May 31, 2011

Today the Supreme Court issued one decision, described below, of interest to the business community.

• Patent Act—Required State of Mind for a Claim of Inducement

Patent Act—Required State of Mind for a Claim of Inducement

Global-Tech Appliances, Inc. v. SEB S.A., No. 10-6 (previously discussed in the October 12, 2010 Docket Report).

Under Chapter 28 of the United States Patent Act, 35 U.S.C. § 271(b), “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Today, in Global-Tech Appliances, Inc. v. SEB S.A., No. 10-6, the Supreme Court held that to be held liable under § 271(b) the defendant must know that the induced acts constitute patent infringement and that willful blindness, but not mere deliberate indifference, satisfies § 271(b)’s knowledge requirement.

In Global-Tech Appliances, petitioners, the defendants below, bought one of respondent’s home-cooking devices from Hong Kong, copied many features from respondent’s appliance, and developed a similar device for sale in the United States. Because the exemplar that petitioners purchased and copied was bought abroad and not intended for the U.S. market, it lacked respondent’s U.S. patent markings. Petitioners did not inform their attorney that they had copied respondent’s device, and the attorney, having failed to locate respondent’s patent, issued an opinion letter stating that petitioners’ device did not infringe any patent that he had found. Petitioners then sold their device to others, who in turn resold the device to consumers. Respondent filed suit claiming, as relevant here, that petitioners were guilty of induced infringement under § 271(b).

A jury found in respondent’s favor, and on appeal, the Court of Appeals for the Federal Circuit affirmed. Although there was no direct evidence that petitioners actually knew of respondent’s patent before respondent filed suit, the Federal Circuit found that petitioners “‘deliberately disregarded a known risk’” and that “[s]uch disregard” was “‘a form of actual knowledge’” sufficient to establish liability under § 271(b). Slip op. 3.

In an opinion by Justice Alito, the Supreme Court affirmed but on different grounds. According to the Court, § 271(b) “requires knowledge that the induced acts constitute patent infringement.” Slip op. 10. The Court held that the knowledge requirement is not satisfied by proof of deliberate indifference because a deliberate indifference standard “permits a finding of knowledge when there is merely a ‘known risk’ that the induced acts are infringing” and “does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities.” Id. at 14. Rather, absent proof of actual knowledge, § 271(b) demands proof of willful blindness, which, the Court explained, requires proof of the defendant’s subjective belief that there is “a high probability” of infringement and evidence that the defendant took “deliberate actions to avoid learning of that fact.” Slip op. 13.  Although the lower court had applied the deliberate indifference standard rather than the stricter willful blindness standard, the Court affirmed judgment for the respondent, finding that the record evidence established the petitioners’ willful blindness.

In a dissenting opinion, Justice Kennedy took the position that § 271(b) requires actual knowledge, and that proof of willful blindness is therefore insufficient to establish liability.

Mayer Brown LLP filed an amicus brief in support of petitioners on behalf of the Business Software Alliance.

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