NBJ Online | Article of the Month
Beware of Spyware
Spyware Primer for Family Lawyers
By Lisa Binder and Jim KempVanEe
The use of technology to obtain evidence in divorce cases is a hot topic of growing interest to all family law practitioners across the nation. More and more common is the client who asks his or her attorney the question:
Can I spy on my spouse?
All attorneys are aware of their ethical obligation to zealously advocate for their clients and to pursue and utilize all evidence that will be helpful to their client. However, they can run seriously afoul of federal and state laws when it comes to the use of spyware or the use of evidence procured through spyware.
What Is Spyware and Is It Legal?
Spyware is any device or program that records and/or replays something typed on a computer, whether that be emails, documents, contacts, web addresses, or other. Attorneys have an ethical obligation to their clients to caution them against the illegal use of spyware and to refrain from assisting in the procurement, encouraging the procurement, or in the utilization of evidence obtained in violation of state and federal laws outlined in this article. When asked about using spyware, the best rule is simply to tell your client not to do it because the answer is complex and the rules are murky. Often involved is a slippery slope of differing definitions of “consent”.
When confronted with the client who has already retrieved information through the use of spyware, the attorney should ask his client the following questions: Did you have authorized use of the computer you used to “spy”? Is it a family computer? Do you have the password of your spouse?
If the client had consent to use the computer and access the information thereon, then the interception may not be unauthorized, and if not, there is no violation of law. Implied consent may be found when circumstances lead to that conclusion, such as when one spouse provides the other with emails and account passwords, and they use the same home computer—but be careful trying to draw this conclusion. The problem is that courts decide consent on a case-by-case basis, and since there is no uniform definition of consent, this is dangerous territory. If an attorney tells a client that he or she can use the spyware, or the evidence obtained through the use of spyware, and a court ultimately rules that there was no consent, the attorney has subjected his client—as well as himself—to possible civil and criminal consequences.
Applicable Federal Law
The Electronic Communications Privacy Act of 1986 (ECPA), 18 U.S.C. §§ 2510-22, consists of the Electronic Communications Privacy Act and the Stored Wire Electronic Communications Act. The ECPA has been amended periodically to reflect advances in technology. In short, the ECPA protects wire, oral, and electronic communications while those communications are being made, are in transit, and when they are stored on computers. The Act applies to email, telephone conversations, and data stored on computers. The ECPA is violated when a person intentionally:
- Intercepts, uses, or discloses any wire or oral communication by using any electronic, mechanical, or other device.
- Without authority, accesses a wire or electronic communication while in storage. There are financial and criminal consequences to any person who violates the ECPA, including attorneys.
The bottom line is that a family law attorney can neither obtain, nor encourage the procurement, or use the evidence obtained in violation of this Act.
The Wiretap Act prohibits the intentional, actual, or attempted interception, use, disclosure, or procurement of any other person to intercept or endeavor to intercept any wire, oral, or electronic communication. Title 1 prohibits the use of illegally obtained communications as evidence. Title II is the Stored Communications Act and protects the privacy of the contents of files stored by service providers and of records held by service providers, such as a subscriber name, billing records, or IP addresses. Title III requires the government to obtain a court order authorizing the installation and use of a pen register (a device that captures dialed numbers and related information to outgoing calls) and/or a trap and trace (a device that captures the numbers and related information from which incoming calls coming to the subject have originated).
Applicable Tennessee Law
The Tennessee counterpart to the federal act prohibiting wiretapping and electronic surveillance is spread across several chapters of Tennessee Code Annotated Title 39.
First, Part 6 of Chapter 13 addresses invasion of privacy concerns. T.C.A. § 39-13-601 specifically prohibits intentional interception, or attempts to intercept, and/or helping another person to use any device to intercept electronic communications. An attorney cannot advise a client to do this or assist a client to do this, nor can an attorney receive or use in any way the evidence procured by this illegal activity. T.C.A. § 39-13-603 provides for civil actions and injunctive relief when such interception occurs.
Section 39-13-604 governs the interception of cellular or cordless telephone transmissions. It defines communications to include those transmitted by voice, data or image, including facsimile. Interception can be either a Class A or Class E felony if the defendant knowingly publishes, distributes, or disseminates it.
Section 39-13-607 makes it a criminal offense to spy upon an individual without consent if the viewing would offend or embarrass an ordinary person.
Section 39-13-609 contains the Freedom from Unwarranted Surveillance Act, which prohibits the use of drones to conduct surveillance—except if terrorism or homeland security is at stake. It is directed at law enforcement agencies and makes clear that such would constitute a search.
