New Risk-Reward Paradigm for Technology Startups, Part II
The New Standard for Assessing Willfulness and the Advice-of-Counsel Defense
A patentee’s ability to obtain enhanced damages from willful infringement has been eroded in recent years, and the Federal Circuit's opinion in Bard Peripheral Vascular, Inc. v. W.L. Gore & Associates may have tipped the balance even further in favor of the technology startup. To establish willful infringement, a patentee must show by clear and convincing evidence that: 1) the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent; and 2) that the objectively defined risk was either known or so obvious that it should have been known to the accused infringer.
Under this standard, courts have adopted a general rule that the first prong of the willful infringement test is not met where an accused infringer relies on a reasonable defense of counsel to a charge of infringement. In the past, a jury determined, as a question of fact, whether an accused infringer’s reliance on advice of counsel was reasonable.
In Bard, the Federal Circuit held that the threshold objective prong of the willfulness standard is a question of law for the judge to decide and is subject to de novo review on appeal. The result? Judges have greater discretion to keep questions of willfulness out of the hands of a jury by determining as a matter of law that a defendant’s reliance on advice of counsel was reasonable. Arguably, this will limit the number of willfulness questions that are presented to juries and result in fewer findings of willfulness in future cases. For startups that obtain advice of counsel prior to launching new products, the risk of enhanced damages for patent infringement continues to decline.
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