Supreme Court: 'Willful Blindness' Supports a Judgment of Induced Infringement

In Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011), the Supreme Court held that “willful blindness” may satisfy the knowledge element required for a finding of induced infringement. In so doing, the Court rejected the prior “deliberate indifference” standard articulated by the Federal Circuit.

Factual History

SEB sells home cooking appliances in the United States under the trademark
T-fal. Among its successful products is the Uno deep fryer. The construction of the patented Uno fryer keeps the exterior of the fryer cool during operation without using expensive heat-resistant plastic material. Pentalpha, a Hong Kong company, manufactures cooking appliances for a number of different companies. In response to a request from Sunbeam Products, Pentalpha purchased a SEB deep fryer in Hong Kong and designed a competitive fryer by copying the SEB product in all but its cosmetic features.

When its design was completed, Pentalpha obtained a “right-to-use” opinion from a U.S. patent attorney. Significantly, Pentalpha neglected to tell the attorney that it had copied the SEB fryer. The attorney did not locate SEB's patent on its cool touch construction and opined that the Pentalpha design could be sold in the United States free of patent infringement.

SEB, in response to lost sales to Sunbeam, first sued and settled with Sunbeam and then sued Pentalpha and its parent, Global-Tech Appliances, Inc., claiming direct infringement under 35 U.S.C. ' 271(a) and inducement of infringement under ' 271(b).

While the defendant's intent and knowledge of the patent is immaterial for direct infringement, Pentalpha argued that liability under ' 271(b) required proof that it knew of the patent on the SEB deep fryer and knew that sale of its product by its customers in the United States would infringe the patent.

A jury found willful direct infringement and induced infringement, and the court entered judgment for $2.65 million in damages. SEB S.A. v. Montgomery Ward & Co., No. 99-9284, 2008 WL 454016 (S.D.N.Y. Oct. 1, 2008). On appeal, the Federal Circuit affirmed the judgment. 594 F.3d 1360 (Fed. Cir. 2010). The Supreme Court granted certiorari to consider whether a party who “actively induces infringement” must know that the induced acts constitute patent infringement.

While direct infringement is a strict liability cause of action, in the sense that there is no requirement that a defendant know either of the existence of the patent, or that its accused device infringes the patent, case law has required a showing of knowledge and intent for both induced infringement under ' 271(b) and the other statutory form of indirect infringement, contributory infringement under ' 271(c).

The Supreme Court's Decision

The Supreme Court confirmed that some mental element, or mens rea component, is included in the causes of action under ” 271(b) and (c), finding that the statute's reference in ' 271(b) to “actively inducing” (emphasis added) implies that inducement must involve “the taking of affirmative steps to bring about the desired result.” Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2065 (2011).

The statutory language, the Court pointed out, is, however, ambiguous as to whether it requires merely that the inducer lead another to engage in conduct that happens to infringe the patent, or that the inducer must lead another to engage in conduct that the inducer knows is infringement. The Court illustrated the ambiguity by referring to a used car salesman selling a car that is damaged: Does the statement that the salesman induced the customer to buy a damaged car imply that the salesman knew the car was damaged, or merely that he sold a car which, unknown to him, was damaged? Id.

Faced with the ambiguous statutory language, the Court looked to its case law starting with cases that predated the enactment of ” 271(b) and (c) in 1952, which, the Court said, was designed to “codify in statutory form principles of contributory infringement which had been part of the law for 80 years.” Id. at 2066 citing Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 485-486, n.6 (1964). Pre-1952 case law, however, provided “conflicting signals” as to the intent needed. The Court therefore looked to its decision in Aro Mfg., which concerned contributory infringement under ' 271(c), as the best case authority. The language of ' 271(c) contains, the Court observed, the same ambiguity as ' 271(b). In Aro Mfg., a divided majority of the Court had held that knowledge of the patent is required for liability under ' 271(c). In Global-Tech, the Court noted that the requirement for knowledge has become a “fixture” in the law of contributory infringement since Aro Mfg. and that Congress had taken no action to alter this requirement. Id. at 2068.

The Court held that, based on the common origin of ' 271(b) and ' 271(c) and the similarity of ambiguity in the two subsections, the same knowledge requirement applies in the case of induced infringement as for contributory infringement. Id.