Editor’s Note: Tennessee’s Wiretapping and Electronic Surveillance Act of 1994, codified at T.C.A. § 40-6-301 et seq., governs use of wiretapping in general by law enforcement and is structured similarly to the federal wiretapping statute known as the Omnibus Crime Control and Safe Streets Act of 1968, codified at 18 U.S.C. §§ 2510-2520.
Part 6 of Chapter 14 governs computer crimes and comprises the Tennessee Personal and Commercial Computer Act of 2003 (codified at T.C.A. §§ 39-14-601 through 606). This Act prohibits accessing telephone systems, telecommunications facility, computer software, computer program, computer data, computer system, computer network, or any part thereof for the purpose of obtaining money, property or services by false representations or causing computer output to be false to obtain money, property or services, or to effect or alter a financial instrument or electronic transfer of funds to disrupt, alter, misappropriate or commit fraud. Pay particular attention to section 39-14-602(c), which prohibits anyone from receiving, concealing, using, or aiding another in this. An attorney cannot advise a client to do this, or assist a client to do this, or receive or use in any way the evidence procured by this illegal activity.
GPS tracking of vehicles is addressed in Part 6 of Chapter 16. That is, T.C.A. § 39-16-606 makes it a criminal offense to electronically track motor vehicles without the consent of the lessee of the vehicle.
In addition, Tennessee’s stalking laws might be applicable to the use of spyware. See T.C.A. § 39-17-315.
Types of Spyware Readily Available
Monitoring of digital communications can be accomplished several ways, including using hardware devices, installed software, and remotely stored data. Corporate networks, home systems, and mobile devices each have their own vulnerabilities. The environment being monitored will be a factor in determining which method(s) may be used.
Spyware is available to compromise nearly every digital device, including desktops, laptops, mobile phones, and tablets. Monitoring of mobile devices is on the rise as the use of these devices has far surpassed traditional desktop and laptop computers. Exploits range from poorly managed pre-existing programs and services to commercially available services marketed as a means of monitoring employees or children. The more complex, homebrewed attacks are seen rarely in family law matters as they are typically targeted as corporate and governmental espionage.
Family law practitioners are most likely to encounter compromised home systems, mobile devices, and cloud accounts. Although the home computer and mobile devices are certainly susceptible to rogue programs and hardware, most domestic monitoring is accomplished through software and services that were in place long before the relationship between the parties failed.
The most common, non-spyware related exploits used in domestic cases involve either:
- Accessing iCloud and Google accounts with known passwords or through pre-existing settings.
- Accessing web-based accounts with usernames and passwords stored within internet browsers.
These exploits are usually brought to the family law attorney’s attention through concerns from their clients who complain the opposing party knows where they have been, knows who they have been communicating with, and knows specific content from the client’s private communications.
Family law attorneys should understand that deployment of spyware on Apple devices currently requires physical access to the device and requires the device’s operating system be altered, commonly referred to as “jail-breaking”. In some cases, Android spyware also requires the deploying party have physical access to the device and requires the operating system be altered, which is called “rooting”; however, spyware does exist for Android devices that do not require rooting and can be deployed with very little physical interaction with the device.
Mobile device services commonly exploited:
Popular mobile device exploitation software & services:
Exploitation of desktop and laptop computers is less common than mobile devices, but is still possible nonetheless. Monitoring of these devices can include capturing images of the user’s screen, monitoring chat and email communications, remote access of the computer’s webcam, and capturing keystrokes. The capturing of keystrokes can be accomplished by use of software or hardware key loggers. Software key loggers are installed directly into the computer’s operating system where hardware key loggers are normally attached directly between the computer and keyboard. Remote key loggers have been successfully used to capture the keystrokes from wireless Microsoft keyboards and are much more difficult to detect.
Common computer monitoring software:
- Veriato (formerly SpectorSoft)
- Wireless keyboard sniffer
- USB keyboard keylogger
In the event spyware or monitoring software is suspected to be in use, a digital forensic expert should be retained to ensure proper documentation of the event and remediation efforts are maintained for later presentation to the court.
Case Law to Consider
Larocca v. Larocca, 86 F.Supp.3d 540 (E.D. LA 2015)
Wife brought an action against Husband for violation of the Electronic Communications Privacy Act alleging Husband had illegally used spyware (Eblaster) to intercept emails during divorce proceedings. Husband filed for summary judgment on the basis that there was nothing “retrieved.” Acquisition but no retrieval is not an interception under the Wiretap Act. The motion was denied, however, because the product description indicated the defendant could receive by the use of the product a forwarding of each email incoming and outgoing.
