The Importance of Counsel Opinions in the US Patent Law after Broadcom v. Qualcomm

2011/05/04,Gu Ping, Visiting Professor of American IP law inLaw School of Hong Kong City University,[Patent]

In US patent litigation practice, the alleged infringer, facing the prospect of a patent infringement lawsuit, will often contact lawyers to seek opinion of counsel, which often makes conclusions of law for invalidity or unenforceability of the allegedly infringed patents, or non-infringement of an accused product. If sued, a defendant may produce such opinion of counsel in court as evidence to prove good-faith reliance on the professional opinion that the patent is invalid or not infringed, and to exonerate itself from the bad-faith intent to infringe.

However, the United States Court of Appeals for the Federal Circuit lessened the need for the role of the above-mentioned counsel opinions in In re Seagate Tech., LLC., 497 F.3d 1360 (Fed. Cir. 2007). The Court of Appeals for the Federal Circuit held that when willful infringement was asserted there was no affirmative obligation to produce such opinion of counsel on the invalidity, unenforceability or noninfringement of the patent, in the absence of which, a defendant would not be presumed to have the intent for infringement. After Seagate, many defendants mistakenly believed that it would not be necessary to incur the cost of seeking counsels’ opinions.  However, in September 2008, in Broadcom Corp. v. Qualcomm, Inc., the Federal Circuit Court of Appeals reaffirmed the importance of obtaining these opinions.  It held that opinion of counsel remained a relevant factor in determining specific intent of inducing patent infringement. The court held that whether the defendant had obtained the counsel opinions on invalidity, unenforceability, and non-infringement was considered among other factors in determining whether the defendant had the specific intent of inducing infringement. As many Chinese companies have been sued in the US courts or in the International Trade Commission in accordance with Section 337, this case is of particular importance.

“Qualcomm v. Broadcom” Review

Qualcomm is the world’s second largest mobile communications chipset maker with world-leading CDMA and 3G cellular phone chipset technologies. Broadcom, being a “rising star” in the cellular phone chipset business, although of lesser scale than that of Qualcomm, became famous after its chipset patent lawsuit with Qualcomm. The Broadcom v. Qualcomm case as discussed in the article relates to chipset roaming technology on 3G cellular phone network, including both CDMA2000 and WCDMA. Broadcom accused in the complaint Qualcomm for direct infringement of its 3G patents, inducement of infringement by its customers and contributory infringement. The district court found for direct infringement and inducement of infringement, and issued a permanent injunction enjoining Qualcomm from acts of direct infringement and inducement of infringement.

Qualcomm appealed the trial court’s decision to the Court of Appeals for the Federal Circuit. On appeal, Qualcomm argued that intent was more difficult to prove for inducement than for willful infringement, and if it could not be presumed for willful infringement for lack of counsel opinions under Seagate, it would be less so for inducement infringement  to be willful by presumption; Qualcomm further argued that the district court erred in its jury instructions on inducement infringement, as it believed that Seagate eliminated the need to obtain a counsel opinion as defense to willful infringement. Therefore, the jury instructions on inducement should not have conditioned willful infringement upon lack of a counsel opinion.

The Federal Circuit rejected Qualcomm’s argument.

The court held that intent for inducement was different from that for willful infringement.  Under 35 U.S.C. § 271(b), inducement of infringement referred to acts of active inducement of infringement and encouragement of another’s infringement upon a patent. To establish inducement, the plaintiff needs to prove: defendant’s knowledge of the patent and active inducement of another to infringe, the key to finding which lies in defendant’s subject intent to encourage another’s infringement. Under Seagate, to prove willful infringement, the plaintiff must demonstrate that the defendant, who knows or should know possible infringement, had the intent to infringe the plaintiff’s patent notwithstanding, the key to finding which lies in the objective determination of whether the defendant knows or should know the existence of the patent. The Federal Circuit held that the failure to procure an opinion of counsel should not infer that the alleged infringer had the intent of willful infringement, and the defendant obligation to get the opinion of counsel was waived, but Seagate had not altered the state of mind requirement for inducement.

Furthermore, the Federal Circuit found no error in the district court’s jury instructions to hinge intent for inducement on counsel opinions, which gave the following directions: “To find for inducement of infringement, the accused infringer must have specific intent (1) to actively induce direct infringement, and (2) it knows or should known that its action would lead another to direct infringement …. In considering whether Qualcomm knew or should have known its actions would lead another to directly infringe on Broadcom’s patents, you may consider the totality of circumstances, including whether Qualcomm had procured the opinion of counsel.” The Federal Circuit held that the opinion of counsel, together with other circumstances, would infer that the accused infringer knew or should have known its actions may lead to direct infringement, which was precisely the second factor of the jury instructions on inducement of infringement. Thus, the Federal Circuit held that the district court did not err in instructing the jury to hinge intent to induce on whether or not advice of counsel was procured. Moreover, the evidence showed that Qualcomm knew of Broadcom’s patents before the lawsuit, and its allegation for the patent infringement, but nevertheless did not get an opinion of counsel; after being sued, Qualcomm continued to provide after-sales services for downstream customers regarding allegedly infringing products, did not reinvent or design around the Broadcom patents, nor notify customers to avoid the patents. The totality of the circumstances was sufficient to establish Qualcomm’s intent for inducing infringement. Since Qualcomm did not carry any infringement search, did not design around, and sought no counsel opinion, the Federal Circuit affirmed the ruling of the district court and ruled for Qualcomm’s infringement.

Importance of Counsel Opinions after Qualcomm v. Broadcom

Based on the ruling of Qualcomm v. Broadcom, the lawyers’ opinions on patent invalidity, unenforceability and non-infringement remain very important in patent infringement analysis. Although Seagate eliminated the need to obtain a counsel opinion to defend against willful infringement, it did not eliminate the defense against willful infringement through counsel opinions. Therefore, counsel opinions  on patent invalidity, unenforceability and non-infringement may still serve as defense not only to inducement of infringement, but also to willful infringement.

Chinese companies have frequently become subject to litigations in the United States. In 2008 alone, about 40% of ITC Section 337 investigations were against Chinese companies. In the face of a sluggish economy and competition from foreign products, more U.S. companies will turn to the patents. Chinese companies are well advised to seek counsel opinions, once potential infringement looms large, on patent invalidity, unenforceability and non-infringement.

(Translated by Wang Hongjun)

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