IP News

Actual Knowledge Not Required for Inducing Infringement

In Global-Tech Appliances, Inc. v. SEB S.A., No. 10-6 (2011), the Supreme Court affirmed a ruling of the Federal Circuit, holding that “willful blindness” is enough to satisfy the knowledge element for inducement of infringement. The 8-1 decision, in a majority opinion authored by Justice Samuel Alito, rejected the prior “deliberate indifference” standard articulated by the Federal Circuit.

The case involved technology related to deep fryers for home use. SEB had invented a deep fryer for home use that remained cool to the touch on the outside, for which it obtained patent protection. A Global-Tech subsidiary purchased an SEB deep fryer and copied the design for production in Hong Kong. After copying the design, Global-Tech's subsidiary obtained a right-to-use study from a patent attorney, who failed to locate SEB's patent during a search.

After a five-day jury trial, SEB won a jury verdict, the jury agreeing with SEB that the Global-Tech subsidiary had actively induced other companies to infringe the SEB patent. The district court upheld this verdict, unpersuaded by the argument that the Global-Tech subsidiary did not know of SEB's patent until after it received notice of the lawsuit.

The Federal Circuit held that the verdict of inducing infringement could be upheld because inducement requires a “plaintiff [to] show that the alleged infringer knew or should have known that his actions would induce actual infringements.” SEB S.A. v. Montgomery Ward & Co., 594 F.3d 1360, 1376 (Fed. Cir. 2010). Despite the lack of proof of actual knowledge, the Federal Circuit found that the Global-Tech subsidiary “deliberately disregarded a known risk that SEB had a protective patent.” Id. at 1377.

The Supreme Court held that the Federal Circuit's standard of deliberate indifference cannot satisfy the knowledge requirement, but the “willful blindness” exhibited by the Global-Tech subsidiary does. Willful blindness consists of two requirements: First, “the defendant must subjectively believe that there is a high probability that a fact exists.” Slip Op. at 13. Second, “the defendant must take deliberate actions to avoid learning of that fact.” Id.

The Supreme Court looked to criminal law's interpretation of willful blindness for guidance, wherein a defendant “takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” Slip Op. at 14.

Justice Anthony Kennedy authored a lone dissent, arguing that allowing willful blindness to substitute for actual knowledge is error. Specifically, Justice Kennedy's dissent is concerned that the Court has endorsed willful blindness to substitute for the statutory requirement of knowledge in “all federal criminal cases involving knowledge.” Slip Op. at 3 (Kennedy, J., dissenting).

Patent Inventors Have First Claim to Patent Ownership Under the Bayh-Dole Act

The Supreme Court also weighed in on a patent issue in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, et al., No. 09-1150 (2011), holding that inventors maintain ownership of their inventions over federal contractors when the inventions are federally funded.

In a 7-2 opinion authored by Chief Justice John G. Roberts, Jr., the Supreme Court held that the Bayh-Dole Act does not expressly vest the title of a patent in contractors or anyone else. “Instead, the Act provides that contractors may 'elect to retain title to any subject invention.'” Slip Op. at 9 (internal citations omitted). Stanford had proposed that the provision includes “all inventions made by the contractor's employees with federal funding.” Id. The Supreme Court rejected this view, holding that only “subject inventions,” defined in the statute as “any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement” (Id. (citing 35 U.S.C. ' 271(e))), are encompassed by the statutory language.

According to the Court, Stanford's interpretation of the statute would move the inventor “from the front of the line to the back,” a move inconsistent with the last 220 years of the Patent Act. Slip Op. at 8. The Court noted that “[i]t would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions. To do so under such unusual terms would be truly surprising.” Id. at 14.

Justice Stephen G. Breyer filed a dissenting opinion, joined by Justice Ruth Bader Ginsburg, arguing that the answer to the question presented in the case “turns on matters that have not been fully briefed,” and recommending that the Court return the case to the Federal Circuit for further argument. Slip Op. at 1 (Breyer, J., dissenting).

Federal Circuit to Address Joint Infringement En Banc

The Court of Appeals for the Federal Circuit has ordered en banc rehearings in two cases involving joint infringement by multiple parties. The first, McKesson Technologies Inc. v. Epic Systems Corp., Civ. No. 2010-1291 (Fed. Cir. 2011), involves questions related to whether entities can be found liable for inducing infringement or contributory infringement when multiple, separate entities perform separate steps of a method claim. In Akamai Technologies, Inc. v. Limelight Networks, Inc., Civ. No. 2009-1372 (Fed. Cir. 2011), the court also ordered an en banc rehearing to resolve a similar question with respect to direct infringement.

The underlying Federal Circuit opinion in McKesson required that to infringe a method claim, a single entity must perform all steps of the claimed method. Slip Op. at 7. In order for a third party's action to contribute to that infringement, there must be “an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.” Id. (internal quotation omitted).

The underlying Federal Circuit opinion in Akamai held that an agency relationship or similar type of control is required when two parties are alleged to directly infringe a method claim. Slip Op. at 14. The opinion also contained a note directing prosecutors to draft better patent claims. The court noted that it is important to structure claims so that they can capture infringement by a single party. Slip Op. at 17.

Howard J. Shire is a partner and Joseph Mercadante is as associate in the New York office of Kenyon & Kenyon LLP.

