Legal Matters: Patent opinions: What are they and when should Utah businesses get them?

Adam Smoot & Antony Zhang 

The law always seems to be changing, and patent law, with its constantly shifting legal standards and best practices, is certainly no exception. So-called patent opinions are a perfect example of the malleable legal standards and best practices in patent law. In the 1980s and 1990s, it was borderline malpractice for attorneys to not recommend getting such patent opinions as courts had established a “duty of care” to avoid infringement, and willfulness of patent infringement was found in nearly two-thirds of cases.{mprestriction ids="1,3"}

The Seagate decision in 2007 removed the previously established duty of care, but with the Halo decision from the Supreme Court in 2016 and subsequent decisions in 2018, the landscape shifted again to where willful infringement and the specter of enhanced damages were on the table. District courts are still in the soul-searching process of defining the boundaries and standards for willful infringement and “egregious” conduct to adhere to the principles set out by the Supreme Court, which has led to quite a bit of uncertainty for businesses embroiled in patent disputes. This article will consider the questions of whether and when patent opinions are still helpful.

Spoiler alert: Patent opinions definitely have their uses.

A patent opinion is a written legal analysis that typically comes in one of two varieties:

An opinion of non-infringement compares an existing patent for which the opinion is sought (which we will refer to as the patent-at-issue) to a product and provides reasons why the product does not infringe the patent-at-issue.

An opinion of invalidity compares the patent-at-issue to other existing patents, or prior art, and provides reasons why the patent-at-issue is invalid in light of this prior art.

Typically, a patent opinion is sought to provide cover for possible litigation relating to a business’s products that may infringe the patent-at-issue. A rigorous assessment of non-infringement or invalidity with respect to the patent-at-issue can help show that the business that commissioned the patent opinion did not believe its actions (or the actions of its customers) infringed the patent-at-issue. This may help with avoiding willful or induced infringement of the patent-at-issue should litigation arise. If the business is found to have willfully infringed the patent-at-issue during litigation, the patent opinion may help to mitigate the amount of enhanced damages.

When Should a Party Seek a Patent Opinion?

Businesses should seek a patent opinion when they suspect a risk of patent litigation exists involving a new or existing product or service offered by the business, or in other words, once the business is “on notice” of the patent-at-issue. When a new product or service is being released, businesses could perform freedom-to-operate analyses, which may lead to identifying one or more patents that might read onto the new product or service for which patent opinions may be beneficial. This may be particularly applicable in a technology space that is known to be especially competitive or crowded with participants. Patents in such technology spaces, especially specific patents that could read onto new products or services, would be suitable subjects for patent opinions.

In What Ways are Patent Opinions Beneficial?

Patent opinions can be an important tool when new products are launched, potential infringement is discovered or other times when the party might be “on notice” of potential infringement to avoid a finding of willful infringement or induced infringement. And while such an opinion may not avoid a finding of willfulness, it might still help to avoid enhanced damages anyway. In particular, the Halo decision separated the legal analysis of willfulness from the question of enhanced damages. Willfulness is a pre-requisite, but the court must find “egregious” conduct before enhanced damages are awarded.

A post-Halo empirical study of willful infringement and enhanced damages cases conducted by Karen Sandrik in the Michigan Technology Law Review indicates that 37.1 percent of cases before Halo included a finding of willful infringement and 64.9 percent of cases after Halo included a finding of willful infringement.

Before Halo, cases included enhanced damages 60.3 percent of the time, while 69.0 percent of cases included enhanced damages after Halo. In total, Halo has increased findings of willful infringement by 27.8 percent and findings of enhanced damages by 8.7 percent.

When considering enhanced damages, courts have almost universally applied the Read factors, which relate to whether an infringer acted in good faith. Two of the nine Read factors involve determining whether the infringer investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed (Factor 2) and the infringer’s motivation for harm (Factor 8).

Securing a patent opinion before performing any potentially infringing acts or within a reasonable amount of time after being on notice of potentially problematic patents can have a substantial effect on these factors. Given the significant impact on at least these two factors, having an opinion can give a judge good reason to decline to enhance damages for a party or decrease the magnitude of any enhanced damages.

Lastly, we note that a policy of burying your head in the sand to avoid discovering others’ patents has its risks, whether for willfulness or enhanced damages. For example, in Motiva Patents LLV v. Sony Corp., HTC Corp. filed a motion dismiss the claim for willful infringement based on no pre-suite knowledge of the patent. However, because of a policy to not review the patents of others, the court found that “willful blindness” can supply the requisite knowledge to keep the motion in the suit.

Similarly, when addressing enhanced damages, the court in Mestso Mins. Inc. v. Powerscreen Int’l Distrib. Ltd. stated that “even if [defendant’s] belief of non-infringement was subjectively in good faith, this is negated by the Court’s finding that the defendants evinced ostrich-like, head-in-the-sand behavior.”

By working with your patent counsel and being proactive in addressing issues upfront rather than ignoring or avoiding knowledge of high-risk patents, your business can be better protected from claims of willful infringement and the associated potential for enhanced damages.

Adam Smoot is a shareholder in Maschoff Brennan’s Salt Lake City office. His practice focuses primarily on post-grant proceedings before the United States Patent and Trademark Office, patent prosecution and counseling and complex intellectual property litigation. He has handled numerous inter partes review proceedings, as well as inter partes reexamination proceedings. He has represented both petitioners and patent owners before the Patent Trial and Appeal Board.

Antony Zhang is a registered patent attorney in Maschoff Brennan’s Salt Lake City office. His practice focuses on patent prosecution and intellectual property litigation support in a variety of technologies. He has also worked on office action responses, provisional applications, intellectual property due diligence and prior art searches in technical fields such as computer architecture, cybersecurity, chemical compositions and mechanical devices.{/mprestriction}