Warwick v. Warwick, No. E2011–01969–COA–R3–CV, 2012 WL 5960850 (Tenn. Ct. App. Nov. 29, 2012)
Husband and Wife engaged in various lawsuits against each other, both during and after divorce proceedings. Wife sued Husband for fraud and for using spyware on Wife’s computer (used to discover her affair). The suit was brought to attack Husband’s separate estate. In this “Spyware suit,” Wife claimed that Husband withheld information about his property and the value thereof during divorce proceedings. Husband sued Wife and her attorney for conspiracy to defraud the court, abuse of process, and intentional infliction of emotional distress. He claimed use of spyware by Wife and her attorney was a part of this fraud on the court. The court stated “that the [ ] causes of action are barred by the statute of limitations or that the complaint failed to state a claim, or both.” Husband appealed. On appeal, Husband argued that the separate filing of a spyware suit was a triggering event that allowed Husband to discover his claim for abuse of process. The appellate court determined that his claim was time barred. The court said all facts alleged in the spyware case were known to Husband prior to the filing of the spyware case, so the statute began to run long before the date of filing. Wife’s fraud and spyware suit was eventually non-suited. The court noted the Marital Dissolution Agreement said there was no fraud or coercion.
Legal Avenues of Retrieving Same Information
Should an attorney conclude there is information contained on a computer that may be critical to his client’s case, it is probably best for him to seek a court order to legally make a copy of the contents, although this can get pricey. Many attorneys across the nation are already using this technique regarding telephones and are procuring the phones to retrieve call logs and text messages and so forth. A motion can be filed for the preservation, storage, and forensic examination of cell phones and/or computer hard drives. Sometimes an agreement can be reached regarding the same. Sometimes the filing of such a motion can tip the scales towards an early resolution of the matter. When it comes to computer storage, this puts the decision about retrieval in the hands of your divorce judge on the front end of the case without risk of how a judge might rule on the question at the end of litigation.
By Todd Jefferson Hartley
As the traditional law firm model changes, more attorneys are going in-house early in their careers, many of which are “millennials”―born between 1980 and the mid-1990s—today around age 25 to 35. Millennials, according to the U.S. Census Bureau, marry later, are more racially and ethnically diverse, and have spent more years in school than prior generations. They are also optimistic, cause-oriented, high achieving, team-oriented, and crave constant feedback. Along with those positive traits, millennials are often associated with negative stereotypes―a sense of entitlement, addicted to technology, and self-absorbed. Regardless of your view on millennials, demographics and evolving trends in law firm and in-house hiring point to a millennial invasion of the in-house ranks. According to The New York Times, millennials will make up half of the work force by 2020. Thus, your relationships with millennial counsel are here to stay and working effectively with them is a necessity. What follows are suggestions for working with and mentoring your new young clients.
Tip #1 | Expect More Calls from Us than You May Want
Attorneys who go in-house early in their careers may have very limited trial, motion practice, or negotiation experience. Millennial counsel are no exception and likely did not have strategic responsibility for very large matters before their in-house roles. Therefore, you may receive basic questions. Even if you already know what you plan to do, humor the questions. While it may not be the level of advice you are used to giving the senior IP counsel, it is still invaluable advice to millennial counsel evaluating strategic options for the company.
For example, I recently faced the task of settling my first in-house class action. While I practiced complex litigation before going in-house, I had never settled a large class action alone. As anyone who has ever tried to land a class action knows, it is much more intricate than a traditional single party settlement. My outside counsel in that case had resolved dozens of class actions before, including several for my company. Many of the unique aspects of class action settlement practice were mechanical and routine to him, and he brushed past some of the discrete steps we would need to take to close out the matter.
I ended up talking with another outside attorney to get a sense of the timeline for class settlement approval. I also talked with two experienced in-house colleagues to better understand the questions and dynamics we had to anticipate from our business groups. Though I like to think my outside counsel’s goal was to avoid billing too much time explaining the details of his settlement strategy, this was one case where additional discussion on the front end would have ultimately saved his client time and effort.
Remember, the day-to-day work of millennial counsel is not the same as the work of a law firm associate. We are not writing briefs or answering discovery all day. Rather, much of our work is focused on explaining the law and the risks of a matter to our business colleagues. Thus, we may need more help structuring a matter that may, to you, be fairly routine.
While millennial counsel may not know as much as you about the practice of law, they do know quite a bit about the internal dynamics of their companies. Take advantage of access to that perspective.
Tip #2 | Don’t Be Upset if We Call Your Associate First
Millennial counsel are, almost by definition, younger than most law firm relationship partners. Naturally, they are going to have much more in common, personally and professionally, with a 5-year associate than a 25-year partner. They may feel more comfortable puzzling through an issue with your associate instead of calling you because the discussion is less intimidating and better priced.
