Supreme Court Rules on Induced Infringement Case

June 8, 2011 – Blog Post

On May 31, 2011, the Supreme Court issued its opinion in Global-Tech Appliances, Inc. v. SEB S.A. The opinion was focused on the proper legal standard for the intent element of induced infringement under 35 U.S.C. § 271(b).

Relevant Facts

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 a right-to-use opinion regarding whether any of these patents covered 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. Pentalpha’s attorney failed to find the SEB patent in its search and provided Pentalpha with an opinion. 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”) (collectively “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.

Oral Argument

The Supreme Court heard oral argument in this case on February 23, 2011. For more details on the argument, see our March 1, 2011 article entitled “Supreme Court Hears Oral Argument In Induced Infringement Case.”

Supreme Court Opinion

The question presented to the Court was “[w]hether the legal standard for the state of mind element of a claim for actively inducing infringement under 35 U.S.C. § 271(b) is ‘deliberate indifference of a known risk’ that an infringement may occur … or ‘purposeful, culpable expression and conduct’ to encourage an infringement …?” The Court found it is neither.

The Supreme Court’s 8-1 majority opinion was written by Justice Alito and joined by Justices Roberts, Scalia, Thomas, Ginsburg, Breyer, Sotomayor, and Kagan. Justice Kennedy authored a dissenting opinion.

In assessing the appropriate state-of-mind, or “knowledge,” standard for induced infringement, the Court first looked to the statutory language of 35 U.S.C. § 271(b). The Court stated that in referring to a party that “induces infringement,” the statute could be interpreted as requiring “merely that the inducer lead another to engage in conduct that happens to amount to infringement …” or “that the inducer must persuade another to engage in conduct that the inducer knows is infringement.” In the Court’s reading either was possible. Thus, the Court turned to case law.

The Court found that it’s pre-1952 case law, the law pre-dating the enactment of § 271, was also susceptible to conflicting interpretations. However, the Court found assistance in its contributory infringement decision in Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II). In Aro II, the Supreme Court found that knowledge of the patent was required to find contributory infringement under 35 U.S.C. § 271(c). The Court observed that, since Aro II, this requirement had become a fixture in the law and noted that in nearly half a century since that decision, Congress had not altered § 271(c)’s intent requirement. It then held that the same knowledge should be required to find induced infringement under § 271(b). “It would thus be strange to hold that knowledge of the relevant patent is needed under § 271(c) but not under § 271(b).”

Having determined that knowledge of the patent is required under § 271(b), the Court then determined that “willful blindness” could satisfy that knowledge requirement. “Willful blindness,” it noted, is a concept well established in criminal law. The Court stated it could see no reason why the concept of “willful blindness” should not also apply in civil suits for patent infringement. The Court identified two requirements of “willful blindness”: “(1) the defendant must subjectively believe that there is a high probability that a patent exists and (2) the defendant must take deliberate actions to avoid learning of that fact.” Having determined that “willful blindness” was the proper standard for the intent requirement, the Court then found that “deliberate indifference,” the standard set by the Federal Circuit, was not. “Deliberate indifference,” rather, departs from “willful blindness” in two respects. First, it permits a finding of knowledge of the patent when there is merely a “known risk” that the induced acts are infringing. Second, it does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities.

Despite its finding that the Federal Circuit had used the incorrect standard, the Supreme Court affirmed, finding that Pentalpha had in fact been willfully blind. The Court pointed to several of Pentalpha’s decisions for evidence of willful blindness. One such decision was Pentalpha’s choice to copy an overseas model of SEB’s product. The Court noted that Pentalpha’s CEO and President, John Sham, a named inventor on several other patents, was “well aware that products made for overseas markets usually do not bear U.S. patent markings.” The court also found fault in Pentalpha’s decision not to inform its attorney providing the right-to-use opinion “that the product to be evaluated was simply a knockoff of SEB’s deep fryer.” Justice Alito wrote, “we cannot fathom what motive Sham could have had for withholding this information other than to manufacture a claim of plausible deniability in the event that his company was later accused of patent infringement.” The Court determined that this evidence was more than sufficient for the jury to have found that Pentalpha willfully blinded itself and thus, affirmed the judgment of the Federal Circuit.

In his dissent, Justice Kennedy agreed with the majority that knowledge of the patent should be required, but disagreed as to whether “willful blindness” should satisfy that requirement. Justice Kennedy expressed his opinion that there was no need to invoke willful blindness for the first time in this case. Rather, he indicated that there was enough evidence to suggest knowledge based on Pentalpha’s conduct. Thus, in his opinion, the jury could have inferred knowledge from this conduct.