IP Due Diligence and Willful Patent Infringement: Part 2

In one of my early posts in this blog, I wrote about due diligence practices for a situation where a buyer wants to investigate the effect of a potentially-concerning patent on a seller’s business.  In the post, I noted that sellers sometimes cite a practice of not reviewing any patents in order to avoid risking liability for willful patent infringement.  However, my view is that it’s usually preferable to know about a patent — and design around it or take a license — early in the stage of a product or company, rather than risk liability for infringement after the a new product achieves market success.

I wrote my first post before last year’s Federal Circuit opinion in In re Seagate Technology, LLC , where the court stated that mere knowledge of a patent is not sufficient to find liability for willful patent infringement, but instead a showing of “objective recklesness” is required.  To establish willful patent infringement under Seagate, the patent holder must show that the infringer acted “despite an objectively high likelihood” that its actions constituted patent infringement.

In the due diligence context, a buyer will want to know whether there is an objectively high likelihood that the seller is infringing a patent.  Sellers should be prepared to address significant issues of concern to buyers, and a seller’s response of “I don’t want to see the patent” may be harder to defend after Seagate.

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