Federal Circuit: Failure to Obtain Non-Infringement Opinion May Serve As Evidence of Intent to Induce Infringement

Broadcom v. Qualcomm (Fed. Cir. 2008)

A California jury found Qualcomm liable for infringing or inducing infringement of three Broadcom patents covering 3G mobile phone technology. (US Pat. Nos. 6,847,686, 5,657,317, and 6,389,010). On appeal, the Federal Circuit has invalidated one of the patents, but left the judgment and injunction standing.

Seagate and Inducement: Like willfulness, inducing infringement requires proof of culpability. In Seagate, the Federal Circuit altered the standard for willful infringement – making it more difficult for a patentee to obtain treble damages. Consequently, in the willfulness context, there is no longer an "affirmative duty of due care" to avoid infringement. Here, Qualcomm argued (unsuccessfully) that the evidence available to prove inducement should be changed as well.

More generally, the defendant argued that it could not be liable for inducement if it was not liable for willfulness because the specific intent standard for inducement is greater than the recklessness associated with willful infringement. On appeal, the Federal Circuit rejected these arguments – finding the inducement standards unchanged and finding that inducement may be found even when willfulness is absent. The crux of the holding may be that the "specific intent" requirement of inducement is not so specific. Under the leading inducement case DSU v. JMS, proof of inducing infringement requires evidence that the accused "intended to cause the acts that constitute the direct infringement," and that the accused "kn[ew] or should have known [that] its action would cause the direct infringement."

The evidentiary argument was whether – for its inducement decision – the jury could consider Qualcomm's decision to seek advice of counsel as circumstantial evidence of intent. The appellate panel saw such evidence as fair game.

"Because opinion-of-counsel evidence, along with other factors, may reflect whether the accused infringer "knew or should have known" that its actions would cause another to directly infringe, we hold that such evidence remains relevant to the second prong of the intent analysis. Moreover, we disagree with Qualcomm's argument and further hold that the failure to procure such an opinion may be probative of intent in this context. It would be manifestly unfair to allow opinion-of-counsel evidence to serve an exculpatory function, as was the case in DSU itself, see 471 F.3d at 1307, and yet not permit patentees to identify failures to procure such advice as circumstantial evidence of intent to infringe. Accordingly, we find no legal error in the district court's jury instructions as they relate to inducement."

Too Broad: Prosecutors are typically careful to ensure that claims will be given a broad interpretation during litigation. If the claim is too broad, however, it will likely be found invalid. Here, Broadcom's '686 patent digital video signal processor. The district court found that a 'global controller' was required for operation of the processor, but the Federal Circuit could not find that limitation in the claims or any justification from the specification. Without that limitation, the claim was invalid as anticipated.

Broadcom's argument for a narrow interpretation was based on its discussion of prior art admissions in the specification – arguing that its admitted prior art would invalidate a broad claim. The Federal Circuit did not reject that contention per se. Rather, the court rejected Broadcom's version because the company had failed to show that its admitted prior art would actually anticipate the broad claim. "Because Broadcom has not demonstrated that "every limitation" of claim 1 is found in this reference, its self-invalidating argument must fail."

Late Claim Construction: Claim construction can happen at any stage of a case. Here, however, Qualcomm did not request a construction of the "network" term found in the '317 patent until after the jury had returned its verdict. On appeal, the Federal Circuit agreed with the lower court that Qualcomm had waived its right to demand construction of that term. "We agree that Qualcomm cannot be allowed to create a new claim construction dispute following the close of the jury trial."

'Qualcomm's eleventh-hour attempt to litigate a newly minted claim construction controversy falls squarely within our holding in Eli Lilly & Company v. Aradigm Corporation, where a party "never requested that the district court construe any terms in [the relevant claim] and never offered a construction of [that claim]," but rather "[o]nly after the presentation of all of the evidence to the jury . . . even suggest[ed] that claim construction might be helpful to determine the proper scope of the claimed invention." 376 F.3d 1352, 1360 (Fed. Cir. 2004).'

Injunctions: District courts issue injunctions while sitting 'in equity.' This typically gives the court discretionary power to shape and craft relief in a way that best achieves the right result. Here, the district court pushed enforcement of the injunction back to January 31, 2009. In the meantime, Qualcomm pays mandatory damages and Broadcom has now power to stop continued infringement in this period.

