By A. J. Nelson

The October 29th IPO summary reports on the Senate version of the bill (attached below) regarding willful infringement:

SENATE BILL CODIFIES SEAGATE STANDARD FOR WILLFUL INFRINGEMENT AND IMPOSES ADDITIONAL LIMITATIONS ON FINDING WILLFULNESS — Section 4 of S. 515, the patent reform bill that was reported out of the Senate Judiciary Committee on April 2, 2009, at p. 30 amends 35 U.S.C. §284 on willful infringement. The section continues the statutory provision that allows a court to increase damages up to triple the normal amount for willful infringement and adds extensive language to define “willfulness.” The section incorporates the “objective recklessness” standard of the Federal Circuit’s 2007 Seagate opinion and prescribes requirements for notice of infringement. Other permitted grounds for willfulness include intentional copying with knowledge of the patent and a second infringement finding. Willfulness cannot not be found if there was an informed, good faith belief of patent invalidity, unenforceability or no infringement. Willfulness cannot be pleaded until after a finding of infringement. IPO POSITION: IPO believes that in light of the Federal Circuit’s 2007 opinion in the Seagate case, patent reform legislation should not include any provision on willful infringement.

The bill includes a provision that willfulness cannot be found (the report incorrectly reads “cannot not”) if there was an “informed good faith belief of patent invalidity. unenforceability or no infringement.” If passed in this form, the provision likely would put back in place the need (but not obligation) to have a competent opinion before launching a product. While touted as a codification of Seagate, this Senate bill is thus a change from the understanding many litigators attribute to Seagate. As currently interpreted by many litigators, Seagate eliminates the obligation and need to have a competent opinion before launching a product. If this bill passes, companies still will not be obligated to have such competent opinions before launching but will have an express need to obtain such opinions. The need is founded upon the provision that willfulness cannot be found if there was a good faith belief of patent invalidity, unenforceability or non-infringement. A clear demonstration of such a good faith belief would be a competent written opinion by outside counsel.

Of course, the IPO, aka The Patent Owners Organization, opposes because the somewhat vague recklessness guideline promulgated by the Court can be seen as permitting very little Due Diligence and FTO work before a product is launched. The business owner can say in that instance “I had no idea that patent was out there. I was not reckless because my technical researchers said I was okay. They know the art. That is my good faith belief. After all, my researchers are at the forefront of this business.”

Many in the business of litigation currently subscribe to the allegedly smart view that the approach of little or no FTO work and no prior formal opinions preserves as much flexibility as possible for patent infringement litigation and does not commit to positions before litigation occurs. Is it smart business, however, to spend thousands or millions of dollars on development of a product without knowing whether or not a U.S. patent may stop sales cold in their tracks?

s.515.pdf