The US Supreme Court’s May 31, 2011 decision in Global-Tech Appliances, Inc. v. SEB, S.A. is the latest – and final – word in a string of decisions over the past five years defining the intent that must be shown for inducement of patent infringement. As discussed in our Spring 2010 Intellectual Property Update, the dispute involved two deep fryer manufacturers. The accused inducer, Pentalpha, developed its fryers by copying the non-cosmetic features of SEB’s patented “cool touch” fryer. Pentalpha obtained a “right-to-use” study from a US-based patent attorney, but did not tell him that their deep fryer copied SEB’s model.
After Pentalpha began selling its knockoffs to retailers in the United States, SEB sued for inducing infringement. A jury found that Pentalpha willfully induced infringement by its US customers.
Pentalpha argued in its post-trial motions that the jury’s finding of induced infringement under 35 USC §271(b) was not supported by sufficient evidence because Pentalpha did not actually know of SEB’s patent until it received the notice of the lawsuit. (The copied SEB fryer had been obtained in Hong Kong and was not marked with a patent number.)
The district court and then the Court of Appeals for the Federal Circuit rejected Pentalpha’s argument. The article in our Spring 2010 Intellectual Property Update explained that the Federal Circuit decision had articulated a standard for inducement requiring that (1) the inducer knew of the patent at the time of the inducement and (2) the alleged inducer knew or should have known that his actions would induce a third party’s actual infringement. The Federal Circuit found strong evidence that Pentalpha “deliberately disregarded a known risk that SEB had a protective patent.” Such disregard, the Court of Appeals held, is simply a form of actual knowledge sufficient to meet the knowledge requirement for inducement. The Supreme Court’s decision firmly rejects that standard.
On review, the Supreme Court first examined Section 271(b)’s language: “whoever actively induces infringement of a patent shall be liable as an infringer.” This language implies both the necessity of at least some intent and an affirmative act to bring about the desired result. The Court thus confirmed that inducement “requires knowledge that the induced acts constitute patent infringement.”
The Court then addressed – and rejected – the Federal Circuit’s holding that the actual knowledge requirement may be met by a showing of Pentalpha’s deliberate indifference to a known risk. Instead, the Court adopted the “doctrine of willful blindness.” Although traditionally limited to criminal cases, the Court observed that the doctrine is widely accepted in the federal judiciary system and could divine “no reason why [it] should not apply in civil lawsuits for induced patent infringement.”
The willful blindness standard also has two requirements: “(1) the defendant subjectively believes there is a high probability that a fact exists and (2) the defendant takes deliberate actions to avoid learning that fact.” Under that doctrine, a defendant cannot escape liability by deliberately shielding itself from clear evidence of critical facts that are strongly suggested by the circumstances, because a defendant that behaves in this manner is considered equally as culpable as one having actual knowledge. Put differently, 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 known the critical facts.”
The Court consequently held that Pentalpha was liable for inducement infringement for willfully blinding itself to the infringing nature of its conduct. The Court pointed to the fact that Pentalpha knew of SEB’s fryer’s significant sales in the United States and, indeed, copied all but the cosmetic features of SEB’s fryer. While the SEB fryer copied was an overseas model that was not marked with any patent numbers, Pentalpha’s CEO knew that overseas models rarely bear U.S. patent markings. Most damaging to Pentalpha, however, was the decision not to inform its patent attorney that the product analyzed knocked off SEB’s deep fryer. Taken as a whole, this evidence was more than sufficient to support a jury finding that Pentalpha subjectively believed “there was a high probability” that SEB’s fryer was patented, that Pentalpha took deliberate steps to avoid knowing that fact, and that it had willfully blinded itself to the infringing nature of the retailer’s sales.
To recap, the Court confirmed that inducement of patent infringement under Section 271(b) requires knowledge of the patent-in-suit and active steps to induce a third party to take actions that the alleged inducer knows will constitute infringement of the patent. The newly articulated standard of “willful blindness” allows a patent owner-plaintiff to establish liability for inducement with proof that falls short of absolute knowledge – but the proof required is more stringent than the “knew or should have known” standard previously articulated by the Federal Circuit. Whether this will reduce the frequency with which inducement is alleged remains to be seen. What is clear, however, is that the Global-Tech decision’s heightened standard makes inducement more difficult to prove.