Patent Clearance Opinion

Freedom-to-operate (FTO) Opinion

• Broader
• Typically preceded by an FTO search to identify all relevant patents
• The opinion then analyzes those patents for infringement risk

Non-infringement Opinion

• Narrower
• Analyzes specific identified patents and concludes whether the subject product/process infringes them

Invalidity Opinion

• Analyzes whether identified patents are likely invalid based on prior art
• Often paired with non-infringement analysis ('even if we infringe, the patent is invalid')
• Combined non-infringement + invalidity provides the strongest protection

Before Product Launch

• Most critical timing
• Identify and address infringement risks before committing to manufacturing and marketing

Upon Receiving a Demand Letter

• Immediately upon notice of a potentially infringed patent
• The opinion establishes good-faith belief in non-infringement or invalidity

Minimum Contents of a Valid Clearance Opinion

• Identification of the specific product or process analyzed
• Identification of specific patent(s) and claims analyzed
• Claim construction analysis
• Element-by-element comparison of the claims to the product/process
• Prosecution history review
• Validity analysis
• Clear conclusion on non-infringement and/or invalidity.

Willful Infringement Risk

• If a company is found to have willfully infringed a patent, the court can treble (3x) the compensatory damages under 35 U.S.C. § 284
• HALO ELECTRONICS STANDARD (S.Ct. 2016): willfulness requires conduct that is 'wanton, malicious, bad-faith, deliberate, consciously wrongful, or flagrant'
• Focuses on the infringer's subjective state of mind at the time of infringement

How Opinion of Counsel Helps

• A written opinion from qualified patent counsel showing the company: reviewed the patent
• Had the claims analyzed against its product
• Received advice that the product does not infringe (or that the patent is invalid)
• Demonstrates that the company did NOT act recklessly or with knowledge of a high risk of infringement
• This negates the subjective willfulness required for enhanced damages

Timing is Critical

• The opinion must be obtained BEFORE or DURING the period of alleged infringement
• An opinion obtained after the lawsuit is filed is too late for the period before filing

Knorr-bremse Rule

• Knorr-Bremse Systeme v. Dana Corp. (Fed. Cir. 2004): adverse inference from FAILING to obtain an opinion of counsel is NOT permitted
• Jurors cannot be instructed that failure to get an opinion is evidence of willfulness
• Companies are NOT required to get an opinion

Strategic Decision

• Whether to get an opinion involves a waiver risk analysis (see below)
• Companies sometimes choose NOT to get a written opinion to preserve privilege, instead relying on internal analysis
• This is a valid strategy if the infringement risk is low or the invalidity analysis is strong.

Attorney-client Privilege

• Communications between the client and counsel seeking legal advice are privileged
• A patent clearance opinion is a privileged attorney-client communication
• The client controls the privilege and can choose to disclose or keep confidential

Introducing the Opinion as a Defense

• If a company introduces its clearance opinion as a defense to willfulness, it WAIVES attorney-client privilege with respect to: the specific opinion and related communications
• Potentially the entire subject matter of the patent and product at issue

Scope of Waiver

• Courts have debated how broadly the waiver extends
• In most circuits: the waiver covers all communications between the client and counsel about the same subject matter (the specific patent and product)
• This means opposing counsel can demand production of: all communications about the opinion
• All related research and analysis
• Prior communications about the patent, product, and any infringement risk
• It does NOT automatically extend to communications with different counsel about different patents or products

Work Product Protection Survives

• Attorney work product (attorney's mental impressions; strategy; notes not shared with client) is NOT waived by introduction of the opinion
• Only the communication between attorney and client is waived
• IN-HOUSE vs.

Outside Counsel

• Outside patent counsel opinions are stronger: independent (not subject to employment bias)
• Presumed more objective
• Courts give them more weight
• In-house counsel opinions are admissible but carry less weight because of perceived conflicts

Reliance Letter

• Some clients get a reliance letter — a short letter from counsel confirming the company has received and considered the opinion — without sharing the full analysis
• This is a middle ground between full waiver and no opinion
• Courts are split on whether a reliance letter creates the same waiver as the full opinion.

Competence Requirement

• The opinion must come from counsel with actual patent expertise (registered patent attorney or agent; technical background in the relevant field)
• A general corporate attorney's opinion on patent non-infringement provides little protection

(1) Scope Statement

• What product or process is being analyzed
• What jurisdiction
• What time period
• What patents are in scope

(2) Product/process Description

• Detailed technical description of the accused product or process
• Includes drawings
• Schematics
• Specifications
• The description must match what the company actually does (not a hypothetical version)

(3) Patent Identification and Status

• USPTO registration number
• Owner
• Assignee
• Expiration date
• Maintenance fee status
• Family members

(4) Claim Construction

• Independent claims of the asserted patent must be construed
• Each claim element must be defined
• Apply the broadest reasonable interpretation (BRI) standard for prosecution
• Apply the Philips (intrinsic evidence first) standard for litigation

(5) Element-by-element Analysis

• Compare each claim element to the product/process
• Explicitly state how each element is absent from the product/process (for non-infringement conclusion)

(6) Prosecution History Review

• Review file wrapper for disclaimers
• Claim narrowing
• Arguments
• This affects the scope of the claims

(7) Doctrine of Equivalents Analysis

• Address whether any changed elements might be equivalent
• (8) VALIDITY ANALYSIS (recommended): prior art search
• Obviousness analysis
• § 101/§ 112 issues
• If the patent is likely invalid, this reduces infringement risk

(10) Caveats and Limitations

• What is NOT covered
• Reliance on facts provided by client
• Limitations on jurisdiction
• Limitations on claim scope assumed.

Response to Demand Letter

• Immediately
• Don't delay

Entering a New Technology Area

• Acquisition
• Licensing
• Or development of a new technology area

Building the Program

• Maintain a patent watch list of competitor patents
• Conduct FTO search before any major product launch
• Commission formal opinions for high-risk patents
• Maintain records of opinions and their conclusions
• Update opinions when products change significantly or new continuation patents issue

Document Retention

• Clearance opinions should be retained as long as the potential infringement period and any subsequent statute of limitations
• In litigation, you will want to produce the opinion as a defense — it must be preserved

Internal Communication

• Be careful about internal emails characterizing patent risk
• Infringement risk assessments in internal emails may not be privileged if they were not prepared at the direction of counsel for legal advice
• Route patent risk discussions through counsel

Proactive Vs. Reactive

• Proactive (FTO search + opinion before launch) is far less expensive than reactive (respond to lawsuit)
• Typical reactive patent litigation cost: $2-10M+
• Typical proactive FTO opinion cost: $10,000-$50,000 per patent
• The ROI of preventive opinions is extremely high for significant product launches.