On February 5, 2010, in SEB v. Montgomery Ward & Co., Inc., 594 F.3d 1360 (Fed. Cir. 2010), the United States Court of Appeals for the Federal Circuit revisited the standard for proving inducement of patent infringement in light of their decision in DSU Medical Corp. v. JMS Co., Ltd., 471 F. 3d 1293 (Fed. Cir. 2006) (en banc). In SEB, a panel led by Judge Rader affirmed the district court’s denial of Pentalpha Enterprises’ motion for judgment as a matter of law on SEB’s claim that Pentalpha had induced infringement of the asserted patent. The Federal Circuit rejected Pentalpha’s argument that DSU Medical requires a patentee to prove the alleged infringer had actual knowledge of the patent.
Section 271(b) of the Patent Act states, “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” While a party is traditionally liable for so-called direct patent infringement only when it makes, uses, sells, offers for sale or imports an infringing product into the United States, or supplies substantial components of that product for export from the United States, § 271(b) extends the reach of U.S. patent laws, imposing liability for the direct infringement of others. Inducement is a particularly important theory in markets where product development and sales involve a combination of U.S. and international activities.
The court held in DSU Medical that a plaintiff must adduce evidence of culpable conduct, directed to encouraging another’s direct infringement, not merely that the inducer had knowledge of the direct infringer’s activities. The court further noted that “[t]he requirement that the alleged infringer knew or should have known his actions would induce actual infringement necessarily includes the requirement that he or she knew of the patent.” (emphasis added).
In SEB, patentee SEB sued manufacturer Pentalpha and Montgomery Ward for infringement of a patent claiming a deep fat fryer with an inexpensive plastic outer shell or skirt. Pentalpha purchased a SEB deep fat fryer and copied the design. After agreeing to supply an American seller, Pentalpha obtained a “right-to-use” study, but failed to inform the patent attorney that the company had copied SEB’s design.
The jury found infringement and inducement of infringement based on Pentalpha’s sales to Montgomery Ward. Pentalpha argued post trial that SEB had not shown that Pentalpha knew of the patent, as required by DSU Medical. The Federal Circuit noted that in DSU Medical, the alleged infringer knew of the patent and therefore the court had not addressed the scope of the knowledge requirement. As in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), the court turned to caselaw from other civil contexts to determine that “‘deliberate indifference’ is not necessarily a ‘should have known’ standard” but rather a “form of actual knowledge.” Inducement may be established by showing that the defendant deliberately disregarded the risk that a patent existed. The failure to inform the patent attorney of the direct copying and the president’s familiarity with U.S. patent law provided “considerable evidence of deliberate indifference.” An alleged infringer may defeat a showing of deliberate indifference by establishing actual belief that a patent covering the accused product did not exist but Pentalpha provided no such evidence.
After SEB, patentees no longer have to prove actual knowledge, but may point to evidence of deliberate indifference by the alleged infringer. However, the Federal Circuit has another opportunity to address this standard: Pentalpha’s petition for rehearing en banc, asks: “Does a claim for inducing infringement under § 271(b) require that the inducer ‘knew of the patent,’ as set forth in DSU . . . or does it merely require . . . that the inducer ‘deliberately ignored the risk that [the plaintiff] had a patent that covered its [product]’?”