On May 31, in an 8-1 opinion, Global-Tech Appliances, Inc. v. SEB, S.A., the Supreme Court resolved the question of the knowledge which must be proven to charge a defendant with inducing another to infringe a patent under 35 U.S.C. § 271(b). The tort requires actual knowledge of a patent or willful blindness to the existence of one. Willful blindness exists where the defendant subjectively believes that there is a high probability that a patent covers a product or process he induces others to make or sell, and he takes deliberate actions to avoid learning of the patent.
In the late 1980s, the French company SEB invented a “cool touch” deep fryer for the home market. The fryer included a frying pot that was suspended within a plastic housing, such that the outer surface of the housing remained cool to the touch when the frying pot was heated for cooking. SEB patented the design in the U.S., and sold the fryer under the “T-Fal” brand.
In 1997, Sunbeam asked Pentalpha Enterprises, a Hong Kong maker of home appliances (and subsidiary of Global-Tech) to supply it with deep fryers. Pentalpha purchased an SEB fryer in Hong Kong, and copied the design, other than cosmetic features. The SEB fryer – not intended for sale in the US – bore no US patent markings. Pentalpha then retained a patent attorney to conduct a clearance search, but did not tell the attorney that the design was copied.
The attorney conducted a search, and did not locate SEB’s patent. Accordingly, the attorney issued an opinion letter stating that the Pentalpha fryer design did not infringe any patent he had found. Pentalpha began selling the fryers to Sunbeam, which resold them in the U.S. Due to Pentalpha’s low costs, Sunbeam was able to sell its fryer for less than SEB.
Facing losing sales, SEB sued Sunbeam for patent infringement in 1998. Sunbeam notified Pentalpha of the lawsuit. However, Pentalpha continued to sell the infringing deep fryers to Fingerhut Corp. and Montgomary Ward, which both resold the fryers in the U.S. under different brand names.
SEB settled the lawsuit with Sunbeam, and then sued Pentalpha for direct infringement under 35 USC § 271(a) and for inducing others to infringe, under 35 USC § 271(b). The latter statute states simply, “Whoever actively induces infringement of a patent shall be liable as an infringer,” without any indication whether the inducer must know of the patent, or that it is in fact inducing infringement. A jury found that Pentalpha both directly infringed SEB’s patent, and that it induced others to do so. Pentalpha appealed the damages assessed for sales prior to 1998, claiming that inducement to infringe under § 271(b) requires actual knowledge of a patent, which Pentalpha claimed not to have until notice of the Sunbeam lawsuit.
The Court of Appeals for the Federal Circuit stated that inducement to infringe under § 271(b) requires a “plaintiff [to] show that the alleged infringer knew or should have known that his actions would induce actual infringements” and that this showing includes proof that the alleged infringer knew of the patent. The court held that the evidence supported a finding that “Pentalpha deliberately disregarded a known risk that SEB had a protective patent,” and that this disregard “is not different from actual knowledge, but is a form of actual knowledge.” SEB S. A. v. Montgomery Ward & Co., 594 F. 3d 1360, 1376-77 (Fed. Cir. 2010).
Pentalpha appealed this decision to the Supreme Court, arguing that active inducement liability under § 271(b) requires more than deliberate indifference to a known risk that the induced acts may violate an existing patent. Rather, Pentalpha argued that actual knowledge of a patent is required, and must be proven. After all, Pentalpha argued, it had commissioned a patent search, and obtained a patent attorney’s opinion of no infringement; it should be allowed to rely on that advice. Google, Yahoo!, eBay, and Hewlett-Packard agreed, all filing amici briefs arguing that a “deliberate indifference” standard would discourage competition and innovation by too easily exposing companies to patent infringement liability. For example, Google claimed it had been sued more than 50 times for patent infringement over the last five years, with frequent allegations that it induced one or more of its millions of users to infringe. These companies argued that actual knowledge of a patent should be required before one can be liable for inducing others to infringe it.
On the other hand, several law professors and intellectual property law associations asserted in amici briefs that deliberate indifference was the proper standard, because it prevents “willful blindness.” That is, if a company could escape liability for inducement to infringe by not having actual knowledge of the relevant patent(s), it would never conduct patent searches prior to launching new products.
Writing for the majority, Justice Alito stated that § 271(b) is ambiguous as to the mental state required of one inducing infringement, and turned to the case law preceding the statute’s adoption in 1952 for guidance. “Unfortunately, the relevant pre-1952 cases are less clear than one might hope with respect to the question presented here.” The Court found resolution in the “badly fractured decision” of Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II). That case dealt with a third statutory provision, § 271(c), which defines contributory infringement for selling a component of a patented machine or process that is a material part of the invention and not a staple article of commerce. Aro II held, in a 5-4 decision, that actual knowledge of a patent is necessary for liability under § 271(c), and the Court adopted that requirement for inducement liability under § 271(b). “Accordingly, we now hold that induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement.”
However, lest Pentalpha breathe a sigh of relief, the Court held that “the evidence in this case was plainly sufficient to support a finding of Pentalpha’s knowledge under the doctrine of willful blindness.” Borrowing this doctrine from criminal law, Alito explained that:
Many criminal statutes require proof that a defendant acted knowingly or willfully, and courts applying the doctrine of willful blindness hold that defendants cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances. The traditional rationale for this doctrine is that defendants who behave in this manner are just as culpable as those who have actual knowledge.
Providing guidance in applying this rule, the Court stated two basic requirements of the doctrine of willful blindness: “(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.” This is a more exacting standard than recklessness or negligence. The Court faulted the Federal Circuit’s standard – that Pentalpha “deliberately disregarded a known risk that SEB had a protective patent” – in two respects. First, it permitted finding knowledge when only a “known risk” of infringement exists. Second, “deliberate indifference” to that risk is passive; it requires no active effort by the inducer to avoid knowing about the infringing nature of the activities.
Nevertheless, the Court affirmed the Federal Circuit holding, since Pentalpha’s actions met the proper willful blindness test (as well as the deliberate indifference test). The Court pointed out that not only did Pentalpha copy all non-cosmetic aspects of a commercially successfully fryer, they did this copying from an overseas model that they knew would not bear U.S. patent markings. Furthermore, in seeking a right-to-use opinion from a patent attorney, Pentalpha neglected to tell the attorney that the design was copied, much less from whom. “On the facts of this case, we cannot fathom what motive [Pentalpha’s CEO] could have had for withholding this information other than to manufacture a claim of plausible deniability in the event that his company was later accused of patent infringement.”
Justice Kennedy agreed that actual knowledge of a patent was necessary for liability under § 271(b), but dissented from the Court’s finding such knowledge through “willful blindness.” Kennedy would have remanded the case for the Court of Appeals to determine whether Pentalpha knew about SEB’s patent.
The Global-Tech decision describes, by negative example, the steps a company must take to avoid liability for inducement to infringe under § 271(b). A bona fide patent search and right-to-use opinion from competent patent counsel is the best defense – but the attorney must be provided with all known relevant information for reliance on the opinion to be reasonable. That is, a patent search must actually and legitimately be conducted for the purpose of finding relevant patents, not to provide the appearance of doing so while remaining “willfully blind” to their existence. Where new products are based – to any degree – on competitors’ products, this should be pointed out to the person conducting the patent search. In general, a patent attorney should always be made aware of a company’s major competitors, and of all similar products, when clearing new designs against adversely held patents.