Seagate's Sea Change

The law doesn't evolve quickly. In the last several years, however, the courts have repeatedly reshaped intellectual property law. In particular, the law governing patents has undergone substantial revision. This month's column addresses the most recent noteworthy patent decision and the impact it may have on your business going forward.

Previously, patent law imposed a “duty” on anyone who was placed on notice that they might be infringing someone's patent. Once on notice, the duty required a potential infringer to use “due care” to investigate whether it infringed a patent. This usually meant talking with a patent lawyer and obtaining his or her opinion about infringement.

Why were opinions so important? Because if you failed to fulfill your duty of due care, and there was a lawsuit, you were much more likely to be found to be a “willful” infringer and willful infringers can be assessed damages up to three times as severe.

The rules have changed, though. In a 2007 decision known as the “Seagate” case, the Federal Circuit appellate court decided there should no longer be a duty of due care on accused patent infringers. Instead, the court focused the willfulness analysis on whether the accused infringer acted despite an unjustifiably high risk. This requires considering if the infringer acted even though there was an “objectively high likelihood” that it infringed a valid patent. Also to be considered is whether the infringer knew or should have known of the risk. It was a dramatic change in the law from both a business perspective and a litigation perspective.

Here's how Seagate has played out so far. On the business side not much seems to have changed; companies are still obtaining patent opinions. Opinions are still helpful in eventual litigation, but at heart these opinions are meant to help decision-makers with tough calls. Do we make the new game and risk infringement, or do we redesign it?

On the litigation side, things have changed dramatically. As I'm writing this column, I'm aware of 14 cases following Seagate that address willful infringement claims. Only 1 of the 14 cases resulted in a finding of willful infringement. Notably, none of the 14 cases resulted in increased damages against an accused infringer.

So, whether navigating through difficult business decisions or preparing to battle in litigation, make sure to keep Seagate and its implications to your business on the radar.