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Federal Circuit holds that induced patent infringement “knowledge-of-the-patent” requirement can be satisfied by showing “deliberate indifference”
March 19, 2010
Intellectual Property Alert

In its recent decision in SEB, S.A. v. Montgomery Ward & Co., Inc., the Federal Circuit held that the “knowledge-of-the-patent” requirement for proving inducement of patent infringement can be satisfied by a showing of “deliberate indifference” on the part of the accused infringer, such as when the accused infringer copies a patentee’s product and fails to inform its patent attorney of that fact when obtaining a “right to use” opinion.

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Abstract: The en banc Federal Circuit, in DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1304 (Fed. Cir. 2006), ruled that, to show induced patent infringement under 35 U.S.C. § 271, a patentee must show that the accused infringer “knew of the patent.” A recent Federal Circuit case, SEB, S.A. v. Montgomery Ward & Co., Inc., 2009-1099 (Fed. Cir. Feb. 5, 2010), holds that this “knowledge-of-the-patent” requirement could be satisfied by a showing of “deliberate indifference” on the part of the accused infringer, such as when the accused infringer copies a patentee’s product and fails to inform its patent attorney of that fact when obtaining a “right to use” opinion.

According to 35 U.S.C. § 271(b), “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

Before 2006, there was ambiguity in the law of induced infringement as to whether a patentee was required to show that an accused infringer intended to cause the acts that constituted infringement, or additionally whether the patentee was required to show that the accused infringer intended to cause actual infringement of the patent. Compare Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464 (Fed. Cir. 1990) with Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544 (Fed. Cir. 1990). In DSU Medical Corp. v. JMS Co., Ltd., the en banc Federal Circuit resolved this dispute, holding that “[t]he plaintiff has the burden of showing that the alleged infringer’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringements.” 471 F.3d 1293, 1304 (Fed. Cir. 2006), quoting Manville, 917 F.2d at 554. In clarifying the proof requirement for induced infringement, the Federal Circuit further explained that the patentee must prove that the accused infringer “knew of the patent” and had a “specific intent …. to induce infringement.” DSU, 471 F.3d at 1304-05.

The Federal Circuit recently held that the “knowledge-of-the-patent” requirement can be satisfied by showing that the accused infringer manifested a “deliberate indifference to” or “knew of and disregarded” a risk that its activities were covered by a patent. SEB, S.A. v. Montgomery Ward & Co., Inc., 2009-1099 (Fed. Cir. Feb. 5, 2010), Slip Op. at 23.

Pentalpha, an accused infringer, manufactured a deep fryer in Hong Kong and sold it to others (including accused infringer Montgomery Ward). It was found by a jury to have infringed a patent owned by SEB. See id. at 1, 4. Pentalpha designed its product in part by copying an SEB deep fryer it obtained in Hong Kong. See id. at 4. Pentalpha obtained a “right-to-use study” from a patent attorney in the United States, but failed to inform that attorney that it had copied SEB’s product. See id. Pentalpha’s attorney analyzed 26 patents and concluded that Pentalpha’s deep fryer did not infringe them.  However, the attorney apparently never found SEB’s patent. See id.

The Federal Circuit concluded that this evidence was enough to satisfy the jury’s implicit finding that Pentalpha knew of SEB’s patent, even though there was no direct evidence of such knowledge:

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. This case shows such an instance. The record contains adequate evidence to support a conclusion that Pentalpha deliberately disregarded a known risk that SEB had a protective patent.
Id. at 25.

The court explained that, although the DSU decision requires “that [the accused infringer] kn[o]w of the patent,” the DSU court never set out the “metes and bounds” of this requirement. Id. at 22. The court then cited Insituform Technologies, Inv. v. CAT Contracting, Inc., 161 F3d 688 (Fed. Cir. 1998), for the premise that the “knowledge-of-the-patent” requirement could be satisfied by “constructive” knowledge. See id. As to DSU’s “specific intent …. to induce infringement” requirement, the Federal Circuit explained that “‘specific intent’ in the civil context is not so narrow as to allow an accused wrongdoer to actively disregard a known risk that an element of the offense exists.” Id. at 23.

The Federal Circuit appeared to be basing its ruling on the fact that Pentalpha “hired an attorney to conduct a right-to-use study, but did not tell him that it had based its product on SEB’s product,” concluding that “[a] failure to inform one’s counsel of copying would be highly suggestive of deliberate indifference in most circumstances.” Id. at 25. However, the Federal Circuit did not explain why a failure to inform the attorney of the copying, rather than the copying alone, constituted the deliberate indifference sufficient to be constructive knowledge.

The Federal Circuit also found support for the jury’s verdict in testimony that Pentalpha’s president was “well versed” in U.S. patent law and that he understood SEB to be “cognizant of patent rights ….” Id. at 25. Thus, an accused infringer’s sophistication in U.S. patent laws, as well as its knowledge of the patentee’s awareness of the U.S. patent laws, are factors that a jury can consider in determining deliberate indifference.

Pentalpha had also argued that the SEB product it copied was not marked with the number of the patent in suit. The Federal Circuit rejected that argument, stating that Pentalpha never argued that it actually relied on the lack of a patent marking as exculpatory evidence, and that, even if it had, such an argument “would likely lack credibility unless it were supplemented by an explanation for why one would expect an SEB deep fryer purchased in Hong Kong to have U.S. patent markings.” Id. at 26.

As to other examples of possible constructive knowledge, the Federal Circuit, while declining to set the boundaries on the knowledge requirement for induced infringement, did suggest that ignoring patent markings could satisfy that requirement:

This opinion does not purport to establish the outer limits of the type of knowledge needed for inducement. For instance, a patentee may perhaps only need to show … constructive knowledge with persuasive evidence of disregard for clear patent markings, similar to the constructive notice requirement in § 287(a) … This court does not set those boundaries now, just as it did not set them in DSU Medical.
Id. at 26.


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