In the appeal, Broadcom argued that, under eBay, no permanent injunction should be awarded. In particular, Qualcomm had licensed its patents to Verizon for money – indicating that monetary relief is adequate and because the injunction will disrupt (non-Verizon) CDMA carriers (hardship) and will also be tough on the public. On appeal, the appellate panel rejected those arguments and instead found that the district court acted within its proper discretion by issuing the injunction order. (more to come on injunction order)

Notes:

• In the parallel Broadcom v. ITC, last week the Federal Circuit vacated the ITC's non-infringement finding of another Broadcom patent. The ITC will reconsider that issue.

A third parallel case, Kyocera v. ITC, is pending appeal at the Federal Circuit. In that case, the cell phone companies are appealing the ITC's exclusion order regarding yet another Broadcom patent.

Comments

[Malcolm Mooney]

"Broadcom's argument for a narrow interpretation was based on its discussion of prior art admissions in the specification – arguing that its admitted prior art would invalidate a broad claim. The Federal Circuit did not reject that contention per se."

Too bad because such arguments, on their own, should never be permitted to justify reading a limitation into a claim.

[Michael Barclay]

An argument can be made that today's 3-Judge Broadcom decision on drawing adverse inferences from not getting an opinion of counsel is not consistent with Knorr-Bremse's en banc decision banning such inferences in the willfulness context. See the discussion of Question 2 starting at 383 F.3d at 1345 of Knorr-Bremse. Knorr-Bremse banned adverse inferences for reasons that are far more general than just the issue of willfulness, such as "extensive satellite litigation."

[Steve Sereboff]

Well put, Michael. Watch for the petition for rehearing en banc, and then the petition for writ. Let's hope these two horses can wait for the willfulness/inducement conflict to be resolved before they settle.

[Malcolm Mooney]

"Knorr-Bremse's en banc decision banning such inferences in the willfulness context"

Let's face it: in certain circumstances a reasonable person would get a legal opinion before infringing a particular patent. Under those circumstances, when one refuses to obtain a well-considered legal opinion -- perhaps after others have advised or even begged the defendant to get the opinion -- how can the absence of an opinion be excluded as evidence of intent? Doesn't make sense.

Broadcom v. Qualcomm makes sense, or tries to.

Seagate and Knorr-Bremse took a very naive and simple-minded approach to "solving" the alleged problem of excessive findings of willful infringement. Those cases deserve to be revisited repeatedly until there is little left of their holdings.

[MaxDrei]

The voice of reason, yet again. I dare say there will be plenty with something negative to write about Mooney's above, but can any of them can displace the good sense of what he has just written? Now me, as an innocent little European, I'm wondering whether the importance to justice of the word "intent" outweighs the mischief of having to litigate it so often. I think we in Europe don't "do" intent in our patent law (not even in contributory infringement), and I'm wondering what we're missing.

[Cookie Monster]

Cookie no get it. For willfulness, no adverse inferences if defendant did not seek opinion of counsel. For intent to induce infringement, can still draw adverse inferences. Why the difference? Both are state of mind. Also, defendant still have to choose between disclosing opinion but waiving privilege, or not disclosing opinion and having adverse inference drawn. I go back to eating cookies, patent law too hard to digest.

[SKR]

I am an in-house counsel [NOT a US JD] and I still am not able to place the present Qualcomm opinion vis-a-vis the Seagate opinion.

I 'thought' that Seagate gave the following proposition for us in-house Counsels:
"What is necessary in house, if no external opinions are sought?
In house IP teams need to have thorough searches/ documentation done before Company asserts invalidity / non-infringement for any patent.
Based on these searches, in-house opinions could be prepared.
Also, the Seagate Court has spoken of ‘valid’ patents. Thus, a belief about the patents’ validity based on above search could possibly remove the perennially hanging sword of willful infringement and consequent treble damages."

Now, the above 'thought'/ understanding does NOT seem so convincing.

[Leopold Bloom]

"An argument can be made that today's 3-Judge Broadcom decision on drawing adverse inferences from not getting an opinion of counsel is not consistent with Knorr-Bremse's en banc decision banning such inferences in the willfulness context."

And what did Emerson say about consistency? The fact is that willfulness and inducement of infringement are quite different things, despite sharing an intent element. Willfulness is about punishing the infringer, on top of making the damaged party whole. Inducement is simply about trying to make an injured patentee whole. Our system of civil justice has always been suspicious of punitive damages. So, the standards of evidence/proof should be higher in the willfulness context.

Regarding "extensive satellite litigation": this is a real concern with respect to willfulness, as the issues are completely distinct from the main cause. I don't see where "satellite litigation" becomes an issue in the inducement context - the intent to induce is a central issue in the primary cause.

