McDermott Achieves Precedent-Setting Victory in Patent Infringement Case
WASHINGTON, D.C. (August 22, 2007) — On August 20, 2007, a unanimous U.S. Court of Appeals for the Federal Circuit issued a precedent-setting victory for McDermott Will & Emery client Seagate Technology LLC. The court overturned 24 years of precedent by abolishing the "duty of due care" standard imposed on defendants in the context of willful patent infringement. The Court's decision will make it far more challenging for companies to prove that opponents are engaged in willful patent infringement, which can result in treble damages.
Prior to yesterday's ruling, companies would typically obtain an opinion letter regarding the potential infringement from "opinion counsel" following an accusation of patent infringement. During trial, the company could waive privilege and rely on the opinion letter in court to defend against the claim of willful infringement. In Convolve, Inc. v. Seagate Technology LLC, the district court extended this waiver to include communications between Seagate and its trial counsel, McDermott Will & Emery. The district court also ordered that trial counsel's work product was subject to discovery. Seagate then petitioned to the Federal Circuit for a writ of mandamus vacating the district court's orders.
The Federal Circuit, recognizing the importance of these issues, took the extraordinary step of hearing the case "en banc" and ordered the parties to address: (1) whether the duty of due care standard should be eliminated; (2) whether the waiver with regard to opinion counsel should extend to communications with trial counsel; and (3) whether any such waiver should extend to trial counsel's work product.
As argued by Seagate, the duty of due care standard improperly shifted the requirement to prove willful infringement to the defendant who had to then prove it did not willfully infringe. Further, the district court's orders took away Seagate's right to effective trial counsel by allowing the patentee to "listen in" on the client's communications with its trial counsel.
The Federal Circuit agreed with Seagate. It abolished the duty of due care standard and established a new test for proving willful infringement: a patentee must show by clear and convincing evidence that the defendant acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Thus, the court held that the state of mind of the accused infringer was not relevant to the objective inquiry. It also held that there was no affirmative obligation to obtain opinions of counsel. With respect to the issues of attorney-client privilege and work product immunity, the Federal Circuit held that asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute waiver of the attorney-client privilege for communications with trial counsel, nor does it waive work product immunity with respect to trial counsel. The Federal Circuit thus granted Seagate's petition for a writ of mandamus and remanded with instructions for the district court to reconsider its earlier rulings in light of the Federal Circuit’s decision.
"This decision goes a long way towards leveling the playing field in patent cases. It restores a client's right to receive effective representation from trial counsel without a threat of interference from the patentee," stated Ray Lupo, who argued the appeal. "It also places the burden back on the patentee to prove willful infringement by clear and convincing evidence, and establishes that willfulness should be found only in circumstances where reckless conduct was present," added Mr. Lupo.
The McDermott team representing Seagate Technology included Ray Lupo, Terry McMahon, Natalia Blinkova, Mary Boyle, Amanda Koenig, Sabrina Chang and Brian Baker. Ray Lupo argued the appeal before the Federal Circuit. Others who provided invaluable assistance in preparing the case were Bobby Burchfield, Paul Devinsky, Joel Freed, Dennis Mondolino and Tim Waters.
Seagate is the worldwide leader in the design, manufacture and marketing of hard disc drives, providing products for a wide-range of applications, including Enterprise, Desktop, Mobile Computing, Consumer Electronics and Branded Solutions. Seagate’s business model leverages technology leadership and world-class manufacturing to deliver industry-leading innovation and quality to its global customers, and to be the low cost producer in all markets in which it participates. For more information, visit www.seagate.com.
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