What is the Standard for Active Inducement of Patent Infringement?
The “state of mind” requirement for “actively inducing” patent infringement was debated in oral arguments before the U.S. Supreme Court last month. The case of Global-Tech v. SEB SA raised the question of whether plain ignorance of a patent is enough to excuse an act that would otherwise be considered inducement of patent infringement if the defendant was aware of the patent.
U.S. patent laws distinguish between direct and indirect patent infringement. Simply put, direct infringement is an action that literally follows each and every step or element of patent claim. Indirect infringement, however, is harder to explain because it comes in two favors: contributory infringement and active inducement of infringement.
Contributory infringement is the sale of material components that have been especially made for use in a patented invention and have no substantial non-infringing use. To prove contributory infringement one must show the defendant intended direct infringement to occur. The contributory infringement section of the statute applies to those who sell components “knowing the same to be especially made or especially adapted for use in an infringement.”
Active inducement of infringement, on the other hand, applies to activities that cause someone else to infringe a patent. For example, someone who sells a product necessary to perform a claimed process – even if the product has non-infringing uses – can be found to have actively induced infringement of the claimed process if the product was sold with express instructions for use in the manner that would constitute infringement.
Asserting inducement has also become an effective weapon for U.S. patent holders to go after foreign manufacturers – as well as U.S. distributors – when the patent covers a product imported into the U.S. Increasingly, federal courts have disregarded defenses raised by foreign manufacturers who assert they only sold a product outside of the U.S. and they were not responsible for the actions of the buyers. In fact, this is precisely what happened in the Global-Tech case. SEB S.A., the plaintiff sued Sunbeam for direct infringement and Global-Tech for indirect infringement. After Sunbeam settled the charges against it, SEB S.A. continued to pursue the foreign manufacturer, Global-Tech.
Unlike contributory infringement, the section of the patent laws that defines inducement does not require a showing that the defendant intended that infringement occur. But it does require “active” inducement, which implies some knowledge requirement. Prior cases have held that it requires that the defendant knew or should have known that a U.S. patent existed that prohibited the method or product.
In the Global Tech case, the defendant (Global Tech’s Hong Kong subsidiary) entered into an agreement with a U.S. company (Sunbeam) to make deep-fryers to be sold in the U.S.by Sunbeam.
Global-Tech’s Hong Kong engineers went out and bought several deep-fryers including SEB’s “cool touch” fryer. The model they bought contained no patent number to alert the public that its design was covered by a U.S. Patent.
After a jury trial, Global-Tech’s subsidiary was found to have induced infringement under the U.S. patent laws by selling Sunbeam products which the subsidiary knew would be resold in the U.S. The trial judge did not instruct the jury that they had to find that the defendant also knew of the patent-in-suit when they sold the infringing goods.
On Appeal, the Court of Appeals for the Federal Circuit (CAFC) affirmed the decision. In doing so, the CAFC distinguished its own prior holdings that had suggested that active inducement necessarily includes a requirement that the inducer knew or should have known of the patent. Essentially, the appeals court relaxed this knowledge requirement by holding that “deliberate indifference” of a patent was enough to actively induce infringement.
The CAFC pointed to the finding that Global-Tech copied the SEB design by reverse engineering and didn’t check to see if the product was covered by patents. More damning was testimony that Global-Tech had asked a U.S. attorney to render a clearance opinion but failed to tell him that they copied the SEB product.
Global-Tech’s brief to the Supreme Court relies heavily on the Supreme Court’s 2005 decision in MGM Studios v. Grokster. Although Grokster was a copyright case, the Court relied on Section 271 (b) of the patent law as a guide for interpreting the meaning of “inducing copyright infringement.”
Global-Tech’s position was that the Grokster ruling requires that actively inducing infringement means “purposeful, culpable expression and conduct” to encourage an infringement.
Global-Tech also made a public policy argument that a “deliberate indifference” standard would stifle competition because companies that sell products or components they know will be resold in the U.S. will have to decide whether or not to commission a full and complete patent search before they bring products to market. Global-Tech argued that this heightened burden would discourage many companies from marketing competing products even when no patent protection exists
A number of influential companies with overseas operations, such as General Motors, Microsoft, Cisco, Intel and Hewlett Packard have lined-up with Global-Tech and filed “friend of the court briefs” opposing the “deliberate indifference” standard. Internet service providers, such as Google, Yahoo, Comcast and Facebook, were also supporters of Global-Tech – perhaps because they that have been hit with numerous patent infringement suits recently.
On the other hand, SEB’s brief to the Supreme Court argued that nothing in the statute or case law requires that an inducer of infringement have knowledge of the specific patent at issue. SEB further argues that if Congress had meant to include a knowledge requirement, it would have put one in just like it did in § 271(c) – the section that defines contributory infringement.
The oral arguments at the Supreme Court on February 23, 2011 suggest that the members of the Court were not comfortable with the “deliberate indifference” standard but they were also skeptical of Global-Tech’s innocence. Several of the justices appeared to regard the patent clearance that Global-Tech sought as a sham. Justice Ginsburg asked “if the attorney [who rendered Global-Tech’s clearance opinion] had been told this device copied the SEB fryer, isn’t it 99 and 44/100ths percent sure that the attorney would have found the patent?”
Predicting Supreme Court outcomes based on questions raised during oral arguments is often a dubious endeavor. The overall tenor of the justices’ questions and comments suggests that the Court is likely to affirm the decision holding Global-Tech liable for inducing infringement. But the Supreme Court’s reasoning is also likely to be different.
The “deliberate indifference” standard did not sit well with the Court because it seemed to be too low a threshold for liability. Chief Justice Roberts expressed concern that such a low standard on intent “would bring the semiconductor industry to halt.” He noted that there were 420,000 patents dealing with semiconductors and if you do virtually anything in that field, “you’re going to hit a semiconductor patent owned by somebody.” Justice Breyer also express concern that a low standard, such as indifference, would put at risk millions of people who make products that are used in millions of ways.
The Justices seemed to struggle to come up with an alternative standard for intent that was not too hot – but also not too cold. Justice Breyer posed several alternative standards for intent: “should have known,” “conscious disregard” and “willful blindness.”
“Willful blindness” may indeed be where the Supreme Court ends up. In an unrelated, but recent, case of United States v. Santos, 553 U.S. 507 (2008), which also turned on the issue of “intend,” the Court applied this standard and held that “willful blindness arises when a party, aware of a high probability of a fact, deliberately avoids learning the truth.”