[Anonymous]

Circumstantial evidence does not mean the same thing as "adverse inference," Cookie. Specifically, "may be probative of" does not mean "shift the burden to."

[stuart bowie]

In 1982 we set up the CAFC to bring clarity to patent law. Those of us involved assumed naively that the judges selected would be experienced patent attorneys.

Well, here's more silliness from the Beltway favorites. Underwater Devices reasonably held getting an opinion about infringement/validity from an in house general lawyer was no good. Then we were informed opinions aren't really necessary. Now, in the context of an inducement case, get an opinion. [From your local real estate lawyer who majored in polisci? Probably ok.]

To have an viable patent system, manufacturers should be able to secure opinions from experienced outside patent attorneys--not self-proclaimed "IP" lawyers--and rely on them. If willfulness or inducement becomes an issue, then such opinions should suffice to bar enhanced damages.

We let thieves parading as Wall Street experts "handle" our savings and 535 jerks in DC appoint idiots to the CAFC and permit anti-patent lobbyists write "reform" legislation.

The result? Kiss the dollar--and capital needed to fund innovation--goodby.

[Michael Barclay]

OK, let me try to make this as simple as I can. (Cookie Monster, you are correct that this is hard to digest.)

Before the Knorr-Bremse and Seagate cases, the law on opinions of counsel was a mess. Based on Underwater Devices, getting an opinion of counsel was nearly mandatory to avoid willful infringement. This led to at least two problems. If you did get an opinion from separate opinion counsel and waived privilege, that led to a host of satellite litigation over the opinion -- at least the deposition of opinion counsel, and sometimes extensive motion practice in addition, where aggressive patent owners argued that the waiver applied to trial counsel also.

If you didn't get an opinion, or if you got an opinion but chose not to use it, then adverse inferences would be drawn against you.

If you think about it, these type of problems don't happen in other areas of law. It's only patent law where there has been such emphasis on getting opinions of counsel.

Knorr-Bremse and Seagate solved both of the above problems by eliminating adverse inferences, by shielding trial counsel from waiver of privilege, and by ending the near-automatic need to get opinions in every case. Both of those cases were en banc, had tons of amicus briefs to advise the Court, and were carefully reasoned.

Now a 3-Judge panel has brought back at least the inference problem, and likely requiring opinions in many patent cases. The Broadcom v. Qualcomm reasoning either misconstrued Knorr-Bremse or ignored it altogether (for example, the meat of the decision on adverse inferences, at page 26 of the slip opinion, is conclusory and doesn't discuss either Knorr-Bremse or Seagate).

So we will have to see where this all leads in the future.

By the way, the Recorder has an excellent article on the case, see:
http://www.law.com/jsp/article.jsp?id=1202424776945

[EG]

I'm not sure Linn's opinion here regardmg the evidentiary effect of failure to obtain an opinion (or in this case withholding an opinion) on the "intent" prong in "inducing infrngement" is necessarily inconsistent with Knorr-Bremse or Seagate in the arena of "willful infringement." In fact, what Knorr-Bremse said was that the jury can't be instructed that they can draw an "adverse inference" from failure to produce the opinion. Here, the judge's instruction was that the jury "could consider all of the circumstances, including whether or not Qualcomm obtained the advice of a competent lawyer" on whether Qualcomm "knew or should have known that the induced actions would constitute infrngement in the totality of circumstances." That's a far cry from an "adverse inference" instruction. In fact, the judge instructed the jury on the "willfulness" issue that they should not assume that absence of the opinion should be viewed unfavorably, but could only be considered under the "totality of circumstances" like the "inducing infringement" instruction.

Linn's opinion also noted that Qualcomm didn't provide an alternative instruction (and thus waived any legal incorrectness about the instruction the judge made to the jury). Also, the issue of seeking the opinion was not the only evidence the jury saw on the "intent to induce" as was pointed out at page 28 of Linn's opinion. And contrary to those who think Knorr-Bremse removed the dilemma of producing the opinion and waiving privilege, or not producing the opinion and being held to be a "willful infringer", just remember that the opinion may be the only evidence to show the accused infringer's "good faith". Or if you don't produce the opinion because you don't want to waive privilege, you may have no other evidence to show the "bona fides" for the action taken. In fact, Linn's opinion noted that in the earlier DSM case on "inducing infringement", the accused infringer produced the opinion to show it didn't "induce."

