New “Deliberate Indifference” Standard May Make it Easier for Patent Owners to Prove Inducement of Infringement
In a recent decision, the Federal Circuit appears to have departed from prior precedent and held that, in order to prove a claim for inducement of infringement, a patent owner does not have to prove that the accused infringer actually knew of the patent-in-suit. SEB S.A. v. Montgomery Ward & Co., Inc. Instead, evidence of “deliberate indifference” to a known risk of the existence of a patent may be sufficient. This new “deliberate indifference” standard will likely make it easier for plaintiff-patent owners to prove inducement of infringement.
Prior Federal Circuit Cases Required “Actual Knowledge” of the Patent
Significantly, only three years earlier, an en banc panel of the Court held in DSU Medical Corp. v. JMS Co. that the “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.”
The prior DSU Medical decision appears to require that an accused infringer have actual knowledge of a patent in order to be liable for inducement. In attempting to distinguish DSU Medical, the SEB panel, however, asserted that DSU Medical did not set out the “metes and bounds” of the knowledge requirement. In making this assertion, the SEB panel relied heavily on non-patent and non-Federal Circuit cases.
The DSU Medical “knowledge of the patent” requirement, SEB holds, is met not only by actual knowledge but also by “deliberate indifference” to the existence of a patent. The Court’s reasoning, though, is not straightforward. To reach its holding, the Court does not discuss the knowledge of the patent requirement directly. Rather, the Court simply states that inducement requires the specific intent to encourage another’s infringement and that specific intent includes “deliberate indifference” in other civil actions. This approach assumes that the requirement of specific intent and the requirement of knowledge of the patent are not separate elements of proof of inducement. Rather, the Court conflates the two issues, treating the requirement of knowledge of the patent as one aspect of the proof of specific intent. From there, the Court implicitly reasons that because specific intent may be proven by a showing of “deliberate indifference,” then knowledge of the patent at issue may be proven in the same way.
The New “Deliberate Indifference” Standard is Not Clearly Defined
The Federal Circuit, however, provides little guidance on what constitutes “deliberate indifference.” On the one hand, the SEB panel rejected the assertion that “deliberate indifference” is synonymous with constructive knowledge, i.e. that the accused infringer “should have known” of the patent’s existence. On the other hand, the Court refused to hold that constructive knowledge is never sufficient to prove deliberate indifference. Instead, the Court stated that constructive knowledge is a purely objective test, while deliberate indifference may require a subjective determination that a defendant knew of and disregarded an obvious risk. To make the issue even less clear, the SEB panel also stated that “the standard of deliberate indifference of a known risk is not different from actual knowledge, but is a form of actual knowledge.” Further, the SEB panel stated that it “does not purport to establish the outer limits of the type of knowledge needed for inducement” and suggests that constructive knowledge of a patent combined with “persuasive evidence of disregard for clear patent markings” may be sufficient. As a result, the resulting new standard for “deliberate indifference” is not clearly defined and is open to district court or jury interpretation, presumably based on the particular facts of each case.
In SEB itself, there was no direct evidence that the defendant had actual knowledge of the patent, but the Federal Circuit held that there was adequate evidence that the defendant deliberately disregarded a known risk that the plaintiff had patented its product based on the following facts:
- the defendant purchased the plaintiff’s product in Hong Kong and copied it, but did not tell the counsel it hired to conduct a right-to-use study that it had copied, which was “highly suggestive” of deliberate
indifference.
- the defendant’s president was well-versed in the U.S. patent system and understood the plaintiff to be cognizant of patent rights.
- the defendant produced no exculpatory evidence that it believed there were no patents covering the accused product.
The first factor of copying points toward culpable conduct. With respect to the second factor, many accused infringers are “well-versed” in the U.S. patent system at some level, and therefore the second factor may not be significant in most cases. The third factor tends to fault the accused infringer for failing to introduce evidence that it “actually believed” that the plaintiff’s patent did not exist. Although this sounds like proving a negative, in some cases an accused infringer may have a basis (whether based on actual (but inadequate) patent searches, a plaintiff’s failure to mark, or other factors) to demonstrate its belief that the plaintiff did not have a patent covering the product in question. Further, if coupled with no evidence of “actual knowledge,” such quasi-subjective evidence might be sufficient to negate a finding of “deliberate indifference.”
The Federal Circuit’s lack of clarity regarding what constitutes “deliberate indifference” leaves litigants with little guidance on the applicable standard. Although the Federal Circuit appears to require some evidence of an accused infringer’s awareness of the plaintiff’s patent, mere awareness of a competitor or that a competitor sells a product similar to the accused product should not be enough. Technology companies of all varieties should pay careful attention to future Federal Circuit and district court case law developing this standard going forward.