Induced Infringement: Global-Tech Appliances, et al. v. SEB S.A. INTELLECTUAL PROPERTY

On May 31, 2011, the Supreme Court clarified the intent requirement for induced infringement under 35 U.S.C. § 271(b), which states that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Global-Tech Appliances, et al. v. SEB S.A., No. 10-6 (October 12, 2010). The question presented was:

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, as the Court of Appeals for the Federal Circuit held, or “purposeful, culpable expression and conduct” to encourage an infringement, as this Court taught in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 937 (2005)?

The case began on August 27, 1999, when SEB sued Montgomery Ward & Co., Inc. (“Montgomery Ward”), Global-Tech Appliances, Inc. (“Global Tech”) and Pentalpha Enterprises, Ltd. (“Pentalpha”) in the Southern District of New York for infringement of U.S. Patent No. 4,995,312 (“the ‘312 patent”). The ‘312 patent is directed to a deep fryer with a well-insulated outer skirt. A jury found that Pentalpha both willfully infringed and induced infringement of claim 1 of the ‘312 patent and awarded SEB $4.65 million in reasonable royalty. Pentalpha filed post-trial motions on several grounds, most of which the district court denied, except that the court reduced the verdict by $2 million. The district court awarded SEB enhanced damages and attorneys’ fees, but later vacated that award in light of In re Seagate Technology, 497 F.3d 1360 (Fed. Cir. 2007), and entered judgment against defendants in the amount of $4,878,341. SEB S.A. v. Montgomery Ward & Co., No. 99-9284 (S.D.N.Y. Oct. 3, 2008). On October 30, 2008, Pentalpha appealed to the U.S. Court of Appeals for the Federal Circuit, asserting errors by the district court relating to the jury verdict and several post-trial rulings. SEB cross-appealed and sought enhanced damages.

On February 5, 2010, the Federal Circuit affirmed the district court decision and further held that “deliberate indifference” as to whether a product might infringe a patent can satisfy the state of mind element for actively inducing infringement. SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360 (Fed. Cir. 2010). The court held that “a claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit.” Id. at 1377 (emphasis added). The court stated that “deliberate indifference of a known risk is not different from actual knowledge, but is a form of actual knowledge.” Id. In this case “[t]he record contain[ed] adequate evidence to support a conclusion that Pentalpha deliberately disregarded a known risk that SEB had a protective patent.” Id. The Court focused on Pentalpha’s purchasing and copying an SEB deep fryer, and failing to inform the counsel who prepared a “right-to-use study” of the copying. Id.

In the May 31, 2011 opinion by Justice Alito, the Supreme Court affirmed (8-1) the judgment against Global-Tech, but rejected the Federal Circuit’s reasoning. Raising the standard for finding induced infringement under § 271(b), the Court rejected the Federal Circuit’s standard that allowed liability where there is deliberate indifference to a known risk of infringement. Instead, the Court found that induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement. Relying on Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U. S. 476 (1964), in which the Supreme Court held that a violator of § 271(c) must know “that the combination for which his component was especially designed was both patented and infringing,” the Court held that a similar knowledge requirement applies to inducement under § 271(b).

The Court upheld the Federal Circuit’s judgment of induced infringement, concluding that there was sufficient evidence to support a finding of knowledge under the doctrine of willful blindness. (Slip op., pp. 13-14). Specifically, the Court noted that Pentalpha believed that SEB’s fryer embodied technology that would be valuable in the U.S. market based on its decision to copy all but the fryer’s cosmetic features. The Court found revealing that Pentalpha copied an overseas model of SEB’s fryer, aware that it would not bear U.S. patent markings. The Court also found telling that Pentalpha decided not to inform its attorney that the product to be evaluated was “simply a knockoff of SEB’s fryer.” Taken together, the Court found sufficient evidence for a jury to find that Pentalpha subjectively believed there was a “high probability” that SEB’s fryer was patented and took “deliberate steps to avoid knowing that fact,” therefore willfully blinding itself to the infringing nature of Sunbeam’s sales. (Slip Op., pp. 14-16).

Justice Kennedy dissented. He concurred with the Court’s finding that § 271(b) must be read in tandem with § 271(c), and that therefore, to induce infringement a defendant must know that the induced acts constitute patent infringement. However, Justice Kennedy found the Court mistaken in holding that willful blindness will suffice to show knowledge.

Supreme Court Opinion

Supreme Court Merit Briefs

Supreme Court Amicus Briefs in Support of Respondent

Supreme Court Amicus Briefs in Support of Petitioners

Supreme Court Amicus Briefs Supporting Reversal

Supreme Court Amicus Briefs In Support of Neither Party

Certiorari Briefs and Order

On May 31, 2011, the Supreme Court clarified the intent requirement for induced infringement under 35 U.S.C. § 271(b), which states that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Global-Tech Appliances, et al. v. SEB S.A., No. 10-6 (October 12, 2010). The question presented was:

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, as the Court of Appeals for the Federal Circuit held, or “purposeful, culpable expression and conduct” to encourage an infringement, as this Court taught in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 937 (2005)?

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