Richard E. Parke1

In September 2003, the United States Court of Appeals for the Federal Circuit grabbed the patent bar's attention by announcing that it would reconsider en banc "its precedent concerning the drawing of adverse inferences, with respect to willful patent infringement, based on the actions of the party charged with infringement in obtaining legal advice, and withholding that advice from discovery." Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 344 F.3d 1336, 1336 (Fed. Cir. 2003). The Federal Circuit presented the following four questions to the parties, and invited bar associations, trade associations, and government entities to submit amicus curiae briefs on the first, second, and fourth questions.

  1. When the attorney-client privilege and/or work product privilege is invoked by a defendant in an infringement suit, is it appropriate for the trier of fact to draw an adverse inference with respect to willful infringement?
  2. When the defendant has not obtained legal advice, is it appropriate to draw an adverse inference with respect to willful infringement?
  3. If the court concludes that the law should be changed, and the adverse inference withdrawn as applied to this case, what are the consequences for this case?
  4. Should the existence of a substantial defense to infringement be sufficient to defeat liability for willful infringement even if no legal advice has been secured?
Knorr-Bremse, 344 F.3d at 1336-37. The amici curiae response was substantial, with more than twenty briefs-almost unanimously calling for abolishing the inference-eventually being filed.2
Approximately one year later, on September 13, 2004, the Federal Circuit issued its decision, holding:

            [N]o adverse inference that an opinion of counsel was or would have been
            unfavorable flows from an alleged infringer's failure to obtain or produce an
            exculpatory opinion of counsel. Precedent to the contrary is overruled.

Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp.,Nos. 01-1357, 01-1376, 02-1221, 02-1256, 2004 WL 2049342, at *1 (Sept. 13, 2004 Fed. Cir.) (en banc). In effect, this holding reinstates the "totality of the circumstances" test that existed in the regional circuits prior to the Federal Circuit's creation.

In the underlying action, Knorr-Bremse, a German brake manufacturer, sued three competitors for allegedly infringing an air disk brake patent. Those competitors, namely, Dana Corporation, Haldex Brake Products Corporation, and Haldex Brake Products AB, were jointly developing a disk brake system. Knorr-Bremse had orally informed Dana of both its foreign patent disputes with Haldex concerning the brakes and pending patent applications in the United States. Knorr-Bremse later informed Dana in writing of the disk brake patent's issuance in the United States, and followed by suing Dana and Haldex for patent infringement.

Before the district court, Haldex stated that it had consulted with both European and American counsel about Knorr-Bremse's patents, but declined to produce any opinion or disclose any advice received. Dana had not consulted with counsel, opting instead to rely on Haldex. In finding willful infringement, the district court stated that it was reasonable to conclude that the Haldex opinions were unfavorable. Based on this finding, the district court awarded Knorr-Bremse its attorney fees for those portions of the litigation.

The Precedent Under Review

The Federal Circuit explained that changed circumstances were behind its decision to reconsider its willful infringement precedent. The court noted that the Federal Circuit had been created at a time "when widespread disregard of patent rights was undermining the national innovation incentive." Id. at *3 (citation omitted). Tracing the adverse inference rule's progression from Underwater Devices, Inc. v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983) , through Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565 (Fed. Cir. 1986)4, to Fromson v. Western Litho Plate & Supply Co,., 855 F.2d 1568 (Fed. Cir. 1988)5, the court explained that "[t]hroughout this evolution the focus was not on attorney-client relationships, but on disrespect for law. However, implementation of this precedent has resulted in inappropriate burdens on the attorney-client relationship." Knorr-Bremse, 2004 WL 2049342, at *3. The court justified addressing the issue as follows:

            We took this case en banc to review this precedent....[T]he
            "conceptual underpinnings" of this precedent have significantly
            diminished in force. The adverse inference that an opinion was or
            would have been unfavorable, flowing from the infringer's failure
            to obtain or produce an exculpatory opinion from counsel, is no
            longer warranted. Precedent authorizing such inference is

Id.(citation omitted).

The Federal Circuit then addressed each of the questions put to the parties and the amici curiae.

Question 1: The court unequivocally held that "no adverse inference shall arise from invocation of the attorney-client and/or work product privilege." 2004 WL 2049342, at *4. The court concluded that there should be no special rule affecting attorney-client relationships in patent cases. Id. While observing that adverse inferences could properly be drawn in situations other than attorney-client relationships, the Federal Circuit nevertheless held that "this rule applies to the same extent in patent law as in other areas of law." Id. at 5.
Question 2: The court first explained that this question dealt not with privilege, but with whether a potential infringer had a duty to consult counsel or face an inference that such an opinion would have been unfavorable. The Federal Circuit then held that while "there continues to be 'an affirmative duty of due care to avoid infringement of the known patent rights of others,' the failure to obtain an exculpatory opinion of counsel shall no longer provide an adverse inference or evidentiary presumption that such an opinion would have been unfavorable." Id. (citation omitted).
Question 3: This question concerned the consequences to the Knorr-Bremse parties if the law changed and the inference was withdrawn. The district court, in finding willful infringement, had considered Haldex's invocation of privilege and Dana's post-notice failure to get an independent legal opinion. The Federal Circuit ruled that eliminating the adverse inference was a material change in the totality of the circumstances, and thus vacated and remanded the willful infringement determination.6 Id. at 6.
Question 4: As to whether a substantial defense to infringement, even if no legal advice had been secured, should defeat liability for willful infringement, the Federal Circuit declined to adopt a per se rule. Instead, the court chose to stay with precedent, which deemed such a defense to be a factor, along with others, for consideration "among the totality of the circumstances...." Id. at 7. The Federal Circuit preferred that the trier of fact have the flexibility of this approach. Id.

