I can’t believe it. Maybe I’m wrong (I’ll re-read the case Tuesday). But it sure seems the Court of Appeals has finally let common sense influence one of its decisions. The Court today overruled its prior holding that adverse inferences can be drawn when someone accused of patent infringement invokes his fundamental right NOT to disclose his lawyer’s advice. This is as it should be and the Court now has it right.

A little background: Infringing a patent is bad, very bad. KNOWINGLY infringing a patent is even worse. It’s one thing if you infringe by mistake. It’s totally another if you infringe on purpose. If you do so, the court can stick you with “enhanced damages” of up to THREE TIMES the amount of the actual damages. This is an important safeguard for the rights of patent holders as it gives potential infringers a very good reason to take a license or otherwise respect patent rights rather than take their chances in court. So far, no argument from me – willful infringers should get clobbered with hefty fines when they knowingly infringe.

The problem comes with how this actually plays out in court. The Federal Circuit has previously held that you couldn’t be liable for willful infringement if you rely on the advice of competent counsel. Thus, an opinion of counsel that your actions do not infringe, serves as a defense to willful infringement, even if that advice proves to be wrong. Again, no problem with me on that.

The problem comes when a patent owner says to an accused infringer, “tell us whether you’ve received an opinion of non-infringement and, if so, let’s see it.” “No way,” says the accused infringer, “That’s privileged” – as indeed it is.

Even though the attorney client privilege clearly applies, under prior law, courts and juries were permitted to draw the inference that any opinion withheld on the basis of privilege must have been adverse. In other words, even though an accused infringer had the right not to turn over his lawyer’s opinions, actually exercising that right resulted in the jury figuring those opinions must have been bad news. This is sort of like allowing a jury to conclude that any criminal suspect who refuses to talk to the police must be guilty. What’s the point of having the right if actually exercising it lands you in the slammer (figuratively speaking)?

The Federal Circuit’s September 13, 2004 en banc decision revisiting this question concludes that its prior decision was wrong – accused infringers should not be found liable for willful infringement merely because they exercise their right to keep their lawyer’s advice confidential. Although this might make it harder for patent owners to recover enhanced damages in certain cases, this is how it should be. The Court is right and its prior decisions were wrong.

Willful infringement exists and when it does, the willful infringer should pay. However, important basic legal rights and safeguards take precedence. Even patent infringers have rights and should not be penalized for asserting them. While some may view this as a blow to the patent plaintiff’s bar, I applaud the decision. Standing up for the rights of patent owners is one thing. Taking advantage of misguided opinions and mistakes of prior courts is quite another.