Businesses seek opinions of counsel in the Intellectual Property area for various reasons, such as trademark clearance or for guidance on patent threats. However, businesses and their in-house counsel should be careful not just to obtain the opinion, but also to ensure that the appropriate business decision-maker reviews, understands and relies on the opinion when making the relevant business decision to start or continue with the activity in question. Too often an opinion is provided but not clearly relied upon by the business decision-maker, allowing challenges to the relevance of the opinion should it later be relied upon in litigation to defend against, for instance, a charge of willful infringement. Furthermore, counsel must be careful to appropriately protect privileges when sharing the opinion with the business decision-maker.

Taking patent infringement as an example, the U.S. Supreme Court's 2016 decision in Halo Electronics v. Pulse Electronics placed renewed emphasis on the use of opinions of counsel in patent cases. In short, Halo overruled the then-governing standard for finding willful infringement, a standard that included both objective and subjective requirements. Under the objective requirement, accused infringers could defeat willful infringement allegations by presenting good faith defenses at trial, even if they did not know of or rely upon those defenses at the time of the alleged infringement. Halo abolished the objective requirement, instead placing the focus on the accused infringer's subjective state of mind at the time of the alleged infringement. And one way an accused infringer can establish a subjective belief that it does not infringe a patent is by obtaining a competent opinion of counsel and relying on it.

The reliance aspect of an opinion of counsel defense is often overlooked or not fully considered. A company typically obtains an opinion of counsel in the patent infringement context to defend against a charge of willful infringement. But how can a company subjectively believe whatever is stated in the opinion of counsel if the person or people at the company responsible for making the decision to sell the accused product have never seen the opinion? Remember that patent cases are typically tried to a jury. How will it look to a jury if it comes out at trial that the opinion of counsel was obtained and filed away by an in-house lawyer without even being shown to the people in charge of selling the accused product? A juror may well come to the conclusion that the company did not really care about that opinion. Opposing counsel will certainly make that argument.

Once an in-house counsel has obtained an opinion of counsel, a question counsel should ask is how the company will present that opinion to a jury if later sued. Who would be the witness and what is the story they will tell? Being able to present to the jury the head of the division that sells the accused product, to tell the jury that she personally read the opinion of counsel from front to back, understood it and agreed with it, and on that basis decided to authorize the continued sales of the accused products, would be a powerful presentation. If that same head of the division is deposed and admits that she never saw the opinion of counsel before authorizing sales of the accused products, the narrative the jury hears will be less powerful. The difference between those presentations lies, at least in part, in appropriate planning at the time the opinion is obtained.

Another question in-house counsel should consider is how to present that opinion of counsel to the business decision-maker. If the company eventually relies on the opinion of counsel in litigation, privilege will be waived. The scope of that waiver can vary with the circumstances. Certainly the opinion itself will have to be produced, as will any drafts of it and communications regarding it with the counsel who provided the opinion. A December 2016 order from the Eastern District of North Carolina in Krausz Industries Ltd. v. Smith-Blair Inc. et al. (Case No. 5:12-cv-00570) illustrates how the scope of the waiver can become much broader than that.

In Krausz, the alleged infringer, Smith-Blair, retained opinion counsel who provided several opinions of non-infringement before suit. Smith-Blair relied on those opinions. Once the patent owner Krausz sued, Smith-Blair obtained different counsel as trial counsel. However, Smith-Blair continued to seek opinion counsel's advice after suit, and allowed opinion counsel to provide legal advice to trial counsel. On these facts, the court found the waiver extended to post-suit communications between Smith-Blair and its opinion counsel, and between opinion counsel and trial counsel, and between Smith-Blair and trial counsel to the extent the communications “embody or discuss conversations that either had with” opinion counsel. Of note, the court also found that the waiver extended to communications between Smith-Blair and its in-house counsel regarding the subject matter of the opinions of counsel (i.e., infringement of the patent at issue).

Krausz teaches that the better practice may be to insulate opinion counsel from trial counsel entirely. It further demonstrates that in-house counsel should keep in mind that any discussion they have with a business decision-maker about an opinion of counsel (or the subject matter thereof) may well be discoverable. This suggests that the opinion of counsel should preferably be self-contained and understandable to the business decision-maker without the need for follow-up questions. And both the decision-maker and in-house counsel should be aware of the potential discoverability of their communications on the same subject matter (e.g., infringement of the patent at issue) even if not specifically referencing the opinion of counsel. Companies with sufficiently large in-house counsel departments should consider having one in-house counsel work with opinion counsel and another in-house counsel work with trial counsel, should a lawsuit eventually be filed.

Mike Hatcher is an IP Litigation partner at Sidley Austin LLP based in Dallas. He can be reached at [email protected].