Actual Knowledge Not Required for Inducing Infringement

In Global-Tech Appliances, Inc. v. SEB S.A., No. 10-6 (2011), the Supreme Court affirmed a ruling of the Federal Circuit, holding that “willful blindness” is enough to satisfy the knowledge element for inducement of infringement. The 8-1 decision, in a majority opinion authored by Justice Samuel Alito, rejected the prior “deliberate indifference” standard articulated by the Federal Circuit.

The case involved technology related to deep fryers for home use. SEB had invented a deep fryer for home use that remained cool to the touch on the outside, for which it obtained patent protection. A Global-Tech subsidiary purchased an SEB deep fryer and copied the design for production in Hong Kong. After copying the design, Global-Tech's subsidiary obtained a right-to-use study from a patent attorney, who failed to locate SEB's patent during a search.

After a five-day jury trial, SEB won a jury verdict, the jury agreeing with SEB that the Global-Tech subsidiary had actively induced other companies to infringe the SEB patent. The district court upheld this verdict, unpersuaded by the argument that the Global-Tech subsidiary did not know of SEB's patent until after it received notice of the lawsuit.

The Federal Circuit held that the verdict of inducing infringement could be upheld because inducement requires a “plaintiff [to] show that the alleged infringer knew or should have known that his actions would induce actual infringements.” SEB S.A. v. Montgomery Ward & Co. , 594 F.3d 1360, 1376 (Fed. Cir. 2010). Despite the lack of proof of actual knowledge, the Federal Circuit found that the Global-Tech subsidiary “deliberately disregarded a known risk that SEB had a protective patent.” Id. at 1377.

The Supreme Court held that the Federal Circuit's standard of deliberate indifference cannot satisfy the knowledge requirement, but the “willful blindness” exhibited by the Global-Tech subsidiary does. Willful blindness consists of two requirements: First, “the defendant must subjectively believe that there is a high probability that a fact exists.” Slip Op. at 13. Second, “the defendant must take deliberate actions to avoid learning of that fact.” Id.

The Supreme Court looked to criminal law's interpretation of willful blindness for guidance, wherein a defendant “takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” Slip Op. at 14.

Justice Anthony Kennedy authored a lone dissent, arguing that allowing willful blindness to substitute for actual knowledge is error. Specifically, Justice Kennedy's dissent is concerned that the Court has endorsed willful blindness to substitute for the statutory requirement of knowledge in “all federal criminal cases involving knowledge.” Slip Op. at 3 (Kennedy, J., dissenting).

Patent Inventors Have First Claim to Patent Ownership Under the Bayh-Dole Act

The Supreme Court also weighed in on a patent issue in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, et al., No. 09-1150 (2011), holding that inventors maintain ownership of their inventions over federal contractors when the inventions are federally funded.

In a 7-2 opinion authored by Chief Justice John G. Roberts, Jr., the Supreme Court held that the Bayh-Dole Act does not expressly vest the title of a patent in contractors or anyone else. “Instead, the Act provides that contractors may 'elect to retain title to any subject invention.'” Slip Op. at 9 (internal citations omitted). Stanford had proposed that the provision includes “all inventions made by the contractor's employees with federal funding.” Id. The Supreme Court rejected this view, holding that only “subject inventions,” defined in the statute as “any invention of the contractor conceived or first actually reduced to practice in the performance of work under a funding agreement” (Id. (citing 35 U.S.C. ' 271(e))), are encompassed by the statutory language.

According to the Court, Stanford's interpretation of the statute would move the inventor “from the front of the line to the back,” a move inconsistent with the last 220 years of the Patent Act. Slip Op. at 8. The Court noted that “[i]t would be noteworthy enough for Congress to supplant one of the fundamental precepts of patent law and deprive inventors of rights in their own inventions. To do so under such unusual terms would be truly surprising.” Id. at 14.

Justice Stephen G. Breyer filed a dissenting opinion, joined by Justice Ruth Bader Ginsburg, arguing that the answer to the question presented in the case “turns on matters that have not been fully briefed,” and recommending that the Court return the case to the Federal Circuit for further argument. Slip Op. at 1 (Breyer, J., dissenting).

Federal Circuit to Address Joint Infringement En Banc

The Court of Appeals for the Federal Circuit has ordered en banc rehearings in two cases involving joint infringement by multiple parties. The first, McKesson Technologies Inc. v. Epic Systems Corp., Civ. No. 2010-1291 (Fed. Cir. 2011), involves questions related to whether entities can be found liable for inducing infringement or contributory infringement when multiple, separate entities perform separate steps of a method claim. In Akamai Technologies, Inc. v. Limelight Networks, Inc., Civ. No. 2009-1372 (Fed. Cir. 2011), the court also ordered an en banc rehearing to resolve a similar question with respect to direct infringement.

The underlying Federal Circuit opinion in McKesson required that to infringe a method claim, a single entity must perform all steps of the claimed method. Slip Op. at 7. In order for a third party's action to contribute to that infringement, there must be “an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.” Id. (internal quotation omitted).

The underlying Federal Circuit opinion in Akamai held that an agency relationship or similar type of control is required when two parties are alleged to directly infringe a method claim. Slip Op. at 14. The opinion also contained a note directing prosecutors to draft better patent claims. The court noted that it is important to structure claims so that they can capture infringement by a single party. Slip Op. at 17.

Howard J. Shire is a partner and Joseph Mercadante is as associate in the New York office of Kenyon & Kenyon LLP.