© 2005, Dawsey Co., LPA
October 2005

Introduction
For most businesses, Intellectual Property (IP) is the most valuable asset they own and is integral to future success. In order to be successful, a business will need to know the identity and value of their IP assets, or IP portfolio. In addition, that same business must understand the current state of the technology within their industry in order to avoid infringing a competitor’s IP. Early exploration of the IP rights of others can avoid needless expenditure of capital on developing a product that would infringe another’s patent. All of these issues can be addressed by a patent attorney through a variety of IP opinions, such as a patent infringement opinion and a right-to-use opinion, to name just two. Although the need for obtaining such opinions arises in a multitude of scenarios, many advisors to businesspeople neglect to obtain the services of IP counsel until a problem arises. As will be evident, the ramifications of such a decision can have long reaching effects upon the client’s profitability and the business counselor’s reputation.

Process of Opinion Generation
The process of generating an IP opinion tailored to the particular needs of the client proceeds in four distinct stages. The first stage consists of the exchange of information between the IP counsel and either the client or perhaps from the general counsel representing the client, hereafter simple referred to as the client. During this phase, the IP attorney must gather all relevant facts from the client and from other sources, such as issued patents, file histories, and trade publications. Not only must the IP attorney have relevant information specifically relating to the intellectual property in question, but he or she must also be involved in the strategic decision making involving the property.

After the relevant information has been gathered, the second stage requires the IP attorney to go to work analyzing the IP rights, duties, and limitations in light of the current state of the law and the client’s interests. Next, the third stage requires effective communication of the analysis to the client. This communication of the analysis and conclusion includes three distinct components which must be considered.

First, the IP attorney and the client must remain aware of their individual professional responsibilities. They must maintain the attorney-client privilege, especially with regards to disclosure of trade secrets or other sensitive material. The attorney must also care for the client’s other interests. It is possible that the most appropriate IP strategy may be one which is only evident when viewed in context with the client’s general business strategy.

The second component of the communication of the IP opinion to the client involves clarity. Intellectual property law is a very specialized area of the law and, as such, includes a specific jargon and terminology. When this nuance is combined with the fact that the subject matter is often a complicated technology or innovation, a situation can easily occur in which the client and IP attorney fail to effectively communicate their input and concerns. An IP opinion has little value, regardless of the quality of legal analysis, if it its intended recipients are unable to use it due to confusion.

A final aspect of the IP opinion requires awareness that the opinion may be scrutinized by someone other than the client. A third party may obtain access to the opinion through discovery in preparation for litigation, either intentionally or unintentionally. With this fact in mind, the IP counsel must consider that an opinion may one day be provided as evidence against the client’s interests, while an exculpatory opinion may be offered into evidence to support an “opinion of counsel” defense.

After effective communication of the IP opinion to the client, that fourth stage necessitates that all parties be aware of any post delivery concerns or responsibilities. The nature of IP law includes the fact that the state of the technological art in question is usually in flux, so that events which occur after an IP opinion has been issued may have a significant impact on the analysis and contents of the opinion. With this in mind, the IP attorney and client should clearly illustrate at the outset the post delivery responsibilities, such as any duty to update the information in the opinion on the part of the IP counsel or what actions constitute improper use of the opinion by any party.

Business and Legal Reasons for IP Opinion Acquisition
While the process of obtaining an IP opinion should be relatively painless, provided effective communication between the parties, the reality is that the IP impacts are often overlooked. It is difficult to overstate the importance of clearly outlining the contents of an IP portfolio or delineating the boundaries of certain intellectual property rights. One context in which the importance of IP assets is evident occurs during the performance of due diligence for business transactions, such as mergers or acquisitions. In addition, the possession of an IP opinion may be a valid defense in a suit for willful patent infringement. Finally, an IP opinion can assist a company in a variety of ways with product development.
The due diligence process for a business conducting a merger or acquisition is intricate and complex. However, it is one in which the client must have an IP knowledgeable attorney on his or her legal team in order to ensure that all intellectual property angles have been fully explored. For example, an IP opinion should be solicited with the purpose of identifying and evaluating the value of the IP portfolio of the target company. An additional opinion and draft agreement may also be needed to delineate which party will own IP assets in connection with a joint venture. Finally, an opinion should be obtained which identifies potential infringement, both of third parties with regard to patent rights owned by the target company, and any infringement perpetrated by the target company for which the acquiring company may assume liability.

