The Pitfalls of Relying on In-House Engineers for Patent Infringement Analysis

Ken Liu

IP Litigation

Client Bulletin

August 01, 2013

When a company becomes aware that it may be accused of patent infringement, the instinct for in-house counsel is to engage the company’s engineering staff to perform an analysis of the technologies and patents involved. After all, the reasoning goes, the company’s own engineers have intimate understanding of the technology and are already on the payroll. Later, during litigation, the company may again rely on in-house engineers to provide litigation support to trial counsel. These practices, though common, have serious drawbacks compared to using litigation consultant engineers.

Before deciding to rely solely on staff engineers for litigation assistance, in-house counsel should keep in mind the following potential disadvantages: 1) discovery risks related to the practice of forming an opinion using in-house technical staff; 2) typical engineers’ lack of training in the type of thinking necessary to translate technical insights into legally useful information; and 3) non-optimal allocation of resources and impact on product development.

Discovery Issues: the EchoStar Example

First, documents, emails, and other material produced by in-house staff during pre-litigation analysis may be subject to discovery, and the opinions expressed in them may become the basis for a finding of willful infringement. Because in-house engineers are simultaneously involved in many tasks other than litigation support, the scope of disclosure of sensitive material is difficult to constrain.

In In re EchoStar Communications Corp., 448 F.3d 1294 (Fed. Cir. 2006), the defendant company conducted a pre-litigation “in-house investigation supervised by in-house counsel” with its engineering staff to assess whether its products infringed a patent. The in-house counsel then communicated the opinion to company executives. Later, after the company was sued for infringement, the defendant pointed to this advice as evidence that it did not willfully infringe.

The district court held that the advice given to the executives, though not in the form of a traditional opinion of counsel, constituted a legal opinion. And by raising the advice-of-counsel defense, the defendant waived the attorney-client privilege and the work product doctrine as to all documents and communications related to the in-house counsel’s advice (including any engineering reports).

On a petition for a writ of mandamus to the Federal Circuit, the defendant argued that “an internal investigation involving in-house engineers and in-house counsel is simply a different subject matter from legal opinions commissioned at a later date from outside lawyers.” But the Federal Circuit dismissed the argument as “without merit” and affirmed the district court’s ruling that the privilege was waived.

The Federal Circuit’s rule has been applied in subsequent cases. See, e.g., Convolve, Inc. v. Compaq Computer Corp., No. 00-civ–5141, Memorandum and Order (S.D.N.Y., January 22, 2008) (“engineering report” generated by engineering staff, in-house counsel, and a patent agent were within scope of waiver of attorney-client privilege). By directing the company’s own engineers to perform non-infringement analysis, a defending company risks wide disclosure of internal communications related to the topic (including statements made without due care or understanding of the full legal implications) and providing the other side with damaging evidence that can be used to support a finding of willful infringement.

In addition to engaging consulting engineers, companies with dedicated litigation engineering departments may be able to mitigate the threat of unconstrained disclosure somewhat by separating product development from litigation support.

Communication Gap Between Engineering Expertise and Legally Useful Information

Second, in-house engineers are rarely the best choice for providing the kind of technical analysis necessary for effective legal advice, whether before or during trial. They are busy and often cannot devote their full attention to helping counsel. Product engineers are also, as a rule, not trained in the interpretation of patent claims nor in the habit of thinking as litigants. Institutional factors, such as “not-invented-here syndrome” and a mismatch between engineering culture, which prizes technical skill, and legal culture, which prizes precision of verbal formulations, may also contribute to gaps in analysis. In addition, there are understandable human factors that may hinder a thorough, objective evaluation: in-house engineers may be emotionally invested in products that they have worked hard to create; they may fear that a conclusion of possible infringement would result in additional, “pointless” work to devise workarounds or internal staff being blamed for the problem; they may simply be more interested in working on technology problems, instead of trying to explain technical details to counsel. Combined, these factors often result in a tendency to overvalue the novelty of the company’s own products, to undervalue the strength of the patents in question, and to understate the risks of potential infringement.

At Elysium Digital, we have seen a variety of situations where reliance on in-house engineering staff for litigation support led to problems. One set of such problems comes from the tendency for engineers to focus on specific functionality or products with which they’re familiar without considering creative interpretation of claim terms or edge cases. In general, questions turning on “always” or “never” tend to be difficult for engineers to answer to the satisfaction of counsel.