Sometimes it is easier to disagree with your associate than with you. Recently, one of my top commercial litigators and I faced a significant discovery dispute. The plaintiffs threatened to take the deposition of a senior executive unless we provided the name of a mid-level manager with knowledge of the issue as a substitute. My outside counsel’s associate, who was coordinating discovery with the plaintiffs wanted to provide a deponent. I disagreed, believing we should not give up a name and should, instead, make the plaintiffs provide a proper deposition notice naming the individual they wanted for deposition.
Ultimately, my outside counsel convinced me that the major risk of subjecting the senior executive to deposition was not worth the minor gain of potentially avoiding the discovery request. However, the fact that I challenged my outside counsel’s associate on the request pushed the firm to work harder to protect my company’s witnesses and documents, a key consideration for an in-house litigator.
Further, sometimes it is easier and cheaper to discuss certain issues, such as eDiscovery, with your associate than with you. Millennial counsel in the legal departments of major corporations often worked at large defense firms before going in-house. Many also have significant experience working with discovery counsel. They may be more familiar than you with the costs and timelines of a complex eDiscovery review. Since associates generally work up the eDiscovery, it is often better to discuss process issues directly, rather than educate the partner.
Tip #3 | Make our Relationships Accessible
While millennial counsel may be able to teach you something about eDiscovery, they still have much to learn about the business of law. Millennial counsel will skip the senior associate and junior/income partner stages of the law firm to go in-house. Thus, many parts of how the profession operates remain mysteries. You may receive novel questions from your young clients about bills, accruals, preferred rates, relationship partners, and the other facets of running a practice that are not taught in school.
For example, an area that may be especially foreign to millennial counsel is business development. The day they go in-house, your young clients suddenly become twice as smart and three times as funny as when they were your associates. That power transition can be unsettling. Forgive the faux paus as they work through what is expected in the new dynamic. And be sensitive to the internal dynamics of your in-house clients’ team when planning business development functions. Remember that everyone has a chain of command and no one wants to be viewed as “stealing” the relationship with an outside counsel.
For your young clients, the key may be to simply make things more transparent and break down barriers of entry. Also, think about including your own associates to round out get togethers. For example, one of my favorite outside counsel always brings his junior associate to dinner meetings with my assistant general counsels and me. The younger associate balances out the event so that I am not the only junior attorney in the room, putting everyone else at ease.
Finally, remember that millennial counsel also have a perspective on what works and what does not, which can be especially useful to you. Early in my in-house career, I had the opportunity to attend several “pitch” meetings in a row. After each meeting, the litigation director and senior counsels would discuss the pitches, what worked, and what fell flat. This is information that you need and, with the right relationship, probably could leverage.
Tip # 4 | Focus on the “Business” of our Business
While millennial counsel are growing attorneys that need to master the substance and business of law, they also need to learn how to be business leaders within their companies. You can help them understand how this matter, and your strategy to achieve the desired resolution of the matter, affects the company and its bottom line. While you may be only a lawyer and not a businessperson, many of you have worked in an industry for several years. Do not underestimate your knowledge.
For example, I recently faced a court ordered discovery deadline in a large multi-district litigation matter. This particular week, the senior counsel on the case and, perhaps more importantly, our paralegal were both on vacation so all the discovery redirected through me. Without my normal internal resources for locating corporate representatives and documents, my outside counsel and I had to put our heads together to gather the responsive information. We had calls every single day that week to identify the necessary information for our responses. Every time we talked, my outside counsel would say, “You know best, but I bet Betty in Accounting would have that information.” I didn’t know best, and I didn’t know Betty, but she certainly had the information. Without my outside counsel’s in depth knowledge of my company, our discovery responses would never have been complete or accurate.
What can you teach millennial counsel about their business? Probably many different aspects, but you could start with the following: your contacts and document sources within our company, good industry publications to read, experts to consult in various specialty areas, key sources of legal authority for our industry, government agency contacts to know, important industry groups to join, and any other information that will help your young clients pick up the culture of their business. In many ways, millennial counsel are the General Counsel’s “associates.” Think about what you would want your own associates to know and share that knowledge.
Tip # 5 | Above All, Be a Mentor
General Counsels in large corporations are increasingly choosing to train their own teams, rather than relying on outdated law firm training methods. Corporate legal teams are developing their own staff in standalone programs like Hewlett Packard’s Boot Camp or in conjunction with their outside counsel in programs like the Pfizer Legal Alliance Junior Associate Program. It makes more sense to many businesses to bring legal staff in at all levels to handle the myriad big and small matters affecting a company every day, while simultaneously teaching future company leaders about the business. View your interactions with millennial counsel as an opportunity to be part of this new model, rather than an impediment.
