, because a company should avoid treating the letter of infringement in a manner that might show wilful disregard of the potential for infringement. This means taking steps that tends to negate evidence that the company dismissed the letter despite an objectively high likelihood that its actions constituted infringement of a valid patent.  In some instances a defensive declaratory judgment suit could be the best tactic and this Law Firm can help you decide on that.

Sometimes a patent holder will institute suit (many times in Texas) against a potential infringer, but not serve notice on the defendant.  This is a legal tactic that seeks to maintain future control over where (in what jurisdiction) the litigation will proceed.  The filing of a suit does not necessarily mean that litigation in that jurisdiction will be taken to the next step, or that you need litigation counsel.  Most probably, the plaintiff will decide on this based on whether or not there are good reasons to believe that you are not an infringer.  So, in that case, an independent opinion of counsel would be the means to show good faith in avoiding infringement and could be a means to convince a plaintiff that there are insufficient grounds of infringement and also raise the stakes by enabling the defendant to seek of attorney fees if the plaintiff is unsuccessful.  But, if there is infringement, it can also give you an opinion on you whether you have a legal defense that the patent is invalid. A prudent course of action is to plan a defense in two steps by obtaining:  1) an infringement opinion; and, (2) if infringement is likely, then a patent validity opinion.

Independent Opinion and Advice. This Law Firm can provide an independent opinion as to whether or not your product or process infringes on an existing patent, or whether or not there is good reason to believe the alleged infringed patent is invalid.  A patent validity opinion typically involves attorney fees ranging from about $4,500 to $8,000. 

According to the American Intellectual Property Law Association Economic Survey of 2013, the median charge in 2012 for a validity/invalidity only opinion per patent is $10,000; for an infringement/non-infringement opinion per patent is $10,000; and for a combination validity and infringement per patent of $15,000.

My Company Just Bought a Machine, I Cannot be Liable, Can I? You may be surprised to learn that you may be liable for infringement even if you are only using a patented invention. For example, suppose you purchased a car and it incorporates someone else's patented part (such as a patented convertible top) as one component of car: you are liable to the patent owner.  This is a famous Supreme Court case involving Ford Motor Company making convertible tops for its cars without a license from the patent owner.  The court explained,

"Ford lacking authority to make and sell, it could by its sale of the cars confer on the purchasers no implied license to use, and their use of the patented structures was thus 'without authority' and infringing under 271 (a).  Not only does that provision explicitly regard an unauthorized user of a patented invention as an infringer, but it has often and clearly been held that unauthorized use, without more, constitutes infringement."   Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476, 484 [141 USPQ 681] (1964) (citations omitted).

When the patented feature motivates the demand for the unpatented products, a court will award damages based on the sales price of the entire machine, rather than on just the price of the infringing component. In this type of situation, you may be able to pass the buck if you are smart enough and a little lucky.  Sometimes the Uniform Commercial Code's warranty of non-infringement (§2.312(3)) applies.

However, the "entire market value rule" applies only in limited circumstances when “the patent related feature is the basis for customer demand.” Imonex Servs. v. W.H. Munzprufer Dietmar Trenner G.m.b.H., 408 F.3d 1374, 1379, 80 (Fed. Cir. 2005).  This is a very difficult basis to prove and requires giving specific evidence that consumer demand for the overall product is driven by the patented feature or component.

In most cases where the patented item is only one of many features in an infringing product, damages are first based on a valuation of the patented invention and then on an assessment on what the parties would have agreed to in terms of compensation in the hypothetical reasonable royalty negotiation.

In the case of design patent infringement, all of the infringer's profits on the infringing object can be awarded to the patent owner.

Practical Advice and Fees. Attorney Louis Ventre, Jr. will also help you deal with the letter in a practical manner, evaluating the threat and recommending tactics to consider. In many, but not all circumstances, it is customary for the Law Firm to acknowledge the letter by notifying the patent owner's attorney that the matter has been referred to Attorney Louis Ventre, Jr. for response. The Law Firm of Louis Ventre, Jr. charges depending on the complexity of the case and will provide an hourly or fixed-price quote upon request. Typical fees for the full range of infringement services are $4,500 to $10,000, but can go as high as $50,000 if the patents are complex.

Facts. Attorney Louis Ventre, Jr. will confirm with you the facts and information concerning the accused product or process so that these  may be accurately included in a written opinion and factored into the legal advice you are given. This is necessary not only for an opinion that will pass muster with a judge (e.g., summary judgment ruling) and a jury, but is important for a credible opinion. Attorney Louis Ventre, Jr. will want to speak to your engineers and obtain product brochures on the alleged infringing item, the applicable web site pages, your written instructions or directions for use, advertisements, and product packaging.

Infringement. If it is clear that the patent is being infringed and it is not an invalid patent, Attorney Louis Ventre, Jr. will help you find a business solution. In this case, a business solution is preferable to a legal solution. This is so, in no small part, because of the cost of a law suit. 

The American Intellectual Property Law Association reported that the median cost of taking a patent infringement suit through trial in 2008 was about $650,000 when the amount at risk was less than $1 million.  This increased to about $5.5 million when more than $25 million was at risk. 

