Global-Tech v. SEB: The Supreme Court Alters the Intent Requirement for Induced Infringement in Patent Cases Under 35 U.S.C. § 271(b)
On May 31, 2011, the Supreme Court issued its decision in Global-Tech Appliances, Inc. v. SEB S.A., a case involving the proper legal standard for inducing infringement of a patent under 35 U.S.C. § 271(b). By an 8-1 vote, the Court held that liability under § 271(b) requires specific intent—i.e., that the accused inducer have knowledge that the induced acts constitute patent infringement. The Court further held, however, that this "knowledge" requirement can be met by showing "willful blindness" by the defendant, i.e., that the defendant (1) "subjectively believe[s] that there is a high probability" that a patent exists and that the defendant's acts infringe that patent; and (2) "take[s] deliberate actions to avoid learning" about those facts.
In so holding, the Court rejected the Federal Circuit's "deliberate indifference" test for intent in favor of its newly announced "willful blindness" standard. In a lone dissent, Justice Kennedy opposed the majority's view that willful blindness could amount to actual knowledge, and warned of the ramifications of equating such a standard with knowledge.
By requiring specific intent, Global-Tech arguably makes it harder to prove induced infringement but softens the necessary showing somewhat by allowing "willful blindness" to satisfy the Court's "knowledge" requirement. In the end, the new test made no difference to the result, for the Supreme Court upheld the finding of induced infringement that was sustained under the Federal Circuit's now-discredited "deliberate indifference" standard. So while the legal test is now different, what difference it will make to the results of future cases remains to be seen.
The Test for Inducement Before Global-Tech
Section 271(b) of Title 35, United States Code, provides that "whoever actively induces the infringement of a patent shall be liable as an infringer." The term "inducement" covers a range of actions by which one might cause, urge, encourage, or aid another to infringe a patent.
In order to prove inducement, the Federal Circuit has long required a patentee to show that the accused inducer has been "actively and knowingly aiding and abetting another's direct infringement." This was commonly broken out into two prima facie elements: (1) that the conduct being induced by the defendant constitutes direct infringement by another, and (2) that the alleged inducer knowingly induced infringement, and possessed the specific intent to encourage another's infringement.
For decades, courts have grappled with the issue of the requisite intent for inducement liability. Was the intent requirement satisfied by a showing that the defendant intended to induce the acts leading to the direct infringement? Or did it require an intent to induce another's actual infringement? In 2006, the Federal Circuit appeared to answer this question in DSU Medical Corp. v. JMS Co., Ltd., by adopting the latter, more stringent, standard. DSU Medical held that the alleged inducer must possess specific intent to purposefully and culpably encourage another's infringement (i.e., that the accused inducer knew or should have known that his action would induce actual infringements). Of particular importance here, DSU Medical also held 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."
But the Federal Circuit's decision in Global-Tech seemed to run counter to DSU Medical by holding that "a claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit." Instead, "deliberate indifference" to the existence of a patent was sufficient to meet the "specific intent" element for inducement.
That conflict between DSU Medical and Global-Tech set the stage for the Supreme Court's review.
Global-Tech's Factual and Procedural Background
The Global-Tech case was about a deep fryer for use in home kitchens. In August 1999, SEB sued Pentalpha for induced infringement of U.S. Patent No. 4,995,312 (the "'312 patent"). That patent claims a deep fryer having a configuration of a deep fryer pan and an outer plastic shell, or skirt, that functions as an insulation layer around the pan. This innovative design ensures that the external surfaces of the deep fryer remain cool during its use. SEB sold its patented deep fryer in the United States under the well-known "T-Fal" brand.
In 1997, Sunbeam Products, a U.S. competitor of SEB, asked Pentalpha to supply Sunbeam with deep fryers that could be sold in the U.S. In developing what became the product accused of infringing the '312 patent, Pentalpha bought an SEB deep fryer in Hong Kong and copied all but its cosmetic features. Moreover, since the SEB deep fryer was purchased in Hong Kong, it did not bear any U.S. patent markings. Pentalpha subsequently sought a clearance opinion from an attorney in the United States with respect to its deep fryer but did not tell the attorney that it had copied SEB's product. While the clearance opinion stated that Pentalpha's deep fryer did not infringe any of the U.S. patents that the attorney had found and analyzed, the attorney never found or analyzed SEB's '312 patent. Pentalpha went on to sell its deep fryers to Sunbeam, Fingerhut Corp., and Montgomery Ward & Co., who all subsequently sold them in the United States.
