Background
Knorr-Bremse Systeme, a German manufacturer, held a U.S. patent on an air-disk brake system for large commercial trucks. Knorr-Bremse sued Dana Corporation and Haldex Brake Products, alleging that their truck brake products infringed its patent. The district court found infringement and willfulness.
The willfulness finding centered on a practice that had become standard in patent litigation: when Haldex consulted its counsel about the risk of infringement but then invoked the attorney-client privilege and refused to disclose the legal opinion it received, the district court drew an adverse inference. Dana, for its part, had not consulted counsel at all about the patent. Under the then-prevailing Federal Circuit rule, an accused infringer who failed to obtain a favorable opinion of counsel — or who obtained one but refused to produce it by claiming privilege — was presumed to have received an unfavorable opinion, which weighed heavily in favor of a willfulness finding. Willfulness could result in up to treble damages under 35 U.S.C. § 284.
The Federal Circuit took the case en banc to address whether this adverse inference rule was consistent with the attorney-client privilege and sound patent policy.
The Court’s Holding
The en banc Federal Circuit unanimously held that no adverse inference of willful infringement may be drawn from either (1) the failure to obtain a legal opinion of counsel, or (2) the invocation of the attorney-client privilege to protect a legal opinion that was obtained. The court eliminated both bases for adverse inference.
The court’s reasoning rested on the constitutional and policy foundations of the attorney-client privilege. The privilege exists precisely to encourage clients to seek legal advice and to speak candidly with their lawyers. Creating an adverse inference for exercising the privilege effectively penalized defendants for doing so, undermining the privilege’s purpose. A party who invoked the privilege should not suffer an inference that its counsel gave a negative opinion — the privilege protects the advice from disclosure without implying anything about its content.
Similarly, the failure to obtain any opinion of counsel did not necessarily indicate bad faith or recklessness. A party might have many legitimate reasons for not seeking legal advice, and the patent system should not compel defendants to create and produce legal opinions to avoid treble damages. The court held that willfulness must be determined from the totality of the circumstances, not from the presence or absence of a privilege assertion.
Key Takeaways
- No adverse inference arises from an accused infringer’s invocation of the attorney-client privilege over a legal opinion concerning patent validity or infringement.
- No adverse inference arises from an accused infringer’s failure to obtain any legal opinion of counsel.
- Willfulness is determined from the totality of circumstances, including whether the infringer had actual knowledge of the patent and acted in disregard of a known risk of infringement.
- The attorney-client privilege is not a “sword and a shield” dilemma in patent cases — invoking the privilege is a right without adverse consequences.
- This decision reduced the pressure on accused infringers to waive privilege and produce legal opinions as a litigation defense.
Why It Matters
Knorr-Bremse dramatically changed the dynamics of patent litigation. Before this decision, patent defendants faced an agonizing dilemma: obtain a favorable opinion of counsel and then produce it (waiving privilege), or risk an adverse inference for not obtaining or producing one. This so-called “opinion of counsel” practice created perverse incentives — defendants were essentially coerced into waiving privilege, and the patent bar developed a cottage industry of prophylactic opinion letters.
By eliminating the adverse inference, Knorr-Bremse allowed defendants to protect their privileged legal communications without penalty, restored the integrity of the attorney-client relationship in the patent context, and shifted the analysis of willfulness back to the substance of the defendant’s conduct. The decision set the stage for further reform: three years later, in In re Seagate Technology (2007), the Federal Circuit went even further, holding that willfulness requires objective recklessness — a high bar that further limited treble-damages exposure. Together, these cases reshaped the entire willful infringement landscape that had made patent litigation so risky for accused infringers.