This is consistent with the position of the American Bar Association's Standing Committee on Ethics and Responsibility. In the nightmare scenario, there is no question about the lawyer's knowledge. The client admitted to the lawyer that he had lied. In less definitive circumstances, the lawyer must consider all information available in reaching the determination. The rule also provides that knowledge may be inferred from all the circumstances.
Willful blindness is the equivalent of knowledge.
If the lawyer does not know that the evidence is false, the lawyer must preserve the client's secrets. A lawyer who knows that a client has made a misrepresentation in a deposition must also determine the materiality of the misrepresentation. In our scenario, the client's lies concern damages, clearly a material issue in the litigation. Even where the lawyer knows of a material misrepresentation, disclosure is not the initial step in resolving the problem and may not necessarily be the ultimate remedy. The lawyer must first try to persuade the client to rectify the situation.