A lawsuit, which has a likelihood of loss and an award of damages for lost profits, reasonable royalty, and interest and costs, could be devastating. For example, in 2003 Cordis Corp. v. Guidant Corp. resulted in an award of $425 million.

Non-infringement Opinion. If a non-infringement opinion is in order, Attorney Louis Ventre Jr. will consider and evaluate the description in the patent, the claims of the patent, the file history of the patent, and the accused product or process. Both literal infringement and the doctrine of equivalents will be considered, as well as the current law concerning the applicable legal doctrines.  A patent infringement/non-infringement opinion typically involves attorney fees in a range from about $4,500 to $8,000.   In comparison, and according to the American Intellectual Property Law Association 2009 Economic Survey, the 2008 median charge for a patent infringement/non-infringement opinion per patent is $10,000.

Invalidity Opinion. If an invalidity opinion is in order, the description in the patent, the patent claims, and the invalidating prior art or other information will be considered. The invalidity opinion will address the presumption of validity, and the current law concerning the asserted grounds for invalidity.   A patent validity opinion typically involves attorney fees of about $8,000.  In comparison and according to the American Intellectual Property Law Association 2009 Economic Survey, the median charge in 2008 for a validity/invalidity only opinion per patent is $12,000.

Combination Invalidity and Non-infringement Opinion.  A combination invalidity and non-infringement opinion will typically cost $12,000.  In comparison and according to the American Intellectual Property Law Association 2009 Economic Survey, the median charge in 2008 for a combination invalidity and non-infringement opinion per patent is $18,000.

Legal Standard. In either case, you will receive a written opinion compliant with the legal standard that requires analysis of the applicable law and "applies that law to the facts in a rational manner, avoiding plainly incorrect or irresponsible assumptions or judgments." Further, because the issue of willfulness may in the first instance be determined by a jury, the opinion letter will be written in plain English. The opinion letter will avoid unnecessary use of technical or legal jargon that may make the opinion letter incomprehensible to a jury or a judge.

Reacting to a Notice Letter. It used to be that if a company did not seek an independent opinion of counsel, a finding of willful patent infringement could be inferred. The Court of Appeals for the Federal Circuit reversed this adverse inference (Knorr-Bremse Systeme Fuer Nutzfdahrzeuge GmbH v. Dana Corp. Sept. 13, 2004), ruling that the totality of the circumstances govern the determination of willfulness of patent infringement.  At a minimum, these circumstances should include a clearance search of the patent literature; consultation with patent counsel; an internal infringement analysis; and identifying any evidence that no deliberate copying of the designs and ideas was made.

A best practice would involve more.  The same court observed in a recent decision, after citing the Knorr decision, that where the defendant actually obtained an opinion of counsel after receiving the complaint from the plaintiff, "early receipt of legal advice would have strengthened the defendants’ argument that they had not willfully infringed. . . ." (Imonex Services, Inc. v. W. H. Munzprufer Dietmar Trenner GMBH nos. 04-122,-1290, May 23, 2005).  So, when the facts are in dispute, having an early opinion letter, i.e., one that is done before a lawsuit is instituted, is better than having one prepared after receiving the complaint, and it is, therefore, inescapable that it is better to have an early opinion letter, than not having an opinion letter at all.

Nota Bene: Lack of an attorney non-infringement opinion still weighs in the analysis of whether infringement was willful, and may significantly influence a trial court's decision on whether to enhance damages should a jury find willful infringement. For example, in i4i Ltd. Partnership v. Microsoft Corp., 589 F.3d 1246, 1274-75 (Fed. Cir. Dec. 22, 2009), the Federal Circuit affirmed a 20% enhancement (amounting to $40 million) by the Eastern District of Texas court in the damage award where the district court found that the accused infringer, after learning of the patent, failed to obtain an opinion of counsel before continuing with its accused activity.

How Not to React to a Notice Letter. A February 2006 decision by the Court of Appeals for the Federal Circuit is a lesson in how not to behave.  In that case, the infringer obtained two oral opinions in two and a half years after being notified of the patent and his alleged infringement.  The infringer wanted to avoid paying attorney fees. The infringer told its attorney that "for 20 years or more, the whole industry has been making things like this."  Based on that assertion, the attorney advised that there would be no infringement.  However, both oral attorney opinions were not thorough in that they were not based on an examination of the file history of the patent, the accused infringing product or any prior art.  The trial court found these opinions incompetent and in reckless disregard of the patent rights.  Less than good faith attempt to avoid infringement had a devastating effect.  The infringer could not simply await further details from the patent owner on exactly what was being infringed.  The result was a finding of willful infringement, treble damages and attorneys fees against the infringer.  The case was Golden Blount, Inc. v Robert H. Peterson Co., nos. 04-1609, 05-1141, -1202.

Why Outside Counsel? Despite the Knorr decision, a company would be well advised not to give opposing counsel the opportunity to argue that the company displayed objective recklessness in the method it chose to employ in evaluating an infringement claim.  A company's technical expert might provide a first line of defense in the evaluation of infringement and clearly, a company counsel opinion is better than no opinion.  However, the opposing counsel might well raise the suggestion that the use of in-house technical experts and counsel had an obvious conflict of interest and that the resulting opinion of no patent infringement was a self-serving attempt to simply avoid a willfulness determination.