Following a trial, the jury found that Pentalpha was liable under § 271(b) by actively inducing Sunbeam, Fingerhut, and Montgomery Ward to sell, or offer to sell, the infringing deep fryers in the U.S. In post-trial motions, Pentalpha argued that the jury's finding on inducement was erroneous since Pentalpha did not actually know of the '312 patent until it received notice of SEB's separate patent infringement suit against Sunbeam in 1998. The District Court rejected this argument and upheld the jury's finding of inducement. Pentalpha subsequently appealed to the Federal Circuit.
The Federal Circuit's Decision
On appeal, the Federal Circuit affirmed the District Court's ruling on inducement. Relying on its decision in DSU, the Federal Circuit first explained that inducement liability under 35 U.S.C. § 271(b) requires that "the alleged [inducer] knew or should have known that his actions would induce actual infringements." That standard, the Federal Circuit reasoned, "necessarily includes the requirement that [the accused inducer] knew of the patent." Further, inducement liability must be based on proof of "specific intent to encourage another's infringement."
Then, relying on other circuits' precedents, the Federal Circuit held that "‘specific intent' in the civil context is not so narrow as to allow an accused wrongdoer to actively disregard a known risk that an element of the offense exists." Such "deliberate indifference" to a known risk, the court reasoned, "is not different from actual knowledge, but is a form of actual knowledge."
Applying this new standard of "deliberate indifference," the Federal Circuit upheld the district court's judgment, ruling that SEB proved specific intent for inducement under § 271(b), even if Pentalpha did not actually know of the '312 patent before 1998. Specifically, the court noted that the evidence supported a finding that Pentalpha deliberately disregarded a known risk that SEB had a protective patent. To this end, the Federal Circuit relied on the following key facts:
- Pentalpha purchased an SEB deep fryer in Hong Kong and copied all but the external appearance;
- The SEB deep fryer purchased by Pentalpha did not have any U.S. patent markings;
- Pentalpha hired an attorney to conduct a right-to-use study but did not tell the attorney that Pentalpha had copied the SEB product;
- Pentalpha's president had substantial experience with the U.S. patent system and was himself a named inventor on 29 U.S. patents; and
- Pentalpha did not produce any exculpatory evidence to SEB's allegations of specific intent (i.e., that Pentalpha did not believe that a patent covering the accused product existed, even if Pentalpha could claim not to "know" of such a patent).
The Supreme Court Majority Opinion
In an 8-1 decision, the Supreme Court affirmed the Federal Circuit's ruling concluding that Pentalpha was liable for inducing infringement of SEB's '312 patent. The Court's opinion, authored by Justice Alito, contains two significant holdings.
1. Inducement Requires Knowledge that the Induced Acts Constitute Patent Infringement. First, the Court considered what type of knowledge (i.e., intent), if any, is required under § 271(b). In analyzing this issue, the Court began with the language of § 271(b) itself. Since § 271(b) did not specifically speak to the issue of intent, the Court determined that two interpretations were possible: (1) that one must merely induce another to engage in acts that ultimately amount to direct infringement, or (2) that one must induce another to engage in acts that the inducer knows to be infringing.
The Court found similar ambiguity regarding intent when looking at case law prior to the Patent Act of 1952 (in which § 271 was first promulgated in order to codify general principles of contributory infringement). To resolve this ambiguity, the Court looked to its 1964 decision in Aro Mfg. Co. v. Convertible Top Replacement Co. ("Aro II"), where the Court held that contributory infringement, under § 271(c), could only be found where the accused infringer knew "that the combination for which his component was especially designed was both patented and infringing." While Aro II involved contributory infringement (i.e., § 271(c)), the Court noted that inducement had its origins in contributory infringement and, as such, should require the same level of intent. The Court thus concluded that proving induced infringement "requires knowledge that the induced acts constitute patent infringement."
