Brinks Hofer Gilson & Lione: Supreme Court Holds Induced Infringement under Section 271(b) Requires Knowledge, Finds Knowledge Requirement Satisfied by Willful Blindness

Brinks Hofer Gilson & Lione: Supreme Court Holds Induced Infringement under Section 271(b) Requires Knowledge, Finds Knowledge Requirement Satisfied by Willful Blindness

On May 31, 2011, the Supreme Court of the United States, on appeal from the United States Court of Appeals for the Federal Circuit, issued its decision in Global-Tech Appliances, Inc., et al., v. SEB S.A., No. 10-6 [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]. Justice Alito, writing on behalf of an 8-1 majority, held that induced patent infringement under 35 U.S.C. § 271(b) requires knowledge that the induced acts constitute patent infringement. The Court rejected the Federal Circuit's "deliberate indifference" standard but held that the knowledge requirement of § 271(b) can be satisfied under the doctrine of willful blindness, which requires that the accused infringer: (1) "subjectively believe that there is a high probability that a fact exists" and (2) "take deliberate actions to avoid learning of that fact." The Court found that the evidence supported a finding of willful blindness by the defendant and upheld the Federal Circuit's finding of induced infringement under § 271(b).

Summary
Plaintiff-Respondent SEB is a manufacturer and seller of a patented "cool touch" deep fryer product. Defendant-Petitioner Pentalpha is a Hong Kong-based manufacturer of home appliances. Pentalpha supplied many of SEB's competitors with deep fryer products which were alleged to violate SEB's patent rights. Pentalpha copied all but the cosmetic features of SEB's deep fryer, manufactured its own version overseas and then shipped that version to its customers in the U.S. for sale under their respective trademarks. Although Pentalpha did not have actual knowledge of SEB's patent rights, the jury found, inter alia, that Pentalpha violated § 271(b) by actively inducing SEB's competitors to sell or offer to sell Pentalpha's deep fryers in violation of SEB's patent rights.

On appeal, the Federal Circuit rejected Pentalpha's argument that induced infringement requires actual knowledge and held that induced infringement requires only "that the alleged infringer knew or should have known that his actions would induce actual infringement." The Federal Circuit found that "Pentalpha deliberately disregarded a known risk that SEB had a protective patent" and that "[s]uch disregard . . . is not different from actual knowledge, but is a form of actual knowledge."

The Supreme Court held that induced infringement under § 271(b) requires knowledge that the induced acts constitute infringement. While the Court found that both the language of § 271(b) and the pre-1952 case law that this provision was meant to codify were susceptible to conflicting interpretations, the Court relied on its 1964 holding in Aro Mfg. Co. v. Convertible Top Replacement Co. (Aro II) [enhanced version / unenhanced version] to inform its decision. In Aro II, a majority of a divided Court held that a violator of § 271(c) must know "that the combination for which his component was especially designed was both patented and infringing." Because § 271(b) and § 271(c) "have a common origin in the pre-1952 understanding of contributory infringement" and "the language of the two provisions creates the same difficult interpretive choice," the Court opined that it would be "strange to hold that knowledge of the relevant patent is needed under § 271(c) but not under § 271(b)."

The Court rejected the "deliberate disregard for a known risk" test applied by the Federal Circuit and held that the knowledge requirement of § 271(b) can be satisfied under the doctrine of willful blindness borrowed from criminal law. The Court reviewed the history of the federal courts' application of the willful blindness doctrine and concluded that "a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts." This standard "surpasses recklessness and negligence" in that "a reckless defendant is one who merely knows of a substantial and unjustified risk of such wrongdoing," and "a negligent defendant is one who should have known of a similar risk but, in fact did not." The Court also explained that the Federal Circuit's "deliberate disregard for a known risk" test departs from the "willful blindness" test in two important ways: (1) "it permits a finding of knowledge when there is merely a 'known risk' that the induced acts are infringing" and (2) it "does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities."

Despite setting forth a heightened standard for knowledge under § 271(b), the Court still concluded that the evidence was sufficient to show knowledge under the willful blindness standard. The Court identified a number of facts that would support such a finding, including: (1) Pentalpha copied all but the cosmetic features of the SEB product; (2) Pentalpha chose to copy the overseas model of the product, despite knowing that the product was intended for the U.S. market and that overseas models usually do not bear U.S. patent markings; and (3) Pentalpha sought a right-to-use opinion from an attorney but did not disclose to the attorney that "the product evaluated was simply a knockoff of SEB's product." The court concluded that "[t]aken together, this evidence was more than sufficient for a jury to find that Pentalpha subjectively believed that there was a high probability that SEB's fryer was patented, that Pentalpha took deliberate steps to avoid knowing that fact and that it therefore willfully blinded itself to the infringing nature of [SEB's competitors and Pentalpha's customers] sales."

In his lone dissenting opinion, Justice Kennedy agreed with the majority that § 271(b) requires a showing that the defendant knew "the induced acts constitute[d] patent infringement." However, Justice Kennedy took issue with the invocation of the willful blindness doctrine because (i) "willful blindness is not knowledge" and (ii) facts that support willful blindness are often circumstantial evidence of actual knowledge. Justice Kennedy indicated that he would remand the case to the Federal Circuit for a determination as to whether the record supported a finding of actual knowledge.

Impact of the Decision
The Supreme Court heightened the knowledge requirement under § 271(b), thus making it more difficult to prove induced infringement without evidence that the accused infringer actually knew about a patentee's rights. However, by carving out an exception for cases involving willful blindness, the Supreme Court's new test for induced infringement still covers cases involving deliberate attempts to avoid or conceal a patentee's rights. The Supreme Court's holding may prompt patentees to focus more on theories of direct infringement, while providing accused infringers with more options to dismiss claims of induced infringement through dispositive motion practice. The decision may also lead a patentee, when possible, to place an infringing product's entire supply chain on notice of its patent rights to guarantee knowledge under § 271(b). Patent applicants also may consider drafting claims that are better suited for enforcement through a theory of direct infringement.

If you have any questions or wish to discuss how this decision may impact your company, please contact your attorney at Brinks Hofer Gilson & Lione.

This Client Alert is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or problems. Brinks Hofer Gilson & Lione does not intend to create an attorney-client relationship by offering this information and review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention. For further information, please contact a Brinks Hofer Gilson & Lione lawyer.

 

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