After concluding that ' 271(b) included a mens rea component, the Court then considered whether the Federal Circuit's articulation of such component was correct. In 2006, the Federal Circuit had held that a defendant must have intended to induce infringement, not just the acts found to constitute infringement. DSU Medical Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006). In the en banc portion of DSU, the court held that the patentee must prove the accused inducer “knew or should have known” its actions would induce infringement. Id. This necessarily requires a showing that the inducer knew of the patent. Id. Two years later, the Federal Circuit approved, as consistent with DSU, a jury instruction that allowed a finding of induced infringement if the defendant was “aware of the patent,” “[knew] or should have known that the encouraged acts constitute infringement of the patent” and had “intent to cause the encouraged acts.” Broadcom Corp. v. Qualcomm, Inc., 543 F.3d 683, 698 (Fed. Cir. 2008). Under this standard, a reasonable belief in non-infringement is a defense to a charge of inducing infringement, even if the induced acts constitute infringement.

In its Global-Tech decision, the Federal Circuit noted that in DSU Medical, it had not addressed the scope of the knowledge requirement for intent; that is to say, it had decided the “target of the knowledge, not the nature of the knowledge.” SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360, 1376 (Fed. Cir. 2010) citing DSU Medical, 471 F.3d at 1306. Pentalpha argued in the Supreme Court that the standard of knowledge should be actual knowledge of the patent, and not the “should have known” expansion adopted in DSU Medical. The Federal Circuit found that the intent element for inducing infringement was satisfied by evidence that Pentalpha “deliberately disregarded” a known risk that the copied product was protected by a patent. In articulating the test for inducement, the court stated that its opinion did not establish the “outer limits” of the type of knowledge needed for inducement, suggesting that constructive knowledge of the patent with persuasive evidence of clear disregard for patent markings could be sufficient. 594 F.3d at 1377. On certiorari, the Supreme Court held that “deliberate indifference to a known risk that a patent exists” is not the proper standard under ' 271(b). Rather the proper standard is actual knowledge. 131 S. Ct. at 2068. Nevertheless, the Court affirmed the Federal Circuit's judgment by applying the criminal law doctrine of “willful blindness.” Id.

This doctrine holds that defendants who deliberately shield themselves from clear evidence of actual facts cannot thereby avoid a finding of acting knowingly or willfully. U.S. v. Jewell, 532 F.2d 697, 700 (9th Cir. 1976) (en banc). Noting the long history of the willful blindness doctrine in criminal law, the Court saw no reason not to use it in the civil law cause of action for inducing patent infringement. 131 S. Ct. at 2069. The Federal Circuit's test was error first because it permitted a finding of knowledge when there is merely a “known risk” that the induced acts are infringing, and second, because it did not require active efforts by an inducer to avoid knowledge that the induced activities were infringing. Id. at 2071.

Nevertheless, on the facts of the case, the Supreme Court found that Pentalpha's actions satisfied the “willful blindness” test: It knew of the commercial success of the SEB Cool Touch deep fryer, and its decision to copy that fryer evidenced a belief that it embodied the SEB's protected technology. Of particular import to the Court was the decision to copy an overseas model of the SEB deep fryer, which it knew would not carry U.S. patent markings and, above all, its decision not to inform the attorney who authored the right-to-use opinion that it had copied the SEB product. This evidence, the Court found, was more than sufficient for a jury to find that Pentalpha subjectively believed there was a high probability that the SEB deep fryer was patented and took deliberate steps to avoid knowledge of the patent. These actions constituted willful blindness, equivalent to knowledge, and supported a judgment of induced infringement under ' 271(b). Id.

The Court's decision, written by Justice Samuel Alito, was supported by the entire Court with the exception of Justice Anthony Kennedy who, in his dissent, stated that the correct standard for inducing infringement is knowledge, and that willful blindness cannot be said to constitute knowledge. Id. at 2072.

Conclusion

Accordingly, the requisite mens rea standard after Global-Tech for induced infringement under ' 271(b) and contributory infringement under ' 271(c), given that the Court said the two standards are the same, is the highest standard, namely actual knowledge, including the penumbra of willful blindness. Mere recklessness is not enough: there must be proof of deliberate steps taken to avoid obtaining knowledge of the patent.

John M. Cone practices with Hitchcock Evert LLP in Dallas. He can be reached at 214-880-7002 and [email protected].

In Global-Tech Appliances, Inc. v. SEB S.A. , 131 S. Ct. 2060 (2011), the Supreme Court held that “willful blindness” may satisfy the knowledge element required for a finding of induced infringement. In so doing, the Court rejected the prior “deliberate indifference” standard articulated by the Federal Circuit.