Judge Dyk's Partial Concurrence and Dissent

Judge Dyk was the only dissenting panel member. While agreeing with elimination of the adverse inference, Judge Dyk did not join the majority opinion to the extent it maintained an affirmative duty to exercise due care to determine whether one is infringing where one has actual notice of another's patent rights. Id. at 8.
Judge Dyk stated that enhanced damages for willfulness are punitive. He argued that recent Supreme Court cases hold that punitive damages can only be awarded where the offending conduct is reprehensible, and that "a potential infringer's mere failure to engage in due care is not itself reprehensible conduct." Id. at 9. Moreover, he elaborated that there was no support for the duty of care requirement in the patent damages statute, legislative history, or recent Supreme Court opinions. Id. Judge Dyk concluded that enhancing damages for failure to comply with a due care requirement cannot be reconciled with the cited Supreme Court precedent.


This landmark decision frees those accused of willful infringement from the Hobson's choice of waiving privilege, even when defending against perfunctory willful infringement allegations, in the face of a virtually dispositive adverse inference. At the same time, it does not burden patentees beyond what existed pre-Federal Circuit.
The Knorr-Bremse decision will most likely rein in the scope of discovery in patent infringement litigations. Accusing patentees have frequently used willful infringement allegations to broaden discovery, hoping to ensnare otherwise privileged litigation-related materials. With the coercive power of the inference gone, patentees will now have to focus their discovery requests on the activities of accused infringers.
Finally, some may read Knorr-Bremse as granting a license to operate without securing opinions of counsel. A word of caution: this case does not diminish the wisdom of consulting patent counsel. Exculpatory opinions have not been removed from the willful infringement analysis; rather, they are now just a single factor-along with evidence of copying, concealing infringement, etc.-that the trier of fact may consider. Still, a competent opinion of counsel may be one of the most valuable tools that an alleged infringer has to defeat a willfulness claim.

1Richard E. Parke is a partner at Frommer Lawrence & Haug LLP. The views expressed herein are the author's alone and do not necessarily reflect the views of Frommer Lawrence & Haug LLP or its clients. Copyright 2004, Richard E. Parke, All Rights Reserved.

2In fact, some members of the patent bar advocated scuttling the inference long ago. For example, one of the partners at Frommer Lawrence & Haug LLP, John R. Lane, was a contributing author of a bar association subcommittee report that presaged, by a decade, the Federal Circuit’s position on the adverse inference rule as now articulated in Knorr-Bremse. See Committee on Patents, The Fromson Rule: Should the Respect for Patent Rights Take Precedence Over the Attorney-Client Privilege?, 49:8 THE RECORD OF THE ASSOCIATION OF THE BAR OF THE CITY OF NEW YORK 969 (1994).

3In Underwater Devices, the infringer had notice of the patents at issue, but "flagrant[ly] disregarded" them without any substantive analysis. The Federal Circuit ruled that a potential infringer who has actual notice of another's patent has "'an affirmative duty to exercise due care to determine whether he is infringing,' including 'the duty to seek and obtain competent legal advice from counsel before the initiation of any possible infringing activity.'" Knorr-Bremse, 2004 WL 2049342, at *3 (citations omitted).

4In Kloster Speedsteel, the infringer never asserted that it sought advice of counsel after notification of the allowed claims of the patent at issue--even up to when the litigation began. The Federal Circuit held that "the infringer's 'silence on the subject, in alleged reliance on the attorney-client privilege, would warrant the conclusion that it either obtained no advice of counsel or did so and was advised'" that it infringed. Knorr-Bremse, 2004 WL 2049342, at *3 (citation omitted). Thus, the adverse inference arose from Kloster Speedsteel.

5The adverse inference was "reinforced" by Fromson, which "establish[ed] the general rule that 'a court must be free to infer that either no opinion was obtained or, if an opinion were obtained, it was contrary to the infringer's desire to initiate or continue its use of the patented invention.'" Knorr-Bremse, 2004 WL 2049342, at *3 (citation omitted).

6The court also mentioned that deciding whether the trier of fact could be told if counsel had been consulted, as part of the "totality of the circumstances" test for willful infringement, was not an issue before the court. Id. at 7.

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