Let's also consider what is being compared here, i.e., proving inducement of infringement v. proving willful infringement, and especially what the consequences are. Proving the former means the patentee may get an injunction and damages at least equal to a reasonable royalty. And as Linn's opinion correctly points out, you may only have circumstantial evidence, such as the absence of the opinion, to show "intent." Conversely, proof of the latter is more significant (infringement is already a given) as it normally suggests "bad faith" on the accused infringer's part, thus leading potentially to treble damages and likely to the case being made exceptional under 35 USC 285, so you want to be careful about the possibility of "adverse inferences" in the latter case (in other words a more stringent standard of proof as Seagate now compels).

[EG]

Leopold,

Sorry, I should have also said I agree with your assessment about "consistency" and the differences between inducing infringement and willful infringement.

[Steve]

I don't believe there has ever been a case saying an inhouse IP attorney cannot give an opinion. This is a myth promulgated by outside counsel.

While there are legal reasons why outside opinions should be sought, one of those reasons is not the stamp of automatic lack of "Competence" in inhouse opinions.

[query]

I think that it is more a case of perceived objectivity, Steve.

[Malcolm Mooney]

"I don't believe there has ever been a case saying an inhouse IP attorney cannot give an opinion. This is a myth promulgated by outside counsel."

Fair enough. And the fact of the matter is that a well-considered opinion drafted in-house beats an outside counsel statement that "a commenter on a widely read patent blog agreed the claims were doo-doo."

The problem with all this "avoiding willfulness" nonsense is that many claims can, in fact, be easily dismissed as invalid (or non-infringed) without reams of paper and money being wasted on extensive "analysis", and that includes an "analysis" of infringement under the doctrine of equivalents. Judges may find it necessary to spend twenty pages addressing baloney arguments about whether the term "color" can be construed to mean only "red" but a reasonable opinion for avoiding willfulness should not be required to engage in the same idling sophistry. Likewise, a reasonable jury can not interpret a limitation reciting "a square" to include "a circle" under the doctrine of equivalents. Period -- at least for establishing non-willfulness.

The whole thrust of the aforemtioned cases (not including Broadcom) was that it was oh-so-expensive and impractical to get these opinions, coupled with the ridiculous use of the opinions to pierce the attorney-client privilege veil. Telling a jury that it can't draw an adverse inference re willfulness from a defendant's refusal to produce an opinion re infringement/invalidity of a patent? That is lame.

[stuart bowie]

I don't see a sensible rebuttal to my assertion "To have an viable patent system, manufacturers should be able to secure opinions from experienced outside patent attorneys--not self-proclaimed "IP" lawyers--and rely on them. If willfulness or inducement becomes an issue, then such opinions should suffice to bar enhanced damages."

1-In-house opinions? Always raises a conflict question. That is distinct from the competence of in-house lawyers.

2-Self-proclaimed "IP" lawyers are competent to understand the complex inter-relationship between tough science and increasingly convoluted patent law?
THAT is a myth, one pushed by outside law firms desperate for big fee patent cases.

Ask anyone who pushes that myth if they would retain a patent attorney to defend the agaist a serious IRS charge or a SEC lawyer to represent them in connection with the purchase of an expensive home.

Patent attorneys have degrees in both law and science and have passsed a brutal exam to be registered.

Yet, take any significant patent lawsuit to any of the large general law firms. Once they ascertain that you have deep pockets, you'll be assured the "firm" has "top" litigators who can "handle" the matter.

In short, the ingenious tag "IP --which arrived with the thoughtless conversion of the APLA into the AIPLA--is misleading as to patents. Unfortunately, that tag--which lacks any recognized status as a speciality and for which there are no tests for competency--has only one purpose--so that unqualified "IP" lawyers can make money litigating patent cases.

[AllSeeingEye]

I'm pretty sure Mooney is one of the self proclaimed IP experts, due to his willingness to spout off about just about anything from jury instructions to signal claims to protien folding to beating straw. THAT my friends is lame.

[AllSeeingEye]

I would agree that an in-house attorney providing an opinion is like a fox doing a security check in the hen-house.

[Malcolm Mooney]

"1-In-house opinions? Always raises a conflict question. "

Again, this is false. In-house opinions about patent validity and infringement do not *always" raise a conflict question.

The reason this is true is because (1) the PTO has issued and continues to grant claims that a well-educated high schooler can tank once the high-schooler is provided with the definition of "anticipation"; and (2) patentees regularly wave claims at potential licensees that quite plainly are not infringed.

One does not need an outside "IP lawyer" or even a "patent attorney" to write an opinion that says the sale of one's product that was described in a magazine more than one year before the earliest priority date of a particular patent is a non-infringing act with respect to that patent. You just don't. Write the facts in a letter and send it to the patentee with a kind instruction to save it for any IDS they might be thinking of filing later.

