Supreme Court Grants Cert to Decide the State of Mind Necessary for Induced Infringement
A recognized defense to an accusation of induced infringement was put in jeopardy last February when the Federal Circuit broadened the concept of “actual knowledge” of a patent for purposes of proving induced infringement. SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360 (Fed. Cir. 2010). The issue is important to many industries because induced infringement is commonly alleged in situations where a defendant’s customers (rather than the defendant itself) use the allegedly infringing product or process. The Federal Circuit has struggled to articulate a predictable standard on this issue, and the Supreme Court, apparently dissatisfied by this confusing treatment, has decided to review this critical area of patent law The Supreme Court’s decision to grant certiorari in Global-Tech Appliances, Inc. v. SEB S.A. will hopefully lead to a clarification of the conduct required to impose liability for induced infringement. This may have a profound impact on patent liability with regard to the growing use of indirect infringement allegations.
In its decision below, the Federal Circuit held that an accused infringer need not have actual knowledge of a patent to be liable for inducement of infringement. That decision apparently conflicted with the Federal Circuit’s en banc holding a little over three years earlier in DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1304 (Fed. Cir. 2006), 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.” The SEB court rationalized this seemingly contradictory holding, in part, by stating that “the standard of deliberate indifference of a known risk is not different from actual knowledge, but is a form of actual knowledge.” SEB, 594 F.3d at 1377. The court also noted that DSU did not set out the “metes and bounds” of the knowledge-of-the-patent requirement.
The knowledge of the patent requirement for induced infringement, SEB held, is met not only by actual knowledge but also by “deliberate indifference” to the existence of a patent. The Court, however, did not provide solid guidance on what constitutes “deliberate indifference.” On the one hand, the Court 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. SEB, 594 F.3d at 1376. On the other hand, the Court refused to hold that constructive knowledge is never sufficient to prove deliberate indifference. Instead, the Court cryptically stated that constructive knowledge is a purely objective test, while deliberate indifference may require a subjective determination that a defendant knew of and disregarded a risk. Id. The Court concluded by stating that it “does not purport to establish the outer limits of the type of knowledge needed for inducement” and suggested that constructive knowledge of a patent combined with “persuasive evidence of disregard for clear patent markings” may be sufficient. Id. at 1378.
Two of the defendants in SEB filed a petition for certiorari to resolve the conflict with DSU Medical. As an amicus brief in support of granting certiorari filed by 26 Law, Economics and Business Professors noted, the Federal Circuit has long struggled to agree on the state of mind necessary to prove inducement and since “even a unanimous en banc opinion by the Federal Circuit was insufficient to eliminate that conflict, the Federal Circuit cannot be counted on to resolve the conflicts in its case law on this issue.”
The Supreme Court apparently agreed, and on October 12 it granted the petition for certiorari to decide “Whether the legal standard for the ‘state of mind’ element of a claim for actively inducing infringement under 35 U.S.C. 271(b) is ‘deliberate indifference of a known risk’ that an infringement may occur or instead ‘purposeful, culpable expression and conduct’ to encourage an infringement.” Global-Tech Appliances, Inc. v. SEB S.A., cert. granted, Docket No. 10-6 (U.S. Oct. 12, 2010).
Troutman Sanders LLP’s Appellate Team regularly submits amicus briefs to courts in high-profile appeals such as Global-Tech. We invite you to contact any of the attorneys identified on this Advisory for additional information and assistance.