Yesterday, in Broadcom Corp. v. Qualcomm Inc. (Nos. 2008-1199, -1271, -1272), the Federal Circuit held that an accused infringer’s failure to obtain an opinion of counsel may be considered as evidence to support a determination that it actively induced infringement by a third party. Specifically, the Court ruled that the presence or absence of an opinion is relevant to whether an accused infringer “‘knew or should have known’ that its actions would cause another to directly infringe.”
In an earlier decision, DSU Medical Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006), the Court held that inducement requires proof that an accused infringer “possessed specific intent to encourage another’s infringement.” In Broadcom, the Court ruled that the failure to procure an opinion can be probative of this intent. The Court noted that in DSU, the accused infringer was permitted to introduce an opinion of counsel as exculpatory evidence to show lack of intent. Accordingly, the Court reasoned, it would be “manifestly unfair” to preclude patentees from identifying an accused infringer’s failure to obtain an opinion as circumstantial evidence to prove intent. Notably, although Qualcomm had in fact obtained opinions of counsel, this information was excluded from evidence because Qualcomm chose not to waive attorney-client privilege as to the opinions. As a result, under the district court’s jury instructions, the jury could properly, in the totality of circumstances, consider Qualcomm’s “failure” to obtain advice of counsel as evidence of its intent to induce infringement.
The Broadcom Court reiterated that under In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007), there is no affirmative duty to seek an opinion of counsel regarding infringement, and that, when no opinion is introduced into evidence, it is improper to allow an adverse inference that such an opinion would have been unfavorable. Nevertheless, as a practical matter the Broadcom holding is in tension with Seagate. For companies facing third party patents directed to methods that are performed by the companies’ customers – e.g., patents on methods of treatment or diagnosis, software, telecommunications – Broadcom will increase their exposure to liability for induced infringement if either they fail to obtain an opinion or they elect not to rely on an opinion at trial in order to preserve attorney-client privilege. In short, although under Seagate a company’s failure to obtain an opinion of counsel does not justify a finding that the alleged infringement was willful, under Broadcom, that same failure may nevertheless support a determination of liability for inducing infringement. After Broadcom, a company’s decision whether to obtain an opinion of counsel, and if so, whether to waive privilege to rebut an allegation of intent, must now be reevaluated whenever a company is at risk of liability for inducing third party infringement.