In Willful Infringement Analysis, Exculpatory Opinion Of Counsel Discounted Where Evidence Concealed From Author

The Federal Circuit, in Liquid Dynamics Corporation v. Vaughan Company, Inc. (No. 05-1399; June 1, 2006), affirms a district court's judgment denying defendant Vaughan's JMOL motion for, inter alia , no willful infringement.  In so doing, the Court holds that Vaughan deliberately copied the designs of plaintiff Liquid Dynamics and that a jury may discount an exculpatory opinion of counsel where relevant evidence was concealed from the authoring attorney.

Liquid Dynamics sued Vaughan on U.S. Patent No. 5,458,414 (“the ‘414 patent”) which is directed to slurry tanks. Specifically, the ‘414 patent claims an apparatus for storing slurry (having solid and liquid components) comprising a storage tank having means for generating a substantial helical flow path of the liquid and solid components of the slurry.  After a six-day trial, the jury found that Vaughan infringed the ‘414 patent, the infringement of the ‘414 was willful, and the ‘414 patent is valid.  Subsequently, the court denied Vaughan's motion for judgment-as-a-matter-of-law on the matters of infringement, invalidity, and willfulness. 

In affirming the district court's willfulness decision, the Federal Circuit considered the nine Read factors, including  "whether the infringer deliberately copied the ideas or design of another" and "whether the infringer investigated the scope of the patent and formed a good-faith belief that it was invalid or the it was not infringed."   The Court notes that “good faith may normally be shown by obtaining the advice of legal counsel as to infringement or patent validity.”  In analyzing Vaughan's claim that their infringement was not willful, the Court specifically addresses whether the Vaughan deliberately copied the ideas or design of  Liquid Dynamics and whether Vaughan investigated the scope of the patent and formed a good-faith belief that it was invalid or the it was not infringed.  The Court notes that Vaughan hired a former Liquid Dynamics employee with intimate knowledge of Liquid Dynamics' patented system and infers that this is strong evidence that Vaughan deliberately copied the ideas and designs of Liquid Dynamics. The Court further submits that the evidence shows that Vaughan concealed evidence from their patent counsel regarding fluid flow in their system, and that such concealment may be used by a jury to discount the attorney's opinion.