On May 31, 2011, the Supreme Court announced that a defendant,
to be liable for actively inducing patent infringement under 35
U.S.C. § 271(b), must have "knowledge that the induced
acts constitute patent infringement." Global-Tech Appliances, Inc. v. SEB S.A., No.
10-6, 2011 WL 2119109 (May 31, 2011). In the first of three
patent decisions to be handed down this term, the Court parted ways
with the analysis, but not the outcome, of the Federal Circuit,
which had previously held that the intent element for induced
infringement required only that a plaintiff show that the alleged
infringer "knew or should have known that his actions would
induce actual infringements." The Court nevertheless affirmed
the Federal Circuit's judgment based on evidence showing that
the petitioner-defendant, Pentalpha, had "willfully blinded
itself to the infringing nature" of the induced conduct.
In 1991, SEB obtained a patent for an innovative deep fryer with
external surfaces that remain cool during home use. SEB's deep
fryer proved to be a commercial success in the American market. In
1997, Sunbeam Products, an SEB competitor, asked Pentalpha, a
Global-Tech unit and Hong Kong manufacturer, to supply it with deep
fryers. Pentalpha purchased an SEB deep fryer on the foreign
market, copied its non-cosmetic aspects, and hired an attorney to
conduct an infringement analysis of the resulting product.
Pentalpha did not tell the attorney that its fryer was based on the
SEB product, however, and the attorney issued an opinion letter
stating that Pentalpha's fryer did not infringe any U.S.
patents.
Sunbeam marketed the Pentalpha deep fryers in the United States at
a lower price than SEB's product. In April 1998, SEB sued
Sunbeam for infringing SEB's deep fryer patent; Sunbeam
immediately notified Pentalpha of the lawsuit. Despite
Sunbeam's warning, Pentalpha proceeded to sell its deep fryers
to other major U.S. retailers, including Fingerhut Corp. and
Montgomery Ward & Co. After settling with Sunbeam, SEB sued
Pentalpha for infringing its deep fryer patent—both
directly and by actively inducing the infringement of Sunbeam,
Fingerhut, and Montgomery Ward. A jury returned a verdict for SEB
on both theories, and the district court denied post-trial motions
by Pentalpha. On appeal, the Federal Circuit rejected
Pentalpha's claim that SEB failed to prove that Pentalpha
actually knew about SEB's patents prior to April 1998. Instead,
the Federal Circuit ruled that SEB had demonstrated the requisite
intent for induced infringement by showing that Pentalpha
"deliberately disregarded a known risk that SEB had a
protective patent." SEB S.A. v. Montgomery Ward &
Co., 594 F.3d 1360, 1377 (Fed. Cir. 2010).
On review, the Supreme Court agreed with defendant Pentalpha that
the intent element of induced patent infringement requires that a
defendant have actual knowledge of the infringed patent, not just
deliberate indifference to a known risk of its existence. In doing
so, the Supreme Court noted that, because "induced
infringement was not considered a separate theory of indirect
liability" prior to the 1952 enactment of section 271, the law
of contributory infringement should guide the Court's decision.
According to the Court, it "has become a fixture in the law of
contributory infringement under section 271(c)" that a
contributory infringer must "know that the combination for
which his component was especially designed was both patented and
infringing." Accordingly, because contributory infringement
under section 271(c) requires that the contributor have knowledge
of the infringed patent's existence, the Court held that the
same knowledge is required for induced infringement under section
271(b).
Although the Supreme Court agreed with Pentalpha that the Federal
Circuit incorrectly applied the "deliberate indifference"
standard, the Court nevertheless affirmed the lower court's
judgment against defendant Pentalpha by invoking the criminal law
doctrine of "willful blindness." In the Court's
formulation, willful blindness occurs when a defendant "takes
deliberate actions to avoid confirming a high probability of
wrongdoing." It is as if (1) the defendant subjectively
believes that there is a high probability that a fact exists, and
(2) the defendant can "almost be said to have actually known
the critical facts." Although the theory traditionally arises
in criminal law, the Court adapted the doctrine to "civil
lawsuits for induced patent infringement" based on its
"long history" and "wide acceptance in the Federal
Judiciary." The Court ruled that the jury had "more than
sufficient" evidence to find that Pentalpha had
"willfully blinded itself to the infringing nature of the
sales it encouraged Sunbeam to make," especially in light of
Pentalpha's decision to copy a foreign, unmarked version of
SEB's deep fryer and to withhold that fact from its patent
attorney.
The Supreme Court's decision in Global-Tech should be
a slight boost for manufacturers which create and sell imitative
products intended for domestic resale to consumers. Whereas
previously a patent owner could sue such a manufacturer for induced
infringement by simply alleging that the manufacturer "should
have had knowledge" of the infringed patent, now a patent
owner must plausibly allege that the manufacturer had "actual
knowledge" of the infringed patent's existence.
"Actual knowledge" may be satisfied by "willful
blindness." We predict, however, that juries will be confused
by the elements of that doctrine: What is the defendant's
"subjective intent"? What is a "high
probability"?—Preponderance of evidence? Clear and
convincing evidence? Beyond a reasonable doubt? And what
constitutes a "deliberate action" to avoid confirming
that probability? Patent litigation under an induced infringement
theory just got more complicated.
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