In conclusion, millennials are a new type of in-house counsel that will show up more and more often as the professional in charge of your matter, and this new relationship between outside counsel and their young clients can pay off for both parties. As you may have surmised, all of my advice is about teaching, communicating, and respecting your young clients. This is exactly what millennials want when they work with you. They want a dialogue. They want your feedback. They want to understand the strategy and values behind your negotiation of a deal or defense of a case.
Take the opportunity to mentor and everyone benefits. And while you are free to offer advice on their case management and strategic decisions, please don’t condemn those irritating habits in your young clients―the “fear” of commitment, the Instagram addiction, or the standing desk. On those points, just accept that we may never understand each other. Millennial attorneys are in the house to stay. We look forward to working with you.
By Jeffrey S. Kinsler and David L. Hudson, Jr.
The bar exam has been described as “one of life’s most dreaded experiences” and a “career threatening ordeal.”1 Studying for it “can be a hellish and grueling grind.”2 Many famous people—including John F. Kennedy, Jr.3, Robert F. Kennedy, Jr.4, California Governor Jerry Brown5, former California Governor Pete Wilson6, former Los Angeles Mayor Los Angeles Mayor Antonio Villaraigosa7, former First Lady Michelle Obama8, and former Secretary of State Hillary Clinton9—have failed at least one bar exam. Some individuals try numerous times. One man passed the California bar exam on his 48th attempt.10 Others never achieve a passing score. Widespread awareness of the exam’s difficulty has increased as passage rates have declined in recent years.11
States bar exams differ in content though there are some commonalities. Nearly every jurisdiction’s exam contains the Multistate Bar Exam (MBE), a 200-question test on seven different legal subjects: Federal Civil Procedure, Constitutional Law, Contracts and Sales, Criminal Law and Procedure, Evidence, Property, and Torts. Louisiana and Puerto Rico remain the only jurisdictions to not use the MBE. Most states utilize the Multistate Performance Test (MPT), which requires students to read a host of materials in a “File” and a “Library” before drafting an office memorandum, a persuasive memo or brief, a client letter, a will, a contract, or other legal document. Some states then require students to answer specific, state-law essay questions.
The Tennessee Bar Exam is a two-day exam. During the first day, examinees tackle one MPT and the nine essay questions. The next day examinees take the MBE.
Trending Towards the UBE
Twenty-four states and the District of Columbia have adopted the Uniform Bar Exam (UBE); seven jurisdictions have adopted the UBE in the past six months. The UBE features three components: (1) the MBE, (2) two MPT questions, and (3) the Multistate Essay Examination (MEE), six essay questions on any of the following areas: Business Associations (Agency and Partnership, Corporations, and Limited Liability Companies); Civil Procedure; Conflict of Laws; Constitutional Law; Contracts (including Article 2 on Sales); Criminal Law and Procedure; Evidence; Family Law; Real Property; Torts; Trusts and Estates (Decedents' Estates, Trusts, and Future Interests); and Article 9 (Secured Transactions) of the Uniform Commercial Code.12
The push for a uniform bar exam gathered momentum in August 2010, when the American Bar Association’s Council of the Section of Legal Education and Admissions to the Bar urged its adoption.13 The Council noted the increased demand for lawyer mobility and multijurisdictional practice. The National Conference of Chief Justices also adopted a resolution urging consideration of a uniform bar exam. Missouri became the first state to adopt the UBE and now a total of 24 states have adopted it. New York and Massachusetts adopted the UBE in 2015.
There is even more momentum in 2016 for adoption of the UBE. In February 2016, the American Bar Association’s House of Delegates adopted a resolution urging “bar admission authorities in each state and territory to adopt expeditiously the Uniform Bar Examination.”14
Reasons for Adopting the UBE
The Tennessee Board of Law Examiners should adopt the UBE for at least three reasons. First, the adoption of the UBE will enable lawyers to move more readily from jurisdiction to jurisdiction. The UBE offers a portable score that allows applicants to obtain licensure in another state more easily. This only makes sense in the increasingly interconnected world of legal practice. Erwin Chemerinsky, Dean of UC Irvine School of Law, favors the UBE, calling the current system “inefficient, burdensome, and, frankly, unjustifiable.”15
Jim Nowogrocki, the President of the Missouri Board of Law Examiners, recently explained that his state’s “adoption of the uniform bar exam in 2010 has proved both convincing and a source of satisfaction in today’s ever-changing landscape for new lawyers.”16 He explains that the UBE has provided the state with more new lawyers from different jurisdictions able to meet the changing legal needs of businesses and the public.