2. The Knowledge Requirement Under § 271(b) Can Be Satisfied by "Willful Blindness." The Supreme Court then turned to the issue of whether intent under § 271(b) could be found through something less than direct evidence that the accused inducer had actual knowledge of the patent-in-suit. On this point, the Court determined that the Federal Circuit's intent standard—deliberate indifference to a known risk that a patent exists—was not the correct standard for proving intent under § 271(b). Rather, the Court held that the doctrine of "willful blindness," a stricter standard than "deliberate indifference," was more appropriate.
In considering the willful blindness standard, the Supreme Court began by noting its widespread use in U.S. criminal law, and its purpose to impose liability on those defendants who "deliberately shield[ ] themselves from clear evidence of critical facts that are strongly suggested by the circumstances." Put simply, willful blindness can be thought of as a form of actual knowledge, since a "person[ ] who know[s] enough to blind themselves to direct proof of critical facts in effect ha[s] actual knowledge of those facts." Given its wide acceptance within the federal judiciary as applied in criminal matters, the Supreme Court reasoned that willful blindness could equally apply in the civil context, and specifically with respect to induced infringement in a patent case.
The Court went on to describe the two-part test for showing 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." The Court further stated that the test for willful blindness requires more than mere recklessness or negligence, and described the differences among those standards as follows:
- Willfully Blind: "[O]ne who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts."
- Reckless: "[O]ne who merely knows of a substantial and unjustified risk of such wrongdoing."
- Negligent: "[O]ne who should have known of a similar risk but, in fact, did not."
Finally, the Supreme Court offered two distinctions between the Federal Circuit's deliberate indifference standard and the Court's new willful blindness standard—first, the Federal Circuit's standard allowed a finding of intent where only "known risk" exists; and, second, the Federal Circuit's rule did not require active efforts to avoid knowing about the infringing nature of the activities.
Although it used a different test for intent, the Supreme Court upheld the Federal Circuit's finding of inducement against Pentalpha, since the facts as presented—even under the correct willful blindness test—led to the same result. In the words of the Court, "[t]he jury could have easily found that before April 1998 Pentalpha willfully blinded itself to the infringing nature of the sales it encouraged Sunbeam to make."
Justice Kennedy's Dissenting Opinion
Justice Kennedy issued a dissenting opinion, which began by agreeing with the majority that, like § 271(c), § 271(b) necessarily requires that "a defendant must know the induced acts constitute patent infringement." Justice Kennedy parted company with the rest of the Court, however, because he viewed the new "willful blindness" standard as less than "actual knowledge." In his words: "Willful blindness is not knowledge; and judges should not broaden a legislative proscription by analogy." Justice Kennedy also believed that the Court should have remanded for application of the new legal standard instead of affirming the judgment outright.
To better illustrate the problem he saw in the Court's new test, Justice Kennedy noted that the "willful blindness" standard had the potential to ensnare an accused inducer who actually possesses a good faith belief that the induced acts do not infringe, based on the totality of the circumstances: "The alleged inducer who believes a device is noninfringing cannot be said to know otherwise."
While freely conceding that "[f]acts that support willful blindness are often probative of actual knowledge," and that a jury could properly infer actual knowledge from the facts presented in this case, Justice Kennedy believed that a jury should have been given the chance to draw that inference (or not) rather than having the Court examine the sufficiency of the evidence under its new standard. That examination, Justice Kennedy said, should have been conducted on remand.
With its decision in Global-Tech, the Supreme Court's recent pattern of divergence with the Federal Circuit on substantive patent law issues continues.
The Court's new "willful blindness" standard appears to be incrementally more restrictive compared to the Federal Circuit's previous "deliberate indifference" test. In this case, inducement liability arose where a savvy competitor copied an unmarked product and did not inform its opinion counsel of that fact. It remains to be seen what other conduct might fall under this new intent standard. The precise contours of the Court's new test will be established in future cases. At minimum, though, after Global-Tech, a competitor cannot avoid inducing infringement by "burying its head in the sand," i.e., by taking deliberate actions to avoid learning of protective patents.
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Gregory A. Castanias
The author wishes to thank John C. Evans, Ph.D. and Jonathan A. Muenkel for their assistance in the preparation of this Commentary.
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