WHAT IS INDUCED INFRINGEMENT?
The US Patent Act says that anyone who assists others in infringing a patent is held to secondary liability. Section 271 of the Patent Act differentiates between contributory infringement (supplying parts or services) and induced infringement (directing another to infringe).
The Act says: “Whoever actively induces infringement of a patent shall be liable as an infringer.” Such infringement could pertain to a manufacturer that sells a non-infringing product with instructions to assemble an end product that ultimately infringes a patent.
Induced infringement has been addressed in DSU Med Corp v JMS Co, in which the Federal Circuit used a knowledge of infringement standard to support a finding of liability under Section 271.
In MGM Studios Inc v Grokster, the Supreme Court held that “purposeful, culpable expression and conduct” must be found.
WHAT QUESTIONS ARE BEFORE THE SUPREME COURT?
The Supreme Court is considering the legal standard for state of mind element of a claim for actively inducing infringement. The Federal Circuit sided with SEB in that a “deliberate indifference” to a known risk of infringement is enough. Global-Tech, meanwhile, asserts that “purposeful, culpable expression and conduct” should be required – a higher standard.
WHAT DID THE FEDERAL CIRCUIT SAY?
In its opinion, the Federal Circuit declined to set boundaries for the type of knowledge needed for inducement, as it hadn’t in DSU.
The court said: “A claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit. This case shows such an instance”.
Though actual evidence of deliberate disregard was never presented, the court said that Pentalpha’s failure to inform its US attorney that it had developed its product based on SEB’s deep fryer was enough.
For its part, Global-Tech never argued that it believed a patent covering the deep fryer didn’t exist.
WHO WILL IT IMPACT?
This case is of particular interest to technology and internet companies, many of whom filed amicus briefs in overwhelming support of Global-Tech’s position to raise the standard for inducement. Among those calling for a reversal of the Federal Circuit decision are Google, Facebook, INTEL and Dell.
“I think those companies are concerned they’re going to be hurt by this,” said Barry Herman of Oblon Spivak McClelland Maier & Neustadt. “They’re the ones getting hit a lot by patent trolls. To the extent the trolls have patents that the end user – the consumer – is infringing, they’re not going to sue individual people.”
Author and consultant Eric Bensen said the outcome has wider implications, and that a broad standard could result in several parties – the direct infringer, the inducer and the end user – being liable when infringement occurs.
In his brief, Stanford Law School professor Mark Lemley said the uncertainty of patent scope and validity, and the “almost glacial process of patent prosecution” make it impractical to conduct a patent search ahead of a product entering the market.
It’s quite common, he added, for manufacturers to introduce a product before conducting a search, opting to “wait and see” if a patentee claims infringement.
“The development of the practice of ‘wait and see’ is not reflective of a conscious disregard of the risk of the existence of conflicting patent claims, but a response to the inherent uncertainties of the patent system and a desire to conduct legitimate commerce in the face of those uncertainties,” he wrote.
Among those who filed amicus briefs in support of SEB, AIPLA said the wait and see practise uses a “wilful blindness to patents in order to avoid enhanced damages for wilful infringement”.
“If these corporations are ignoring patents, they are doing so at their peril with respect to direct infringement,” AIPLA wrote.
WHAT COULD CHANGE?
The Supreme Court likely will reverse or clarify the Federal Circuit’s inducement standard, Herman said. If so, he surmised there would be an increase in direct infringement cases because they are easier to prove.
“Some types of patents have claims that don’t lend themselves to assert direct infringement - I think there could be a decrease in those types of suits,” Herman said.
If the induced infringement bar is raised to require actual knowledge of an infringed patent, SEB supporters fear such a narrow restriction would render the inducement statute inapplicable.
“It’s a very, very high standard,” Bensen said. “Realistically, companies don’t go out of their way to infringe a patent just to infringe a patent.”
Bensen said: "The facts strongly suggest that Global-Tech knew about the patent, but just didn’t want to create direct evidence of that knowledge. How often would you find that kind of evidence, [such as] a memo in the company’s files saying, ‘we know the patent’s out there’? It’s not going to happen.”
WHEN WILL WE KNOW?
A decision will likely be rendered before the end of the term in June.