Second, and perhaps more importantly, the quality of the UBE essay questions is better than those currently on the Tennessee Bar Exam. The National Conference of Bar Examiners (NCBE) produces exam products of a very high quality. The organization has been writing exams for decades. “Essays go through multiple drafting sessions, verifications and are eventually pretested,” explains Nowogrocki. “It [is] simply a better product than our jurisdiction could ever produce.”17
Some essay questions on the Tennessee Bar Exam have been well-written and thoughtful. However, others have been woefully inadequate and poorly drafted. The inconsistency in quality is far from ideal. The exam focuses too often on minor issues of state law rather than on broader and more important legal principles. For example, questions have concerned Tennessee’s statute on landlord-tenant law, while ignoring other central concepts of property law.
Third, the Tennessee Board of Law Examiners does not publish model or selected answers. This lack of transparency flouts the NCBE’s and ABA’s Code of Recommended Standards for Bar Examiners, which provides in pertinent part:
An applicant who fails a bar examination should have the right, within a reasonable period of time after announcement of the results of the examination, to see the applicant’s answers to the essay questions and the grades assigned thereto, and to compare each of these answers with an approved answer.18
The Tennessee Board of Law Examiners defies this recommended standard by not giving failing applicants an opportunity to review their essay questions and not providing any approved answers. Unlike the Tennessee essays, there are well-drafted, very detailed model answers to the MEE.
Critics may worry that the adoption of the UBE would take away state control of the bar exam. Such is not the case. If Tennessee adopts the UBE, the Tennessee Supreme Court and the Board of Law Examiners can still establish passing scores, make character and fitness decisions, determine who can sit for the bar exam, and adopt rules regarding the number of times an applicant may take the exam. In addition, although UBE essay questions and model answers are drafted by the NCBE, the TBLE will continue to grade the essay answers and determine the relative weight to give to each question. In other words, adopting the UBE will not diminish state control but will improve the quality of the exam.
ENDNOTES
1 Robert Jarvis, An Anecdotal History of the Bar Exam, 9 Geo. J. Legal Ethics 359, 359 (1995).
2 David L. Hudson, Jr., Professional Responsibility 14 (2015).
3 John G. Browning, Legally Speaking: If At First You Don’t Succeed, SE Texas Record, June 29, 2008.
4 Barbara Goldberg, Now It’s ADA John F. Kennedy, Jr., United Press Int’l, Aug. 20, 1989.
5 Jay Mathews, California’s Bar Exam Breaks Breaks More Lawyers Than It Makes, Wash. Post, Aug. 2, 1983, at A2.
6 David Whelan, Law Exam is a Real Bar for Aspirants, Contra Costa Times, Dec. 7, 2003, at G7.
7 Maura Dolan, A High Bar for Lawyers, L.A. Times, Feb. 21, 2006, at A1.
8 Harrison Barnes, 10 Ways to Bounce Back After Failing the Bar and Pass on Your Next Attempt, LawCrossing.
9 Cornelius Chapman, No bar too low for lawyers turned pols, Boston Herald, June 25, 2012, at 19.
10 Marc Lacey, Passing the Test of Time: After 48 Tries, Compton Man Masters Bar Exam, L.A. Times, May 31, 1999.
11 Tamara Tabo, When Bar Scores Plummet, Who Will Examine the Examiners?, Above the Law (Nov. 7, 2014).
12 National Conference of Bar Examiners, Preparing for the MEE.
13 ABA Section of Legal Education and Admissions to the Bar, Council Resolution, Endorsing Consideration of a National Bar Exam (Aug. 6, 2010).
14 ABA House of Delegates Resolution 109.
15 Erwin Chemerinsky, A better way to license lawyers, L.A. Times (May 11, 2015), at A19.
16 Jim Nowogrocki, Testing the UBE: Missouri Benefits From Uniform Bar Exam, Law360 (July 25, 2016).
17 Id.
18 NCBE, Comprehensive Guide to Bar Admission Standards, at vii (Code of Recommended Standards for Bar Examiners) (2016).
January 2017
By Seth R. Ogden, Alex Huffstutter, and Edward D. Lanquist
SCOTUS dealt another blow to the Federal Circuit patent jurisprudence with substantial financial ramifications for litigants, by abrogating its bright-line Seagate test1 for enhanced damages. Treble damages no longer depend on an “objectively reasonable,” and often after-the-fact, noninfringement or invalidity opinion. Patentees now possess increased negotiating leverage where a defendant knew the infringement risk, and their competitors must assess the need for an opinion of counsel earlier in product development.
Historical Overview of Enhanced Damages for Patent Infringement
Patent infringement is a strict liability tort; liability does not depend on intent. However, intent may govern the size of the damages award. Courts may award treble damages for “willful” infringement.
