On May 31, 2011, the United States Supreme Court ruled in Global-Tech v. SEB on the requisite level of knowledge that must be established to prove a claim for active inducement under patent law. Farella recently hosted a discussion on this topic, and we thought this would be a good follow-up for those who attended or are otherwise interested.
Active inducement is a critical intellectual property issue for businesses today. If you are a company providing products and services you need to know the boundaries of the doctrine so that you can be careful not to engage in activity that could be viewed as inducing infringement by others. And if you are an owner of intellectual property, you should know your rights vis-à-vis parties who may not themselves be directly infringing on your intellectual property, but who nevertheless may be causing others to infringe.
The active inducement doctrine has application in both patent and copyright law, and opinions in each of these areas borrow from one another. In the highly-publicized MGM v. Grokster matter, for example, where the Supreme Court found that the peer-to-peer file sharing site Grokster was actively inducing copyright infringement, the Court relied upon cases from patent law.
Global-Tech is the most recent chapter in the active inducement story. In an 8-1 ruling, with Justice Kennedy dissenting, the Court ruled that, (a) "induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement," (b) "willful blindness" is sufficient to establish "knowledge" for active inducement, and (c) the facts in the Global-Tech record were sufficient to affirm the judgment below under this standard (i.e. to find that the alleged inducer had willfully blinded itself to a likelihood that the accused product would infringe a US patent). For there to be willful blindness, "(1) the defendant must subjectively believe that there is a high probability that a fact exists, and (2) the defendant must take deliberate actions to avoid learning of that fact." Willful blindness "surpasses recklessness and negligence." As requested by Google, Microsoft and other amici, the Court ruled that "deliberate indifference to a known risk," the scienter standard applied by the Federal Circuit, was too low a standard.
The facts in Global-Tech were that a foreign manufacturer of deep-fryers had copied a French deep fryer design and obtained a freedom to operate (a.k.a. a "right to use") study from a U.S. patent attorney. The foreign manufacturer, when instructing the patent attorney, omitted that the deep-fryer was a copy. (Remarkably, the client who didn't tell his patent attorney that the product was copied was "Mr. Sham.") The heart of the Court's conclusion is here:
Also revealing is Pentalpha's decision to copy an overseas model of SEB's fryer. Pentalpha knew that the product it was designing was for the U.S. market, and Sham-himself a named inventor on numerous U.S. patents-was well aware that products made for overseas markets usually do not bear U.S. patent markings. Even more telling is Sham's decision not to inform the attorney from whom Pentalpha sought a right-to-use opinion that the product to be evaluated was simply a knockoff of SEB's deep fryer. On the facts of this case, 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. Nor does Sham's testimony on this subject provide any reason to doubt that inference. Asked whether the attorney would have fared better had he known of SEB's design, Sham was non responsive. All he could say was that a patent search is not an "easy job" and that is why he hired attorneys to perform them.
Justice Kennedy was the lone dissenter, writing that because the statute uses the word "knowledge" it is improper to extend its reach to "willful blindness," and that in any event the record below was unclear on the question of whether the willful blindness standard was satisfied, so a remand was necessary.
Global-Tech lessened the "purposeful, culpable expression and conduct" standard for knowledge of infringement set forth in Grokster but applied a higher scienter standard than that applied by the Federal Circuit. Commentators see this willful blindness standard for knowledge being imported not just into the realm of copyright law, but also possibly more broadly into the criminal law context.