The U.S. Supreme Court has opened a new term by agreeing to hear yet another patent law case. On October 12, 2010, the Court granted a writ of certiorari in Global-Tech Appliances, Inc. v. SEB S.A. to clarify the legal standard for inducing infringement of a patent. The specifi c question to be addressed is the requisite state of mind of the infringer. Entities that routinely assert or defend against claims of induced infringement should closely monitor this case as it promises to impact what is required to prove inducement of infringement.
Section 271(b) of the Patent Act provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” The question presented in this case is whether the legal standard for the state of mind element of a claim for actively inducing infringement is “deliberate indifference of a known risk” that an infringement may occur or “purposeful, culpable expression and conduct” to encourage an infringement. The Federal Circuit has struggled to settle on a precise legal standard for this state of mind element in the past.
Background and District Court Decision
SEB S.A. (“SEB”) owns U.S. Patent No. 4,995,312 (“the ‘312 patent”), which is directed to deep fryers. Pentalpha Enterprises, Ltd. (“Pentalpha”), a wholly-owned subsidiary of Global-Tech Appliances, Inc. (“Global-Tech”), manufactures household deep fryers in China and sells them to other companies for subsequent sale in the U.S. Some of Pentalpha’s deep fryers that were sold in the U.S. were admittedly reverse-engineered after inspection of a similar SEB deep fryer.
In 1997, Pentalpha obtained a freedom-to-operate opinion from a U.S. attorney for its reverseengineered fryer. The attorney analyzed several patents and determined that their claims did not read on the Pentalpha fryer. However, Pentalpha did not inform the attorney of their reverse engineering, and the attorney did not uncover the ‘312 patent. Pentalpha eventually learned of the existence of the ‘312 patent on April 9, 1998.
In August of 1999, SEB sued Pentalpha for infringing the ‘312 patent in the U.S. District Court for the Southern District of New York. Pentalpha argued that it could not be liable for induced infringement before April 9, 1998, because it did not actually know of the ‘312 patent prior to that date. The District Court held that Pentalpha did induce infringement of the ‘312 patent because it “knew or should have known” that its actions would induce actual infringement.
The Federal Circuit Decision
On February 5, 2010, the U.S. Court of Appeals for the Federal Circuit upheld the District Court’s holding that Pentalpha induced infringement of the ‘312 patent. Under the Federal Circuit’s 2006 decision in DSU Medical Corp. v. JMS Co., Ltd., the requirement that an accused infringer “knew or should have known” that its actions would induce actual infringement includes the requirement that the accused infringer “knew of the patent.” Here, however, the court held that direct evidence that the accused infringer actually knew of the patent is not required if there is adequate evidence that the accused infringer “deliberately disregarded a known risk” of the existence of the patent. In reaching its decision, the court noted (1) Pentalpha’s failure to disclose its reverse engineering efforts to opinion counsel, (2) the patent savvy of Pentalpha’s President, and (3) an existing business relationship between Pentalpha and SEB. Pentalpha fi led a petition for rehearing en banc, which was subsequently denied.
The Certiorari Petition and Briefs
Global-Tech’s petition for certiorari was aided by an amicus brief fi led by a group of 26 academics. Global-Tech and the amici argue that the Federal Circuit’s “deliberate indifference” standard confl icts with the Supreme Court’s 2005 decision in MGM Studios, Inc. v. Grokster, Ltd., and that the “deliberate indifference” standard is not clearly articulated. In the Grokster decision, the Court held that the state of mind element for actively inducing patent infringement requires “affi rmative intent that the product be used to infringe.” SEB’s brief in opposition argues that “deliberate indifference to a known risk is not different from actual knowledge, but is a form of actual knowledge,” and that the Federal Circuit’s decision in this case is in harmony with the Grokster decision. SEB further argues that the “deliberate indifference” standard is a practical, workable test that provides courts with fl exibility
What’s at Stake?
Entities that routinely assert or defend against claims of induced infringement should closely monitor this case as it promises to impact the ease with which induced infringement may be alleged and proven.
We will be actively monitoring this case as it progresses.