There may be no adverse inference as a matter of law from failure to obtain an opinion of counsel, but being able to disclose an opinion of an independent counsel on patent infringement is one of the circumstances that might well tip the balance for a jury.  The U.S. Court of Appeals for the Federal Circuit recently held in Suprema, Inc. v. International Trade Commission, Fed. Cir. No. 12-1170, 14-SEP-2015 that the failure to obtain an opinion of counsel may be considered in deciding whether evidence of willful blindness demonstrates the mental state for active inducement of patent infringement.

Waiver and Strategy. As your opinion counsel, this law firm would limit written documentation of a non-infringement opinion to the opinion memorandum.  Work with in-house and litigation counsel would be based on refraining from writing documents on infringement beyond the opinion letter.

The reason for this is strategic legal protection for our clients.  The Federal Circuit in an opinion on May 3, 2006 clarified the law of waiver of attorney-client privilege and work product.  When the advice- of-counsel defense to willful infringement is asserted by an infringer, the infringer waives his right to keep confidential all documents from any attorney (in-house, litigation or opinion counsel) concerning infringement.  This includes not only the traditional opinion letter, but also includes any documents in the attorney's files that memorialize an oral communication between attorney and client concerning whether the patent is valid, enforceable and infringed but are not themselves communications to or from the client.  The waiver does not extend to documents analyzing the law, facts, and trial strategy that reflect the attorney’s mental impressions but were not given to the client.  In re EchoStar Communications Corp., Misc. No. 803 (Fed. Cir. 2006).

Why Not Litigation Counsel? Avoiding opinions by trusted outside litigation counsel may also be prudent for two reasons:

(1) There is a potential, albeit rare, for litigation counsel being disqualified from trying the case. To gain advantage, opposing counsel may argue that the testimony of the trusted litigation counsel on its opinion could be "prejudicial" to the client; or that litigation counsel could to be called as a witness. In either case, litigation counsel could be forced to withdraw, handicapping the company. While the legal standard is that what is important are the objective factors concerning the opinion itself, not the author's testimony, the potential remains and can easily be avoided with an opinion of a completely independent counsel who will work with the litigation counsel.  The Federal Circuit stated in the Seagate (rev'd on other grounds) holding mentioned above that "relying on opinion counsel’s work product does not waive work product immunity with respect to trial counsel."

(2) An opinion letter is often needed in trial after the judge or jury has concluded there is infringement. This means that the conclusions in the opinion letter have already been found to be incorrect, and the issue is whether the opinion letter nevertheless provided a reasonable basis for concluding that the result could have gone the other way.  In the words of the Federal Circuit in the EchoStar decision: "Counsel’s opinion is not important for its legal correctness.  It is important . . . whether it is thorough enough, as combined with other factors, to instill a belief in the infringer that a court might reasonably hold the patent is invalid, not infringed, or unenforceable."  See EchoStar decision above, internal quotes omitted.  If trusted litigation counsel is the author of the opinion, inevitable loss of credibility in the minds of the judge and jury could weigh against the position of the company.

Determining Infringement and Designing Around. Determining whether or not there is patent infringement may be more complicated than one might imagine. There are uncertainties that affect the scope of a patent that should be considered.  For example, the doctrine of equivalents and reexamination.   Furthermore, if you are attempting to design around an existing patent, there is more to it than reviewing the literal meaning of the claims. Informed advice may be your best defense against risking your business future. See this Firm's web page further discussing infringement determinations and designing around existing patents.

Sending a Notice Letter. If you believe that a business or other person is using your patent without your permission, it is appropriate to send them a Notice Letter (sometimes this is a Cease and Desist letter or sometimes just a notice that you have a patent and want them to consider licensing).  However, recent decisions by the Supreme Court (MedImmune, Inc. v. Genentech, Inc., 549 U.S. ___, 127, S.Ct. 764 (Jan. 9, 2007)) and the Federal Circuit (SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. March 26, 2007)) essentially mean that if you send a letter of any kind offering a license to a potential infringer, you could face a Declaratory Judgment lawsuit seeking to invalidate your patent, or asking for a decision that there is no infringement.

Worse, if you are a patent licensing company, there may be little more than sending a letter needed to create federal court jurisdiction.  This was made plain in Hewlett-Packard Co., v. Acceleron, LLC in which Acceleron, a patent holding company, sent a letter to HP saying in part that Acceleron wanted "to call your attention to the referenced patent" and asking for "an opportunity to discuss this patent with you." The Federal Circuit held, "there is declaratory judgment jurisdiction arising from a "definite and concrete" dispute between HP and Acceleron." (Fed. Cir. 2009-1283, 04-DEC-2009).

Your invention is a valuable commodity. Do not waste your investment by ignoring patent infringing activity. The Law Firm of Louis Ventre, Jr. can help with your representation on dealing with a patent infringer, or at the very least going over your options to help you make an informed decision.

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This file last modified 05/19/20.
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