• Competence of Opinion of Counsel Is Proper Subject of Inquiry in Willful Infringement Analysis
  • March 27, 2006
  • Law Firm: Duane Morris LLP - Philadelphia Office
  • Golden Blount, Inc. v. Robert H. Peterson, Co., 04-1609, 05-1141, 05-1202

    In a February 15, 2006 decision from a unanimous panel, the Federal Circuit affirmed a judgment of willful infringement by the United States District Court for the Northern District of Texas. According to the Federal Circuit, nothing in the Federal Circuit's prior en banc Knorr-Bremse decision precluded a patentee from attempting to make a showing challenging the competence of the opinions received. Although not addressed herein, the Federal Circuit also addressed procedural questions under Rule 52(b) of the Federal Rules of Civil Procedure, vacated the damages award and remanded to the District Court for the limited purpose of reexamining the number of infringing products sold.

    Golden Blount filed suit against Peterson on January 18, 2001 for infringement of U.S. Patent No. 5,988,159 ("the '159 patent") relating to fireplace burners and associated equipment. The District Court found that there was willful infringement, that the claims were valid, awarded attorney fees and granted an injunction against Peterson. Peterson subsequently appealed the judgment and, in April 2004, the Federal Circuit (365 F.3d 1054) affirmed the Texas District Court's validity determinations but vacated the infringement finding and remanded the case for factual determinations concerning infringement. On remand, the District Court adopted Golden Blount's proposed factual findings and again determined that Peterson willfully infringed the '159 patent. In addition to trebling the lost-profit damages awarded to Golden Blount, the District Court awarded Golden Blount attorney fees and post-judgment interest. Peterson appealed.

    A key issue on appeal was Peterson's contention that it did not willfully infringe the '159 patent. The factual record before the District Court indicated that Golden Blount first sent Peterson a letter concerning possible infringement of the '159 patent in December 1999. Peterson provided its outside patent counsel (McLaughlin) with the December 1999 letter and a copy of the "instructions and working drawings" for the accused product. McLaughlin provided Peterson an oral opinion, stating that "if we can prove that what the Peterson Company was doing with the present product" was known for 20 or 30 years, then either Peterson does not infringe or the patent is invalid. At the time, McLaughlin did not possess the accused device, the file wrapper, or any prior art. Peterson never provided Golden Blount with a substantive response to the December 1999 letter. On May 3, 2000, Golden Blount sent a follow-up letter to Peterson stating that it had not received a response. Peterson responded on May 16, 2000 that it "very much disagreed" with the allegation of infringement and asked for a detailed explanation as to why it infringed the '159 patent. There was no further communication until Golden Blount filed suit in January 2001.

    McLaughlin testified that after suit was filed, Peterson employee Bortz asked for another opinion of counsel, in part because Bortz "had heard that an opinion could help avoid a charge of willful infringement." Bortz testified at trial he was more concerned about attorney fees than the potential damages for infringing sales. McLaughlin provided two additional oral opinions. In February 2001, McLaughlin opined that based on a photo and drawing of the accused product, there was no literal infringement and some claims were invalid. In May 2001, after reviewing the file wrapper for the first time, but still not having viewed the accused product, McLaughlin advised that the claims were not literally infringed or infringed under the doctrine of equivalents, and any remaining claims were invalid. Peterson never obtained a written opinion on the potential infringement.

    The District Court found that in the two and one-half years after Peterson received notice of the patent, Peterson never obtained a written opinion of counsel and the oral opinions were "incompetent" because they were rendered without reviewing the '159 file history or the accused device. Furthermore, the District Court found that the oral opinions were issued only as "an illusory shield against a later charge of willful infringement, rather than a good faith attempt to avoid infringing another's patent."

    On appeal, Peterson challenged the District Court's willfulness finding on two grounds. First, Peterson argued that the District Court drew an inference of the type prohibited in the 2004 en banc decision by the Federal Circuit in Knorr-Bremse Systems Fuer Nutzfahrqeuge GmbH v. Dana Corp. (383 F.3d 1337). Peterson argued that it had no duty to seek an opinion of counsel and that the lack of a competent opinion cannot help Golden Blount make out is prima facie case that Peterson acted willfully. In effect, Peterson argued that the District Court should have disregarded the opinion-related evidence.

    The Federal Circuit rejected Peterson's interpretation of the Knorr-Bremse decision. First, the Court reiterated the holding in Knorr-Bremse that the failure to produce an exculpatory opinion of counsel cannot be used by the patentee to infer that such an opinion, if rendered, would have been unfavorable to the alleged infringer. On the other hand, if the alleged infringer does not assert the privilege and does rely on opinion of counsel, "the patentee in making its threshold showing of culpable conduct is free to introduce as evidence whatever opinions were obtained and to challenge the competence of those opinions." According to the unanimous Federal Circuit panel, nothing in the en banc Knorr-Bremse decision precludes a patentee from attempting to make a showing challenging the competence of the opinions received. The Federal Circuit proceeded to note that Peterson did not assert the attorney-client privilege regarding the opinions it obtained from counsel and the competence of those opinions, and the facts surrounding Peterson's obtaining of those opinions were relevant to the willfulness issue and properly considered by the District Court. As such, the Federal Circuit rejected Peterson's first argument to overturn the finding of willful infringement as without merit.

    Peterson also argued that even in the absence of the formal opinion of counsel, it had a reasonable, good-faith belief that it did not infringe the '159 patent and did not act in reckless disregard of the patent, and thus, the District Court's willfulness finding was clearly erroneous. Upon reviewing the record, the Federal Circuit found no clear error in according little weight to the first two oral opinions rendered by McLaughlin since he did not consider the prosecution history. The Federal Circuit also found no clear error in the lower court's conclusion that Peterson demonstrated a "cavalier attitude toward Golden Blount's patent rights" from the facts that Peterson did not respond substantively to Golden Blount's notice letters, and only obtained a thorough opinion of counsel after suit was filed , and then only out of a concern to avoid a potential willfulness finding. Given the totality of Peterson's conduct, the Federal Circuit found that Peterson failed to rebut the inference of reckless conduct and affirmed the finding that Peterson willfully infringed the '159 patent.

    For the full opinion, see: http://fedcir.gov/opinions/04-1609.pdf