Now let's imagine the nightmare scenario where you get dragged into District Court before Judge Dangle in Fly Creek, Arkansas. He's clueless. He writes a summary judgment decision and, noting the absence of outside counsel's opinion, he finds that you willfully infringed. OH NO DONT YOU WISH YOU HAD PAID FOR ONE NOW!!! There is a breed of lawyers out there who find these sort of "worst case scenario" arguments compelling. The rest of us have clients who need help resolving *actual* issues that are nuanced and interesting.

[AllSeeingEye]

As any seasoned practitioner would know, patent attorneys can never render opinions regarding validity... Mooney's posts are traps for the unwary.

[AllSeeingEye]

To clarify, what I'm saying is that, despite the multitude of people out there, including the PTO (not surprisingly these days) and some fairly high level firms, who will tell you that they will render a "validity" opinion, the only entity capable of providing a determination of validity is the PTO or a court - although a court will usually make a determination of "validity" only as against some specific references proffered as a defense to infringement. One can do a validity search, find some allegedly anticipatory prior art, and render an opinion regarding whether the art would invalidate the claim, or could render an opinion on whether a particular reference would invalidate a claim, but it seems to me that to say in an opinion that "this patent is valid" goes against my every instinct. I seem to recall that in my early days of practice, the old guys would NEVER give a validity opinion and counseled strongly against even thinking about doing so. Has the patent bar been dumbed down that much - or am I missing something?

[MaxDrei]

I read that procuring an opinion of in-house counsel is like asking a fox to check the security of the hen house. That makes a lot of sense, actually. Who better than a reformed hacker to check the resistance of a system to getting hacked into? But the poster didn't mean a reformed fox, did he. And that's where one begins to get confused. Why should a company fox, conscientiously putting the interests of the employer uppermost, report "No holes in the fence boss" when in reality there is a hole? I think I know but then I begin to think that the equitable tail of the common law dog is wagging the body of the law. Another poster noted (if I can remember it) the ever more convoluted branch of the law called patent law. Is anybody out there trying to "Keep it Simple", so that an innovative American company's best interests do indeed lie in watching A publications diligently, and then promptly getting a well-founded and competent opinion on dangerous ones, from its in-house competent and conscientious patent lawyer? Isn't this how the simple concept of a patent system is "supposed" to work? Isn't this how indeed it does work, everywhere else but in America?

[SKR]

Am the in-house counsel again.
Post reading comments, here, I opened PatentlyO's original comment page for the Seagate decision, here:
http://www.patentlyo.com/patent/2007/08/seagate-ii.html

Repeating myself, the original comments and present comments do not equate or give me any comfort. Any help would be appreciated.

To set the ball rolling, I would ask people to look into another case:
Cohesive Tech. v. Waters Corp – patent case (D. Mass 2007) 
where the Judge said --:
"Because I find that Waters obtained an opinion of counsel in good faith, and because there was a bona fide dispute over whether the Oasis polymeric particles infringed Cohesive's patents, Cohesive has not demonstrated that Waters' infringement was willful. .”

The cases on the other side - e.g. Trading Speed; Jan K. Voda, M.D., v. Cordis Corporation seem easier to me to make sense versus the present Broadcom or the above mentioned Cohesive.

[STUART BOWIE]

SKR:

Let's try it this way: stability in the law of patents is what attracts capital and enables R&D corporate decisions.

Forget the foodfight. If you think there's a prima facie chance that your company may infringe, you can opine as to infringement, validty yourself. However, it sometimes occurs that the CPC is made to understand how that opinion should "come out".

That's why you go to an experienced outside patent attorney and get an opinion. Tell him/her that they are not going to be litigation counsel.

Is that perfect? No, but if there really is "good faith" the law should protect your company against a wilfullness charge.

Will it? Who the hell knows given the wanderings of the present CAFC. Hopefully, the new Congress and President will pass legislation to revise that court and put in place patent attorneys as judges for patent issues.

Such an effort will be met with protests by the Beltway law establishment and "IP" lawyers. That should tell you where the truth lies.

[AllSeeingEye]

Mr. Bowie, you are a wise man.

[SKR]

Dear Stuart Bowie,

Many thanks for pondering upon the issue.
I shall not get in asking questions on this topic since I realise that this is turning very murky.
I shall only express regret that my hope of saving my department's budget from 'avoidable' patent opinions is now back to the drain :-(

IN-house counsel.