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Knorr-Bremse and the Potential Modification of the Adverse-Inference Rule
The near future may bring fundamental changes to patent practice in the United States. On Sept. 26, 2003, the Federal Circuit ordered, sua sponte, the en banc consideration of the Eastern District of Virginia's decision in Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp, 344 F.3d 1336 (Fed. Cir. 2003). In its order, the court sought answers to questions that analyze its current precedent that authorizes the trier of fact to impose an adverse inference of willful patent infringement where accused infringers invoke the attorney-client privilege. On Feb. 5, 2004, the Federal Circuit heard arguments in the appeal. A decision is pending.
Since its adoption, the adverse-inference rule has raised concerns regarding an accused patent infringer's duty of care and the confidentiality and candor of the advice of counsel. Elimination or modification of the adverse-inference rule would significantly affect current opinion practices and litigation strategies given the potential for enhanced damage and attorneys' fee awards if willful infringement is found.
Patentees commonly allege willfulness in patent infringement actions. Proof of willful infringement requires a showing, by clear and convincing evidence, that the accused infringer had knowledge of the subject patent and failed to exercise due care to avoid infringement. A determination of willfulness depends on consideration of the “totality of the circumstances.” Graco, Inc. v. Binks Mfg. Co., 60 F.3d 785, 792 (Fed. Cir. 1995). The Federal Circuit has provided factors (referred to as the “Read factors”) for courts to weigh when considering whether infringing conduct is willful ' including the deliberate copying of ideas, the closeness of infringement and validity issues, and the reasonable reliance on the advice of counsel. Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992).
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