Knorr-Bremse Systeme Fuer Nutzfahrzeuge Gmbh, v. Dana Corporation et al.
Decided September 13, 2004   pdf copy
Judge Newman with Judges Mayer, Lourie, Clevenger, Rader,
Schall, Bryson, Gajarsa, Linn, Dyk and Prost

*           "[N]o adverse inference shall arise from invocation of the attorney-client and/or work product privilege….or from failure to consult counsel."

Knorr sued Dana at the U.S. District Court for the Eastern District of Virginia for allegedly infringing patent claims to air brakes. Judge T.S. Ellis III found literal infringement. The court also awarded Knorr attorney's fees, partly because Haldex admitted that it had consulted counsel about Knorr's patents, but refused to produce any opinion from counsel during litigation. Citing Federal Circuit law, the court concluded "that such opinions were unfavorable" and found the non-disclosure to be evidence of willfulness. Both sides appealed various issues to the Federal Circuit.

The Federal Circuit overturned the cited law by holding that an accused infringer is not adversely affected when it refuses to reveal an opinion of counsel about an alleged infringement. The court explained that conditions which prompted the rule have changed. Before establishment of the Federal Circuit more than 20 years ago parties often had "flagrant disregard of presumptively valid patents." An accused infringer therefore had an "affirmative duty to exercise due care to determine whether or not he is infringing, including the duty to seek and obtain competent legal advice from counsel……" However, this "disrespect for law" has "significantly diminished" in later years.

A partial dissent from Judge Dyk pointed out that the majority opinion appears to reaffirm that an accused infringer "has an affirmative duty to exercise due care to determine whether or not he is infringing" and that this position is inconsistent with recent Supreme Court cases. In this context, the majority opinion also held that a substantial defense to infringement (such as an invalidity argument) by itself does not defeat liability for willful infringement. Thus, obtaining an opinion from counsel may still play a role in patent infringement actions as part of a "totality of the circumstances" test to determine whether an infringer had a good faith belief that it was not infringing a patent that would be found invalid or unenforceable during litigation.