Factual History

SEB sells home cooking appliances in the United States under the trademark
T-fal. Among its successful products is the Uno deep fryer. The construction of the patented Uno fryer keeps the exterior of the fryer cool during operation without using expensive heat-resistant plastic material. Pentalpha, a Hong Kong company, manufactures cooking appliances for a number of different companies. In response to a request from Sunbeam Products, Pentalpha purchased a SEB deep fryer in Hong Kong and designed a competitive fryer by copying the SEB product in all but its cosmetic features.

When its design was completed, Pentalpha obtained a “right-to-use” opinion from a U.S. patent attorney. Significantly, Pentalpha neglected to tell the attorney that it had copied the SEB fryer. The attorney did not locate SEB's patent on its cool touch construction and opined that the Pentalpha design could be sold in the United States free of patent infringement.

SEB, in response to lost sales to Sunbeam, first sued and settled with Sunbeam and then sued Pentalpha and its parent, Global-Tech Appliances, Inc., claiming direct infringement under 35 U.S.C. ' 271(a) and inducement of infringement under ' 271(b).

While the defendant's intent and knowledge of the patent is immaterial for direct infringement, Pentalpha argued that liability under ' 271(b) required proof that it knew of the patent on the SEB deep fryer and knew that sale of its product by its customers in the United States would infringe the patent.

A jury found willful direct infringement and induced infringement, and the court entered judgment for $2.65 million in damages. SEB S.A. v. Montgomery Ward & Co., No. 99-9284, 2008 WL 454016 (S.D.N.Y. Oct. 1, 2008). On appeal, the Federal Circuit affirmed the judgment. 594 F.3d 1360 (Fed. Cir. 2010). The Supreme Court granted certiorari to consider whether a party who “actively induces infringement” must know that the induced acts constitute patent infringement.

While direct infringement is a strict liability cause of action, in the sense that there is no requirement that a defendant know either of the existence of the patent, or that its accused device infringes the patent, case law has required a showing of knowledge and intent for both induced infringement under ' 271(b) and the other statutory form of indirect infringement, contributory infringement under ' 271(c).

The Supreme Court's Decision

The Supreme Court confirmed that some mental element, or mens rea component, is included in the causes of action under ” 271(b) and (c), finding that the statute's reference in ' 271(b) to “ actively inducing” (emphasis added) implies that inducement must involve “the taking of affirmative steps to bring about the desired result.” Global-Tech Appliances, Inc. v. SEB S.A. , 131 S. Ct. 2060, 2065 (2011).

The statutory language, the Court pointed out, is, however, ambiguous as to whether it requires merely that the inducer lead another to engage in conduct that happens to infringe the patent, or that the inducer must lead another to engage in conduct that the inducer knows is infringement. The Court illustrated the ambiguity by referring to a used car salesman selling a car that is damaged: Does the statement that the salesman induced the customer to buy a damaged car imply that the salesman knew the car was damaged, or merely that he sold a car which, unknown to him, was damaged? Id.

Faced with the ambiguous statutory language, the Court looked to its case law starting with cases that predated the enactment of ” 271(b) and (c) in 1952, which, the Court said, was designed to “codify in statutory form principles of contributory infringement which had been part of the law for 80 years.” Id . at 2066 citing Aro Mfg. Co. v. Convertible Top Replacement Co. , 377 U.S. 476, 485-486, n.6 (1964). Pre-1952 case law, however, provided “conflicting signals” as to the intent needed. The Court therefore looked to its decision in Aro Mfg., which concerned contributory infringement under ' 271(c), as the best case authority. The language of ' 271(c) contains, the Court observed, the same ambiguity as ' 271(b). In Aro Mfg., a divided majority of the Court had held that knowledge of the patent is required for liability under ' 271(c). In Global-Tech, the Court noted that the requirement for knowledge has become a “fixture” in the law of contributory infringement since Aro Mfg. and that Congress had taken no action to alter this requirement. Id. at 2068.

The Court held that, based on the common origin of ' 271(b) and ' 271(c) and the similarity of ambiguity in the two subsections, the same knowledge requirement applies in the case of induced infringement as for contributory infringement. Id.