As mentioned earlier, the possession of an IP opinion may be a valid defense in a suit for willful patent infringement. Although there are no per se rules for determining when willful infringement has occurred, the court has adopted a totality of the circumstances approach in the area of intentional infringement. In this totality calculation, the presence of an IP clearance opinion weighs heavily towards a finding against willful infringement. In order for this IP opinion to have maximum impact, it should be from an outside IP counsel with full access to the facts of the situation, and of course the accused must have followed the recommendations in the IP opinion.

A final significant business reason for obtaining an IP opinion relates to product development. An IP opinion will be invaluable for evaluating the patentability of a new product, or a product considered for development. A timely opinion in this situation can avoid needless development of a product which is already patented by a competitor.

Timing Considerations Dictate Early Acquisition of Opinion
The most relevant business reasons for obtaining an IP opinion, the protection of product development and avoidance of infringement of existing patents, dictates that IP counsel be contacted and solicited for an opinion early and often. Specifically, exculpatory and clearance opinions should come extremely early in the development process. A manufacturer or distributor of a product has an affirmative duty to avoid infringing the patent rights of others. Additional to the motivation of avoid infringing activity, however, is that obtaining an early patent opinion allows a business to abort infringing product development before significant capital expenditures. One can imagine the disappointment an executive or board of directors feels upon discovery that a product or process that the company has invested large amounts of capital to develop cannot be sold or used due to the risk of patent infringement. For these reasons, an IP opinion should be obtained early in the product development decision making process, and continually updated as the landscape changes.

Types of Opinions
While the phrase ‘IP Opinion’ has been used generically up to this point to emphasize the context and timing of intellectual property issues, it is important to note that several different types of opinions are available and appropriate in different situations. One type of opinion is a patent infringement opinion. This type of opinion evaluates a product or process in light of either a single patent or group of patents, to determine whether or not the specific item infringes the patent rights of others. Sometimes a client seeks an opinion showing that it is not infringing a specific patent owned by a competitor. In another context, an infringement opinion may be sought prior to initiating licensing negotiations or patent infringement litigation. The patentee may want an opinion that a product infringes their patent, with a detailed discussion of the relevant considerations, to help the decision making process of whether to file suit, or attempt to extract licensing fees. The typical infringement opinion will include a claim construction analysis, and may include an analysis of possible defenses and alternative theories of recovery, such as the doctrine of equivalents.

Another type of opinion frequently solicited by business clients consists of a right-to-use opinion. A right-to-use opinion may be especially useful for a client seeking to determine if its new product or process infringes any patents. These opinions are typically referred to as clearance opinions, or freedom-to-operate opinions.

Yet another type of IP opinion consists of a patent validity opinion. This type of opinion may be solicited by a client seeking to determine the validity of a patent owned by a competitor. The client may use the information contained in such an opinion to decide whether to pursue a licensing agreement with the patent owner or whether to utilize the technology disclosed in the patent without a license. The client may also seek to obtain a validity opinion as to the status of its own patent. Finally, a patent validity opinion is particularly relevant during the due diligence process prior to a merger or acquisition in order to perform an IP portfolio valuation.

Lastly, a patentability opinion is an IP opinion which is commonly solicited from an intellectual property attorney. This opinion is typically requested to determine the potential for obtaining patent protection for a new product or process. This opinion generally precedes the decision to move forward with a patent application. The patentability opinion requires a search of what is known as prior art, which includes prior issued patents and published applications, searchable either online or in the PTO public search room. In addition, pertinent prior art can also be found in a myriad of other locations and sources, such as foreign patent systems and non-patent literature, including trade publications and quarterly journals. The patentability opinion should address the three patentability criteria, which are novelty, utility, and non-obviousness, and may be used by the application drafting attorney to avoid pertinent prior art. It is important to emphasize that this type of opinion must be acquired early in the development process if the client intends to expend capital on the development of a product or process with the expectation that the resulting product is capable of patent protection.

Conclusion
Intellectual Property continues to be a valuable asset within the business world. However, to adequately protect intellectual capital, a business must have the counsel of an experienced IP attorney, who works closely with the client to assist the client in meeting their goals and expectations. One tool to assist this process is the IP opinion, which can be tailored to meet the particular requirements dictated by the situation. Through the early solicitation of IP opinions and frequent and clear communication between the client and IP attorney, a business client should be able to maximize their IP assets and minimize capital expenditure and risk.