United States: The Federal Circuit Resolves Conflicting Precedent Regarding Intent Requirement For Patent Infringement By Inducement

On December 13, 2006, in DSU Medical Corp. v. JMS Co., Ltd., Appeal Nos. 04-1620, 05-1048, -1052 (Fed. Cir. Dec. 13, 2006), the United States Court of Appeals for the Federal Circuit clarified the intent requirement to prove infringement by inducement under 35 U.S.C. § 271(b). In considering the issue en banc, Judge Randall R. Rader stated that a patentee asserting infringement by inducement "has the burden of showing that the alleged infringer’s action induced infringing acts and that he knew or should have known his actions would induce actual infringements."

This ruling affirmed a final judgment on a jury verdict from the United States District Court from the Northern District of California, which found, in relevant part, that one of the three defendants was not liable for inducing infringement under Section 271(b). The Federal Circuit’s ruling resolves the apparent conflict regarding the "intent" requirement under that section of the Patent Act. Prior to this decision, some Federal Circuit cases held that a patentee could establish infringement under an inducement theory merely by showing that the alleged infringer intended to cause the acts of the third party that constitute direct infringement.

The DSU Medical Corp. case involved patent infringement claims by the manufacturers of guarded needle assemblies designed to reduce the risk of accidental needle stick injuries. The plaintiffs (collectively "DSU") brought claims of infringement under three theories, including infringement by inducement under Section 271(b). With respect to the inducement allegations, the jury returned a mixed verdict, finding that some defendants infringed under an inducement theory while others did not. DSU appealed the ruling.

On appeal, DSU argued that the district court improperly instructed the jury on the state of mind necessary to prove inducement to infringe under Section 271(b). Specifically, DSU argued that the jury should have been instructed, in accordance with Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464 (Fed. Cir. 1990), "that to induce infringement, the inducer need only intend to cause the acts of the third party that constitute direct infringement." DSU, 2006 WL 3615056, at *8, slip. op. at 15-16 (emphasis in original text). Instead, the trial court, DSU argued, erred by giving the following instruction, which reflected the Federal Circuit’s decision in Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553-54 (Fed. Cir. 1990):

DSU Medical Corp., 2006 WL 3615056, at *8, slip. op. at 16. DSU argued that "the instruction given to the jury is incorrect because it requires that the inducer possess specific intent to encourage another’s infringement, and not merely that the inducer had knowledge of the acts alleged to constitute infringement." Id.

In its analysis, the Federal Circuit noted that the relevant statute, Section 271(b), does not indicate whether a patentee is required to show that an alleged infringer intended to induce the infringement or merely that the purported infringer intended to engage in the acts that induced the infringement, regardless of whether it knew it was causing another to infringe. The Court looked to a recent Supreme Court case dealing with inducement in the copyright context, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 125 S. Ct. 2764 (2005), in which the Supreme Court favorably cited a Federal Circuit decision.

In Grokster, the Supreme Court stated that showing "an affirmative intent that the product be used to infringe … and that infringement was encouraged overcomes the law’s reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use." Grokster, 125 S. Ct. at 2779 (citation omitted). The Federal Circuit reasoned that, under Grokster, because the rule prohibiting inducement "premises liability on purposeful, culpable expression and conduct," a party is only liable for inducement if it offers a product with the object of promoting its use to infringe, as shown by clear expression or other affirmative steps taken to foster infringement. DSU Medical Corp., 2006 WL 3615056, at *8, slip. op. at 17 (citing Grokster, 125 S. Ct. at 2780) (emphasis added). The Federal Circuit used the analysis in Grokster to validate its prior holdings in Manville and Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 668 (Fed. Cir. 1988), both of which articulated an elevated intent requirement to establish inducement.

The Federal Circuit concluded that "[t]o establish liability under section 271(b), a patent holder must prove that once the defendants knew of the patent, they actively and knowingly aided and abetted another’s direct infringement. DSU Medical Corp., 2006 WL 3615056, at *8, slip. op. at 15 (internal quotation marks and citations omitted) (emphasis in original). This standard, by its nature, requires that a patentee show that the alleged infringer induced the infringing acts and knew or should have known its actions would induce actual infringement. That is, the "inducer must have an affirmative intent to cause direct infringement." Id. at *9, slip. op. at 18.

The Federal Circuit’s decision in this case could potentially enhance a patent owner’s burden of proving patent infringement by inducement under Section 271(b). Given the required level of culpability, it also creates an interesting question of whether a reasoned opinion of counsel could insulate a company from a charge of inducement.

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This article is for informational purposes and is not intended to constitute legal advice.