After concluding that ' 271(b) included a mens rea component, the Court then considered whether the Federal Circuit's articulation of such component was correct. In 2006, the Federal Circuit had held that a defendant must have intended to induce infringement, not just the acts found to constitute infringement. DSU Medical Corp. v. JMS Co. , 471 F.3d 1293, 1304 (Fed. Cir. 2006). In the en banc portion of DSU, the court held that the patentee must prove the accused inducer “knew or should have known” its actions would induce infringement. Id. This necessarily requires a showing that the inducer knew of the patent. Id. Two years later, the Federal Circuit approved, as consistent with DSU , a jury instruction that allowed a finding of induced infringement if the defendant was “aware of the patent,” “[knew] or should have known that the encouraged acts constitute infringement of the patent” and had “intent to cause the encouraged acts.” Broadcom Corp. v. Qualcomm, Inc. , 543 F.3d 683, 698 (Fed. Cir. 2008). Under this standard, a reasonable belief in non-infringement is a defense to a charge of inducing infringement, even if the induced acts constitute infringement.

In its Global-Tech decision, the Federal Circuit noted that in DSU Medical , it had not addressed the scope of the knowledge requirement for intent; that is to say, it had decided the “target of the knowledge, not the nature of the knowledge.” SEB S.A. v. Montgomery Ward & Co., Inc. , 594 F.3d 1360, 1376 (Fed. Cir. 2010) citing DSU Medical, 471 F.3d at 1306. Pentalpha argued in the Supreme Court that the standard of knowledge should be actual knowledge of the patent, and not the “should have known” expansion adopted in DSU Medical. The Federal Circuit found that the intent element for inducing infringement was satisfied by evidence that Pentalpha “deliberately disregarded” a known risk that the copied product was protected by a patent. In articulating the test for inducement, the court stated that its opinion did not establish the “outer limits” of the type of knowledge needed for inducement, suggesting that constructive knowledge of the patent with persuasive evidence of clear disregard for patent markings could be sufficient. 594 F.3d at 1377. On certiorari, the Supreme Court held that “deliberate indifference to a known risk that a patent exists” is not the proper standard under ' 271(b). Rather the proper standard is actual knowledge. 131 S. Ct. at 2068. Nevertheless, the Court affirmed the Federal Circuit's judgment by applying the criminal law doctrine of “willful blindness.” Id.

This doctrine holds that defendants who deliberately shield themselves from clear evidence of actual facts cannot thereby avoid a finding of acting knowingly or willfully. U.S. v. Jewell , 532 F.2d 697, 700 (9th Cir. 1976) ( en banc ). Noting the long history of the willful blindness doctrine in criminal law, the Court saw no reason not to use it in the civil law cause of action for inducing patent infringement. 131 S. Ct. at 2069. The Federal Circuit's test was error first because it permitted a finding of knowledge when there is merely a “known risk” that the induced acts are infringing, and second, because it did not require active efforts by an inducer to avoid knowledge that the induced activities were infringing. Id. at 2071.

Nevertheless, on the facts of the case, the Supreme Court found that Pentalpha's actions satisfied the “willful blindness” test: It knew of the commercial success of the SEB Cool Touch deep fryer, and its decision to copy that fryer evidenced a belief that it embodied the SEB's protected technology. Of particular import to the Court was the decision to copy an overseas model of the SEB deep fryer, which it knew would not carry U.S. patent markings and, above all, its decision not to inform the attorney who authored the right-to-use opinion that it had copied the SEB product. This evidence, the Court found, was more than sufficient for a jury to find that Pentalpha subjectively believed there was a high probability that the SEB deep fryer was patented and took deliberate steps to avoid knowledge of the patent. These actions constituted willful blindness, equivalent to knowledge, and supported a judgment of induced infringement under ' 271(b). Id.

The Court's decision, written by Justice Samuel Alito, was supported by the entire Court with the exception of Justice Anthony Kennedy who, in his dissent, stated that the correct standard for inducing infringement is knowledge, and that willful blindness cannot be said to constitute knowledge. Id. at 2072.

Conclusion

Accordingly, the requisite mens rea standard after Global-Tech for induced infringement under ' 271(b) and contributory infringement under ' 271(c), given that the Court said the two standards are the same, is the highest standard, namely actual knowledge, including the penumbra of willful blindness. Mere recklessness is not enough: there must be proof of deliberate steps taken to avoid obtaining knowledge of the patent.

John M. Cone practices with Hitchcock Evert LLP in Dallas. He can be reached at 214-880-7002 and [email protected].