The Supreme Court Requires Knowledge of Patent Infringement to Justify Liability for Inducing Infringement, but “Willful Blindness” to Such Knowledge Equally Satisfies the “Knowledge” Requirement Under §271(b)

On May 31, 2011, the Supreme Court clarified an important question of patent law, namely, the level of knowledge required of a defendant accused of inducing patent infringement. Is actual knowledge required, or is a “should have known” standard sufficient to sustain liability for inducing infringement? This issue has become increasingly central to enforcement of patent rights in the U.S., in the increasingly global market for manufacture of products for importation into the United States. We identified this important case and the issue that it presented in our Legal Alert of October 14, 2010, just after the Court had granted certiorari in Global-Tech v. SEB. In SEB v. Montgomery Ward & Co., 549 F.3d 1360 (Fed. Cir. 2010), the case from which certiorari was sought and granted, the Federal Circuit appeared to have relaxed its holding in DSU Medical that required a patent infringement plaintiff to show that the alleged infringer knew or should have known that his actions would, in fact, result in direct infringement. The Federal Circuit there sustained a finding of induced infringement on a showing of “deliberate indifference” to potential patent rights. We concluded that this appeal presented an important question due to the apparent tension between the standards for indirect infringement in copyright and patent cases.

Today’s Supreme Court decision settles the issue, effectively by equating the standards in both areas of intellectual property protection enforcement. The Court now holds unambiguously “that induced infringement under §271(b) requires knowledge that the induced acts constitute patent infringement.” (Slip Op., at 10). Previously, the Federal Circuit endorsed a “knew or should have known” standard in its “deliberate indifference” holding in the SEB decision. The Supreme Court today rejected that standard in favor of the adoption of the “willful blindness” rule that has long been articulated in federal criminal jurisprudence. The “willful blindness” test requires that the defendant must subjectively believe that there is a high probability that a fact exists here, whether a product infringes a patent and that the defendant has taken deliberate actions to avoid learning of that fact. Although observing that the Federal Circuit’s articulated test “departs” from a traditional articulation of the law of “willful blindness,” the Court nevertheless affirmed the judgment presented for review.

The reason for affirming the decision presented for review turned on the level of affirmative efforts that the Defendant had taken to shield itself from knowledge of the infringement of the asserted patent. The Defendant in this action knew of the asserted patent through a previously filed action, yet persisted notwithstanding in manufacturing the infringing product, which it admittedly had copied (except for cosmetic and irrelevant details) from the patented product. The Defendant had also sought an opinion from patent counsel without calling that lawyer’s attention to the asserted patent; the searching lawyer had not found the asserted patent, and the Supreme Court concluded that there could be no credible justification for failing to identify the asserted patent for the lawyer giving it an opinion. Although the District Court had not charged the jury in accordance with the newly described test and the Federal Circuit had not applied the proper standard, the Supreme Court nevertheless surveyed the record to conclude that the trial evidence “when viewed in the light most favorable to the verdict for [the plaintiff] is sufficient under the correct standard.” (Slip Op., at 14). Justice Kennedy filed the lone dissent, arguing that only actual knowledge, not constructive knowledge, imputed through application of the willful blindness formulation should suffice to impose liability for induced patent infringement. Justice Kennedy would have remanded to the Court of Appeals to do what the Supreme Court did here, namely, review the Record for the sufficiency of the evidence in light of the new standard, an approach that Justice Kennedy believed inappropriate.

It is hard to escape the conclusion that the manifestly egregious and unjustified conduct of the Defendant’s efforts to “hear, see and speak” no patent infringement respecting the product it admittedly copied carried the day.

What are the practical consequences for the future? First, though the actual metes and bounds of the willful blindness test are somewhat nebulous, even under the long history of its jurisprudence in criminal law, the principal lesson from this decision is that a foreign manufacturer cannot affirmatively take steps to shield itself from knowledge of an asserted patent and thereby avoid liability for inducing infringement. Second, U.S. based purchasers should not be lulled into complacency by the new standard. The overall message is clear and admonitory: the United States will protect intellectual property, subject to the protections of U.S. law, and willful blindness to the reach of U.S. patent law is no defense.