In 2007, the en banc Federal Circuit promulgated a stringent two-prong willfulness test (the Seagate test). The first prong required an objectively high likelihood that the infringer’s actions constituted infringement of a valid patent. The infringer’s state of mind was of no consequence.2 The second prong required that the risk of infringement “was either known or so obvious that it should have been known to the accused infringer.”3 A court could award enhanced damages only upon satisfaction of both prongs. That award was subject to a convoluted trifurcated appellate review, with objective recklessness reviewed de novo, subjective knowledge reviewed for substantial evidence, and the ultimate decision reviewed for abuse of discretion.4 Consequently, the district court’s discretion failed to receive much deference.
In Halo v. Stryker, SCOTUS streamlined the “unduly rigid” two-part test5 by discarding the objective prong.6 Now, a preponderance of the evidence standard applies7, and enhanced damages should be “based on all the facts and circumstances” to punish bad-faith disregard of patent rights rather than reward counsel’s resourceful opinion drafting.8
Patentees Have Gained Increased Negotiating Leverage
Halo lowers the bar for enhanced damages. An accused infringer’s financial risk, and the concomitant pressure that can be applied by a patentee during settlement negotiations, has increased.
First, “many of the most culpable offenders” are no longer shielded by the objective recklessness prong.9 The Seagate bright-line test made the infringer’s ability to “muster a reasonable (even though unsuccessful) defense at the infringement trial” dispositive, even if unaware of the defense at the time of infringement.10 “[S]omeone who plunder[ed] a patent … [could] nevertheless escape any comeuppance under [35 U.S.C.A.] § 284 solely on the strength of his attorney’s ingenuity.”11 Now, culpability is measured against the infringer’s knowledge at the time of his or her conduct.12
Nonetheless, Halo’s true impact remains to be seen. The Federal Circuit recently held that, although subjective willfulness supports an enhanced damages award, objective reasonableness is still relevant in evaluating the totality of the circumstances.13 And district courts’ deference to jury findings of subjective willfulness has varied. Judge Reindinger of the Western District of North Carolina determined that the jury’s “finding standing alone is sufficient to support a finding of willfulness.”14 Other courts’ “sound discretion” led them to “decline to award . . . enhanced damages despite the jury’s finding of willful infringement.”15
Second, the preponderance of the evidence standard—the same standard that governs proof of infringement—makes willfulness easier to prove at trial.16 As a result, district courts will theoretically defer to jury determinations based on sufficient record evidence.17
Third, the abuse of discretion standard of review will promote affirmance.18 SCOTUS scolded the Federal Circuit for its unfounded “concern that district courts may award enhanced damages too readily, and distort the balance between the protection of patent rights and the interest in technological innovation.”19 Defendants will be less likely to expend resources appealing enhanced damages awards.
Consequences for Businesses Competing with Patented Technologies
To shield against a willfulness determination, a patentee’s competitors should be proactive in obtaining a competent opinion of counsel. Opinions should be obtained early in the product development process “before the initiation of any possible infringing activity.”20 Noninfringement opinions should be updated upon major product design revisions. There is no affirmative duty to obtain an opinion,21 but even in the wake of Halo, opinions of counsel will remain the gold standard among willfulness defenses.22
A good-faith belief of invalidity or noninfringement should avoid “increased damage or attorney fees imposed solely because a court subsequently holds that belief unfounded.”23 Thus, the ultimate legal correctness of the opinion is not determinative,24 only that the defendant demonstrates he or she relied on the opinion’s advice.25 Nevertheless, good-faith reliance requires both timely acquisition26 of a competently drafted opinion.27 Competency applies to both the qualifications of the person giving the opinion and the opinion’s content.28 Opinions from non-patent counsel or lay persons are insufficient.29
The decision whether to obtain an opinion of counsel depends on several factors: the likelihood of litigation, the litigation history of the patentee and the patent at issue, the patent licensing history, the importance of and revenue associated with the products implicated by the patent, and whether the opinion will be consistent with trial strategy and thus potentially useful at trial.30
Conclusion
Halo v. Stryker appears to lower the bar to obtaining enhanced damages for patent infringement. Patentee’s negotiating leverage has increased, but this decision creates an opportunity for potential infringers. An opinion of counsel obtained before commencing potentially infringing activity provides litigation counsel with a valuable tool to avoid a treble damages award.
ENDNOTES
1In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007), abrogated by Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016).
