Supreme Court: state of mind requirement for inducing patent infringement

It was long a subject of dispute in America what state of mind a defendant had to possess to be found liable for inducing patent infringement.  Some panels believed that “the only intent required of [the defendant] is the intent to cause the acts that constitute infringement.”  Moba B.V. v. Diamond Automation, Inc., 325 F.3d 1306 (Fed. Cir. 2003) (per curiam).  Others felt that “the plaintiff has the burden of showing that . . . [the defendant] knew or should have known his actions would induce actual infringements.”  Manville Sales Corp. v. Paramount Systems Inc., 917 F.2d 544, 553-54 (Fed. Cir. 1990).  The issue was seemingly resolved in DSU Medical Corp. v. JMS Co., 471 F.3d 1293 (Fed. Cir. 2006) (en banc in part), which adopted Manville’s formulation in an opinion by Judge Randall Rader, the present Chief Judge of the Federal Circuit.

A few years later a panel including Judge Rader was faced with an unusual fact pattern in SEB S.A. v. Montgomery Ward & Co., 594 F.3d 1360 (Fed. Cir. 2010), where the accused products were deep fryers.  The accused manufacturer (Pentalpha, which supplied Montgomery Ward and the other defendants) had based its design on an SEB product.  It had commissioned a patent search which found no patents which its design infringed.  The patent searcher, however, had failed to find SEB’s patent.  The patent searcher was not told about the use of SEB’s product, which would perhaps have induced him or her to search for patents owned by SEB.  The exemplar of the product on which the design was based was bought in Hong Kong (perhaps because Pentalpha is headquartered there), despite the fact that the accused deep fryers were intended for the deep-fried-food loving American market, and was not marked with a US patent number.  SEB was thus unable to prove that Pentalpha knew about SEB’s patent until one of its customers was sued.  Pentalpha argued that this ignorance shielded Pentalpha from liability for inducement.

In ruling against Pentalpha on this point, Judge Rader’s opinion in SEB relied fundamentally on the “should have known” prong of the Manville test quoted above.  He was discomfited, however, by a further statement he had written into the DSU Medical opinion:  “[t]he requirement that the alleged infringer knew or should have known his actions would induce actual infringement necessarily includes the requirement that he or she knew of the patent.”  Skill at distinguishing precedent, accumulated by Judge Rader over the course of twenty years on the Federal Circuit, was required to show that the SEB decision was not inconsistent with the en banc.  Pentalpha’s defense was rejected because “Pentalpha deliberately disregarded a known risk that SEB had a protective patent.”  The legal standard applied was “deliberate indifference” to the risk of infringement, which per the Federal Circuit panel is “a form of actual knowledge.”

The Supreme Court granted certiorari to consider the question of inducement.  It has now handed down its views, Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 458 (2011),  in an 8-1 opinion authored by Justice Samuel Alito and affirming the Federal Circuit.

There is not much surprising in the Supreme Court’s opinion.  “[I]nduced infringement under §271(b) requires knowledge that the induced acts constitute patent infringement.”  “Given the long history of willful blindness and its wide acceptance in the Federal Judiciary, we can see no reason why the doctrine should not apply in civil lawsuits for induced patent infringement under 35 U. S. C. §271(b).”  Willful blindness requires that “(1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact.”  This is intended to be a tightening of the Federal Circuit’s standard:

“The test applied by the Federal Circuit in this case departs from the proper willful blindness standard in two important respects.  First, it permits a finding of knowledge when there is merely a “known risk” that the induced acts are infringing.  Second, in demanding only “deliberate indifference” to that risk, the Federal Circuit’s test does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities.”

The Court concluded easily that the evidence supported liability under its more stringent standard.  It reasoned, for example, that “Pentalpha’s decision to copy an overseas model of SEB’s fryer” – one bought in Hong Kong where Pentalpha is headquartered – was indicative of willful blindness.  “Pentalpha knew that the product it was designing was for the U. S. market, and [Pentalpha’s CEO] Sham . . . was well aware that products made for overseas markets usually do not bear U. S. patent markings.”

Perhaps the biggest surprise in the Court’s opinion is at the end of section II.  The opinion notes that in Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476 (1964) (“Aro II”), the standard for contributory infringement (not inducement) was said to include knowledge of the patent.  It then infers that inducement must include such a requirement, and then immediately states “we now hold that induced infringement . . . requires knowledge that the induced acts constitute patent infringement.”  There is arguably a considerable gap between (A) knowing of a patent (for example, reading it on one’s computer screen), and (B) knowing whether a particular product or process falls within the scope of the claims of that patent.  Knowledge of (B) often requires very careful analysis of claim meaning, which analysis might – despite all the care lavished on it – not convince a judge or be upheld on appeal.  The Court’s reliance on Aro II also raises questions about whether the willful blindness analysis may in the future be found applicable to contributory infringement.

Flavio M. Rose, Irell & Manella LLP

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