D. Delaware Holds Advice of Counsel in Copyright Infringement Case is Not a True or Mandatory Affirmative Defense Under Rule 8(c)

Per LG Philips LCD Co., Inc. v. Tatung Co., --- F.R.D. ----, 2007 WL 2027334 (D.Del., July 13, 2007) (NO. CIV.A. 04-343-JJF):

The primary question presented by Defendants' Objections is whether advice of counsel needs to be pled in an answer as an affirmative defense under Federal Rule of Civil Procedure 8(c). The Special Master recognized that courts have referred to the advice of counsel defense as an affirmative defense and concluded that he could not ignore such characterizations despite Defendants' arguments to the contrary. (D.I. 658 at 10). The Court, however, does not feel similarly constrained, particularly in light of the fact that those courts who have used the affirmative defense characterization have not engaged in an analysis under Federal Rule of Civil Procedure 8(c) for determination of what constitutes an affirmative defense. See e.g., Glenmede Trust Co. v. Thompson, 56 F.3d 476, 486 (3d Cir.1995) (non-patent case); Johns Hopkins University v. Cellpro, 160 F.R.D. 30, 34 (D.Del.1995) (McKelvie, J .) (referring to the "current convention in patent litigation strategy" as including, among others, the following steps: "the patent owner opens with a claim for willful infringement; [and] the alleged infringer answers by denying willful infringement and asserts good faith reliance on advice of counsel as an affirmative defense ...")

Rule 8(c) enumerates specific affirmative defenses that must be raised in the pleadings and includes a "catchall provision" which provides for "any other matter constituting an avoidance or affirmative defense." Fed.R.Civ.P. 8(c). When controlling precedent concerning the nature of a particular defense is lacking, there are two approaches which may be taken to determine whether a defense must be pleaded affirmatively: (1) "whether a particular issue arises by logical inference from the well-pleaded allegations in the complaint relating to a necessary or intrinsic element of the plaintiff's claim," or (2) whether considerations of policy, fairness, and in some cases probability weigh in favor of requiring the matter to be pled affirmatively. 5 Charles A, Wright & Arthur R. Miller, Federal Practice and Procedure 3d. § 1271. The utility of the first approach has been questioned because "determining what matters are part of the plaintiff's case is the very thing to be ascertained by deciding whether a certain issue is or is not an affirmative defense." Id. In the Court's view, the more helpful inquiry examines the policy and fairness considerations implicated by the defense, considerations which are particularly acute in the context of the advice of counsel defense.

Most significantly, the decision to assert the advice of counsel defense in response to a claim of willful infringement results in a waiver of the attorney-client privilege as to all communications regarding the same subject matter. See In re EchoStar Communications Corp., 448 F.3d 1294, 1299 (Fed.Cir.2006). The Federal Circuit has recognized the magnitude of this decision and the resultant dilemmas faced by accused infringers making this decision:

Proper resolution of the dilemma of an accused infringer who must choose between the lawful assertion of the attorney-client privilege and avoidance of a willfulness finding if infringement is found, is of great importance not only to the parties but to the fundamental values sought to be preserved by the attorney-client privilege. An accused infringer, therefore, should not, without the trial court's careful consideration, be forced to choose between waiving the privilege in order to protect itself from a willfulness finding, in which case it may risk prejudicing itself on the question of liability, and maintaining the privilege, in which case it may risk being found to be a willful infringer if liability is found.

Quantum Corp. v. Tandon Corp., 940 f.2D 642, 643-644 (Fed.Cir.1991). While it is true that the Federal Circuit has lessened the burden on accused infringers by abolishing all adverse inferences formerly drawn against them from the failure to obtain the advice of counsel or the decision to withhold the advice of counsel under the attorney-client privilege, the threshold decision of whether to advance the advice of counsel defense remains momentous because "once a party announces that it will rely on advice of counsel ... the attorney-client privilege is waived." Echostar, 448 F.3d at 1299. Thus, the question of timing-of when to assert the advice of counsel defense and bear the burden of the attendant waiver of the attorney-client privilege that follows-becomes crucial to an accused infringer. This concern must, of course, be counterbalanced by the concern of fairness to the party asserting a claim for willful infringement because, as the Special Master recognized, that party becomes entitled to timely discovery concerning the advice of counsel.

In determining the manner in which to balance these concerns, the Court is foremost guided by the substantive law concerning willful infringement. Whether an accused infringer acted willfully is a question of fact determined in light of the totality of the circumstances concerning the alleged infringer's state of mind. In re MediaTek, Inc., 2007 WL 1046900 (Fed.Cir.2007). Reliance on the competent advice of counsel as a means of showing a party's good faith is but one factor relevant to this determination, and the Federal Circuit has not deemed the advice of counsel to be dispositive of a plaintiff's claim of willfulness. Machinery Corp. of America v. Gullfiber AB, 774 F.2d 467, 472 (Fed.Cir.1985) ("There is no per se rule that an opinion letter from patent counsel will necessarily preclude a finding of willful infringement ..., nor is there a per se rule that the lack of such a letter necessarily requires a finding of willfulness."). In contrast, a genuine affirmative defense has been defined as "[a] defendant's assertion raising new facts and arguments that, if true, will defeat the plaintiff's or prosecution's claim, even if all allegations in the complaint are true." Saks v. Franklin Covey Co., 316 F.3d 337, 350 (2d Cir., 2003) (citing Black's Law Dictionary 430 (7th ed.1999)); Reis Robotics USA, Inc. v. Concept Industries, Inc., 462 F.Supp.2d 897, 906 (N.D.Ill.2006). A defense which "merely negates some element of plaintiff's prima facie case is not truly an affirmative defense and need not be pleaded." Sanden v. Mayo Clinic, 495 F.2d 221, 224 (8th Cir.1974). The defense of advice of counsel does not entail admitting the allegations of the plaintiff's complaint and does not alone overcome a plaintiff's claim of willful infringement. Rather, the advice of counsel is only one of several factors to be considered in mitigation of a claim of willfulness. Accordingly, the Court concludes that advice of counsel is only an "affirmative defense" in the sense that it must be introduced into the litigation by the accused infringer in mitigation of a claim of willfulness; it is not a "true" or "mandatory" affirmative defense under Rule 8(c) that must be pled in the answer.

In the Court's view, this conclusion best harmonizes the policy considerations invoked by advice of counsel, including allowing the accused infringer, who is the holder of the attorney-client privilege, some choice in determining when to waive that privilege. That being said, however, the Court also notes that an accused infringer does not have an unfettered right to determine when to raise the advice of counsel defense, and there is a point in litigation when it becomes too late to raise the defense. In deciding when the defense must be offered considerations of fairness, notice and/or surprise to the plaintiff claiming willful infringement may begin to weigh more heavily than the attorney-client privilege policy considerations which typically favor the accused infringer. In any event, these intricate timing questions are best left to a case by case determination.