2 Id.
3 Halo, 136 S. Ct. at 1930 (citing Seagate, 497 F.3d at 1371).
4 Id.; see also Bard Peripheral Vascular, Inc. v. W.L. Gore & Assoc., Inc., 682 F.3d 1003, 1005, 1008 (Fed. Cir. 2012); Spectralytics, Inc. v. Cordis Corp., 649 F.3d 1336, 1347 (Fed. Cir. 2011), abrogated by Halo, 136 S. Ct. 1923.
5 Halo, 136 S. Ct. at 1932 (quoting Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1751 (2014)).
6 Halo, 136 S. Ct. at 1933.
7 Id. at 1934.
8 Read Corp. v. Portec, Inc., 970 F.2d 816, 826 (Fed. Cir. 1992).
9 Halo, 136 S. Ct. at 1932.
10 Id. at 1933.
11 Id.
12 Id.
13 WesternGeco LLC v. Ion Geophysical Corp., 837 F.3d 1358 (Fed. Cir. 2016) (citing Halo, 136 S. Ct. 1923 at 1930) (an attorneys’ fees case, for the proposition that totality of circumstances applies in willfulness cases).
14 Sociedad Espanola de Electromedicina Y Calidad, S.A. v. Blue Ridge X-Ray Co., No. 1:10-CV-00159-MR, 2016 WL 3661784, at *2-3 (W.D. N.C. July 8, 2016).
15 Presidio Components, Inc. v. Am. Tech. Ceramics Corp., No. 14-CV-02061, 2016 WL 4377096, at *10 (S.D. Cal. Aug. 17, 2016); see also Trs. of Boston Univ. v. Everlight Elecs. Co., Nos. 12-11935, 12-12326, 12-12330, 2016 WL 3976617, at *4 (D. Mass. July 22, 2016).
16 Halo, 136 S. Ct. at 1934 (quoting Octane Fitness, 134 S. Ct. at 1758) (“[P]atent-infringement litigation has always been governed by a preponderance of the evidence standard.”).
17 See Radware, Ltd. v. F5 Networks, Inc., No. 5:13-CV-02024, 2016 WL 4427490, at *3-5 (N.D. Cal. Aug. 22, 2016) (granting judgment as a matter of law of no willfulness where evidence of defendant’s knowledge of the patent-at-issue consisted of citation to a patent number in correspondence from the patent office and circumstantial evidence).
18 Id.
19 Id.
20 Underwater Devices, Inc. v. Morrison-Knudsen Co., Inc., 717 F.2d 1380, 1390 (Fed. Cir. 1983), overruled by Seagate, 497 F.3d 1360.
21 35 U.S.C.A. § 298 (stating that the failure to obtain an opinion of counsel “may not be used to prove that the accused infringer willfully infringed the patent.”); see also Knorr-Bremse System Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1345-46 (Fed. Cir. 2004) (en banc).
22 See, e.g., Charles S. Barquist & Bita Rahebi, Willfulness Post-Seagate and the Decision to Rely on Advice of Counsel, 2 Patent Litig. 112, 123 (2010); see also Neil C. Jones, Ashley B. Summer & Brian D. McAlhaney, Using Opinion Letters and Defending Against Willful Infringement, 2 Patent Litig. 171, 185 (2010).
23 Kloster Speedsteel AB v. Crucible Inc., 793 F.2d 1565, 1580 (Fed. Cir. 1986).
24 Id. at 1581, as amended on reh’g (Aug. 15, 1986), overruled by Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH, 383 F.3d 1337 (Fed. Cir. 2004).
25 Johns Hopkins Univ. v. CellPro, Inc., 152 F.3d 1342, 1364 (Fed. Cir. 1998) (finding the opinions must be competent and followed).
26 Michlin v. Canon, Inc., 208 F.R.D. 172, 174 (E.D. Mich. 2002) (“[I]t is difficult to understand how there could be a defense to willful infringement based on an opinion rendered after the litigation began.”).
27 Ortho Pharm. Corp. v. Smith, 959 F.2d 936, 944 (Fed. Cir. 1992) (noting that an opinion must be “thorough enough, as combined with other factors, to instill a belief in the infringer that a court might reasonably hold the patent is invalid, not infringed, or unenforceable.”).
28 Jurgens v. CBK, Ltd., 80 F.3d 1566, 1572 (Fed. Cir. 1996).
29 Jepson, Inc. v. Makita USA, Inc., No. CV 90-4312-GHK, 1994 WL 543226, at *7 (C.D. Cal. May 27, 1994); see also Ortho Pharm., 959 F.2d at 944 (stating competent opinion letters were obtained from “experienced patent counsel”).
30 William L. Lafuze et al., Exculpatory Patent Opinions and Special Problems Regarding Waiver of Privilege, 6 J. Marshall Rev. Intell. Prop. L. 313, 360 (2007).
