On May 31, 2011, the U.S. Supreme Court issued a decision affirming the results in
Global-Tech Appliances Inc. et al. v. SEB S.A., No. 10-6, 2011 WL 2119109 (U.S. May 31, 2011). In the 8-1 decision, the Supreme Court held that inducement of infringement requires knowledge that the induced conduct itself infringes, but this knowledge element can also be met by a showing of "willful blindness". The Court rejected the Federal Circuit Court of Appeals' prior adoption of a "deliberate indifference" standard.
The important takeaway from this decision is when you request a right to use study for a new product or process based on another product or process, you should always inform your patent attorney about that fact.
Trial Verdict and CAFC Ruling
Pentalpha, a subsidiary of Hong Kong based Global-Tech Appliances, was sued for infringing a deep fryer patent of French appliance maker SEB S.A. At trial, it was found that Pentalpha studied various deep fryer models in that market, including that of SEB, before developing its own deep fryer. Pentalpha obtained a written opinion from U.S. patent counsel that its product did not infringe any U.S. patent, but had not informed counsel that its product has some of SEB's product features. Counsel's search did not reveal SEB's patent. Pentalpha's witnesses testified that they did not know of the patent until SEB sued Pentalpha's customer for patent infringement in April, 1998. When SEB then also sued Pentalpha in Aug. 1999, Pentalpha argued that it could not be liable for actively inducing infringement until the April 1998 date, as it did not know about the SEB patent before that date.
The jury returned a verdict against Pentalpha for both inducing infringement and for willful infringement. The District Court awarded almost $5 million in damages and costs. The CAFC affirmed the verdict on appeal, ruling that the evidence is sufficient to show Pentalpha's "deliberate indifference" as to whether its product might infringe a patent, and that satisfies the state of mind element for actively inducing infringement.
Indirect Infringement
There are generally two ways a party that did not directly infringe a U.S. patent can infringe a U.S. patent, namely inducement of infringement, and contributory infringement, 35 U.S.C. 271 (b) and (c):
35 U.S.C. 271 Infringement of patent.
(b) Whoever actively induces infringement of a patent shall be liable as an infringer.
(c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination, or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial non-infringing use, shall be liable as a contributory infringer.
Knowledge That the Induced Acts Constitute Patent Infringement
The Supreme Court reasons that BOTH contributory infringement and inducement of infringement require that the accused KNOWS that the third party's (the direct infringer's) conduct CONSTITUTES AN INFRINGEMENT. The Court also found that Willful Blindness is sufficient to support a finding of the requisite knowledge.
Willful Blindness, not Deliberate Indifference, Meets Knowledge Requirement
Willful blindness exists when two requirements are met: (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.” According to the Court, this combination properly gives willful blindness a narrow scope, i.e., making it harder to establish than recklessness or negligence. The Court noted that the willful blindness doctrine is well accepted in criminal law, and sees no reason it should not apply to civil patent cases.
The Court further explained that a “willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can be said to have actually known the critical facts.”
The Court rejected the CAFC standard of "Deliberate Indifference", as it does not satisfy the knowledge required by Section 271(b). Deliberate indifference does not require deliberate actions by the inducer to avoid knowing about the infringing nature of its activities.
The Court concluded that the evidence on record was sufficient to support a finding of "Willful Blindness" on the part of Pentalpha. Of note is the Court's mention of what it considered important in the evidence of record, as sufficient to support the willful blindness finding, including Pentalpha's incorporation of most of the non-cosmetic features of SEB's fryer; its choice of an overseas model of SEB’s fryer to copy, and Pentalpha's failure to inform its U.S. counsel that the product "was simply a knockoff of SEB's fryer."
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