In one case, a company asked an in-house engineer to prepare a response to an interrogatory regarding a particular feature’s presence in its products. The engineer replied that the feature was present in all their products because he assumed that his knowledge of some products applied to all of the others. Fortunately, at the last minute, outside consultants discovered that the engineer was incorrect for a number of products and changed the response, averting a situation in which incorrect information would have been communicated to the adverse party.

In another case, in-house engineers answered counsel’s questions based on certain applications (with which they were very familiar) and the underlying platform (with which they were not as knowledgeable). Not realizing an information gap existed, counsel proposed a claim construction advancing an ironclad non-infringement position. However, after outside consulting engineers were brought in to perform in-depth analysis on both the applications and the platform, the non-infringement position turned out to be illusory. The problem could have been prevented had outside consultants been brought in earlier.

Another set of problems arises from the mismatch in communication style between engineers and attorneys, which can lead them to not have the same understanding.

Software engineers, for instance, are generally imprecise when it comes to terminology that may have great legal significance. Practitioners in the field apply terms like "objects", "databases" and "processes" to many disparate constructs. As a result, engineers often don’t carefully consider the boundary of a term, which is foremost in attorneys' minds. Faced with the question: "does our product have an object that does X?" an engineer might think, "we aren't using object-oriented programming, so we don't have any objects," and reply "no" without reference to the actual claim construction. Similarly, when asked the question: "does our product automatically start a process when Y happens?" an engineer might think, "we use threads" or "we just call a function," and answer "no", again without regard to the claims.

Finally, in-house engineers are sometimes influenced by institutional pressures to define things in certain ways. For example, due to the company's organizational structure or project management, they might not consider something as part of the relevant program (e.g. an "application") simply because a particular piece of functionality is part of another team's project. Thus, they might declare that a function is "not performed by the application” without fully exploring the issue.

The list of similar mistakes is potentially endless. However, most of them can be avoided by engaging qualified consulting engineers who specialize in litigation support. They are accustomed to communicating with counsel, trained to consider technical issues from a legal perspective, and can devote full resources to the task.

Optimal Use of Resources: Combining In-House and Consulting Engineers

Above all, the chief drawback for relying on in-house engineers for litigation support is also the most obvious one: it takes them away from doing what they love to do. This can result in product development delays and loss of morale. In particular, we've observed that an engineer's job satisfaction can be very adversely affected by depositions, an inherent risk of in-house analyses. A company competing in the innovative, dynamic technology marketplace should focus the valuable time of its engineering staff on product development, not preparing for or aiding litigation.

Optimal allocation of resources suggests that companies can use both in-house engineers and litigation consulting engineers to minimize cost while obtaining the best technical advice.

We’ve discussed ways in which consulting engineers can be helpful, but there are many situations where the expertise of in-house engineers can be valuable to counsel as well as outside consultant engineers. The staff engineers’ familiarity with the product means that they can save valuable time and money by getting consulting engineers oriented in the product. They can also explain major functionality, common practices, general design and structure of the product, and often point consulting engineers to the most directly relevant aspects of the design. Their knowledge of the build process and firm-specific development procedures can prevent outside engineers from wasting time reinventing the wheel. When judiciously used, in-house engineers can work effectively with outside consultants to increase their effectiveness and reduce their cost in providing litigation support.

In addition, there are ways for in-house counsel to manage the use of consultant engineers to minimize cost without losing quality of service. For instance, by setting up budgets with phases with clearly defined scope for each phase, counsel can keep an eye on cost while retaining the flexibility to scale the work up or down as necessary. Also, a preliminary consultation with consulting engineers early on and regular status calls can help prioritize what needs to be done based on the litigation schedule as well as counsel’s immediate needs, thus avoiding unnecessary work.

Resisting the impulse to draw too heavily on in-house engineers and, instead, engaging consulting litigation engineers is a good way to constrain the scope of potential disclosure and waiver of privilege, to obtain the best possible advice from technical personnel specializing in the intersection of law and technology, and to preserve the valuable time of in-house engineering staff for what they’re paid to do: product development, the lifeblood of a technology firm.