Supreme Court Hears Oral Argument In Induced Infringement Case

On February 23, 2011, the Supreme Court heard oral argument from the parties in Global-Tech Appliances, Inc. v. SEB S.A. The argument focused on the proper legal standard for the intent element of induced infringement under 35 U.S.C. § 271(b).

The dispute in this case began when defendant Pentalpha Enterprises, Ltd. (“Pentalpha”) purchased and copied the inventive features of plaintiff SEB S.A.’s (“SEB”) patented deep fryer, to create its own. During this time frame, Pentalpha also contacted its attorneys, asking that a patent search be conducted, and requesting right-to-use opinion regarding whether any of these patents read on its deep fryer. In doing so, however, Pentalpha failed to inform its counsel that in creating its deep fryer it had copied features of the SEB deep fryer. After receiving the opinion of counsel, Pentalpha began selling its deep fryers and SEB filed suit for induced infringement in the Southern District of New York.

At the district court, in a motion for judgment as a matter of law, Pentalpha and it’s parent company Global-Tech Appliances, Inc. (“Global-Tech”) (which will collectively be referred to as “Pentalpha”) argued that SEB had failed to produce evidence that Pentalpha had knowledge of the SEB patent. The court denied Pentalpha’s motion, reasoning that specific intent to induce could be inferred from the fact that Pentalpha asked its attorneys to conduct a patent search and sought an opinion of counsel regarding the technology, but did not disclose to its attorneys that it had copied the SEB product.

On appeal at the Federal Circuit, the court reiterated that in order to prove intent, under DSU Medical Corp. v. JMS Co., Ltd., the patentee must prove that the defendant knew of the patent. In the past this had been done by showing evidence of knowledge in fact. The Federal Circuit stated, however, that DSU did not “set out the metes and bounds of the knowledge-of-the-patent requirement.” The Federal Circuit then held that one may also prove knowledge of the patent by showing “deliberate indifference of a known risk” that a protective patent exists. The court defined the deliberate indifference standard as “active disregard of a known risk,” evidence that the defendant “consciously avoided knowledge of what would otherwise have been obvious to him.” The Federal Circuit affirmed the district court, finding that “Pentalpha deliberately ignored the risk that SEB had a patent that covered its deep fryer,” and therefore had the requisite intent to induce infringement.

During oral argument at the Supreme Court, Pentalpha asserted that the Court should adopt an “actual knowledge” standard. In contrast, SEB argued that the Court should allow intent to be shown by “constructive knowledge,” favoring a “should have known” standard. Much discussion also centered around the possibility of allowing knowledge to be demonstrated by “willful blindness.” Overall, the Justices appeared to be generally receptive to some sort of constructive knowledge standard and to be unsympathetic to Pentalpha’s failure to inform its counsel of its copying. Justice Scalia questioned Pentalpha’s motives, stating “I find that really incredible that, in an honest attempt to find whether there was any patent infringement going on, you wouldn’t even tell the patent attorney that you’ve reverse-engineered somebody else’s product.” Justice Alito agreed, stating “[i]f this is not willful blindness, I don't know what willful blindness is.” Justice Breyer, Justice Sotomayor, and Chief Justice Roberts showed great concern with how to articulate the opinion to “quantify the risk” a party would need to know about in order to have some form of constructive knowledge, in order to protect innocent actors. A decision by the Court is expected in the summer of 2011.

The transcript of the oral argument may be found at http://www.supremecourt.gov/oral_arguments/argument_transcripts/10-6.pdf . The audio will follow on the Supreme Court’s website shortly .