IP Law Bulletin

The Federal Circuit recently addressed the patentability of ranges. In ClearValue, Inc. v. Pearl River Polymers, Inc., decided on February 17, 2012, the court reversed a denial of Judgment as a Matter of Law (JMOL) seeking a ruling of anticipation and found the claimed invention, which recites a clarification process for “water of raw alkalinity less than or equal to 50 ppm” by using a blend of a high molecular weight polymer and an aluminum polymer, to be anticipated by a reference that disclosed the same blend for clarifying water of “up to 150 ppm.”

In Golan v. Holder (No. 10-545, January 18, 2012), the U.S. Supreme Court upheld § 514 of the Uruguay Round Agreements Act (URAA) which restored copyright protection to certain works of foreign authors that had previously been in the public domain. Users of foreign copyrighted works first published abroad between 1923 and 1989 will need to continue to assess their liability and decide whether they need to attempt to locate the owners of the restored copyrights.

In a recent en banc decision of the Federal Circuit, TiVo Inc. v. EchoStar Corp., U.S. Court of Appeals for the Federal Circuit, 2009-1374, decided April 20, 2011, the Court unanimously overruled its previous two-step test, the KSM test, regarding patent infringement in a contempt hearing, which first requires a threshold inquiry of the appropriateness of a contempt hearing before a district court can adjudge whether a redesigned product continues to infringe. The court held that the KSM inquiry “confuses the merits of contempt with the propriety of initiating contempt proceedings,” and replaced that test by allowing broad discretion to the district court to determine the propriety of a contempt proceeding based on the facts presented. While the court held that the district court did not abuse its discretion in holding the contempt proceedings, it vacated the finding of contempt and remanded to the district court to make factual findings under the new guidance. Seven judges joined the majority opinion, written by Judge Lourie, while five judges joined Judge Dyk’s dissenting-in-part opinion.

This case’s somewhat convoluted procedural history started when TiVo initially filed a patent infringement suit in the Eastern District of Texas alleging that EchoStar’s television receivers infringe claims of its U.S. Patent No. 6,233,389 (the ‘389 patent). After a $74 million jury verdict finding EchoStar liable for willful infringement, the district court issued a permanent injunction against EchoStar.  Without appealing the permanent injunction, EchoStar spent time and effort redesigning its receivers and obtaining opinions of counsel that the redesigned devices no longer infringed the ‘389 patent. After the district court found EchoStar in contempt of its permanent injunction order despite these efforts, EchoStar appealed the decision. A panel of the Federal Circuit affirmed the district court’s decision, and EchoStar petitioned for a rehearing en banc.

The Federal Circuit held that the KSM two-step inquiry was unsound, clarified the standards governing contempt proceedings in patent infringement cases, and vacated the district court’s finding of contempt of the infringement provision of the permanent injunction and remanded to make a determination of colorable differences under the newly articulated standard. Preliminarily, the court dismissed EchoStar’s good faith defense. Pointing to Supreme Court precedent, the court stated that “a lack of intent to violate an injunction alone cannot save an infringer from a finding of contempt.” The court did indicate that, though not a defense to civil contempt, good faith efforts may be considered in assessing penalties. After discussing the replacement of the unworkable KSM inquiry, the court held that, given the district court’s familiarity with all the facts, there was no abuse of discretion in the decision to hold the contempt proceedings.

The court also clarified the colorable differences test:  instead of focusing solely on infringement by the newly accused devices, the initial focus should be on the “differences between the features relied upon to establish infringement and the modified features in the newly accused products.” When modifications to those features are “significant,” the newly accused product will be deemed “colorably different” from the adjudged infringing one. If the court determines that the modifications are not colorably different, then the court must find that the newly accused product continues to infringe the relevant claims, making the evaluation on a limitation by limitation basis. The patentee is bound by any prior claim constructions and must prove violation of the injunction by clear and convincing evidence. In the present case, since the district court did not make its contempt determination based on this clarified test, the Federal Circuit vacated the contempt finding and remanded to make the assessment under the new guidance.

The majority and minority divided on the issue of whether provisions of an injunction order can be directly challenged within a contempt proceeding, and, thus, the minority disagreed with the decision to uphold the finding of contempt. The dissent, led by Judge Dyk, stated that an accused party cannot be held in contempt for violating an injunction that does not clearly reach the accused conduct. Judge Dyk noted that policy dictated that accused infringers design around patents and that the permanent injunction at issue did not address design-arounds. The majority, on the other hand, held that lack of clarity of the injunction was not a defense; challenges to clarity are appropriately made as direct appeals or motions to modify the injunction.

The decision therefore suggests that any ambiguities in an injunctive order are best challenged at the time of granting to clarify the scope of the order. The decision also lowers the threshold for initiating a contempt proceeding, but focuses the “colorable differences” inquiry on features that were relied upon in the initial infringement finding. Thus, in cases where there may be significant modifications in these features, the patentee may be better off initiating a new infringement suit against the redesigned products rather than a contempt proceeding, despite the fact that the contempt proceeding is now easier to initiate.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

In the recent decision of CyberSource Corp. v. Retail Decisions, Inc., the Federal Circuit affirmed the District Court for the Northern District of California’s summary judgment holding two software method claims to be invalid because they are drawn to an un-patentable mental process. CyberSource’s claimed invention relates to a method for detecting fraud in a credit card transaction by utilizing Internet Protocol (IP) information, e.g., a user’s IP address. The court held that the method claims do not meet the requirements of the machine-or-transformation test and, furthermore, recite an un-patentable mental process that could be performed in a human mind.

Of particular note in this case is the court’s treatment of the second claim under consideration, a so-called “Beauregard claim” directed to a computer readable medium containing program instructions to execute the disclosed method. Specifically, the court declined to recognize the computer readable medium as a statutory manufacture or machine and invalidated the claim on the same grounds as the method claim. The court stated that it looks to the underlying invention of the claim and is not bound by the “statutory category…a claim’s language is crafted to literally invoke.” In this case, the underlying invention of both claims was identical, i.e., the method of fraud detection. Explaining further, the court noted that merely reciting a computer readable medium does not guarantee patent eligible subject matter where a computer device is not required to perform the method.

Although post-Bilski law is still in an early development stage, practitioners should consider implications this holding may have when drafting software method claims. In particular, practitioners should consider drafting method claims that cannot be performed in the human mind alone. Of particular help may be two cited cases, SiRF Tech, Inc. v. Int’l Trade Comm’n and Research Corp. Techs. V. Microsoft Corp., in which software methods were held to be patentable due to the inability to perform the methods without a computer or other manufactured device.

To read the Federal Circuit’s opinion, click here.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

As our readers likely know, an en banc panel of the Federal Circuit substantially raised the bar for proving inequitable conduct in patent cases in its recent decision in Therasense, Inc. v. Becton, Dickinson and Co., Nova Biomedical Corp. and Bayer Healthcare LLC. The court raised the bar both with respect to the intent and the materiality prongs of an inequitable conduct analysis. The court established the “knowing and deliberate” standard for proving specific intent by clear and convincing evidence, stating that for an applicant to have the specific intent necessary to commit inequitable conduct, the applicant must:  (1) know of a reference, (2) know that the reference is material, and (3) make a deliberate decision to withhold the reference. Further, the court significantly raised the bar with respect to materiality by supporting the “but-for materiality” standard. Under this standard, undisclosed prior art is “but-for material if the PTO [Patent and Trademark Office] would not have allowed a claim had it been aware of” that art. A more in-depth discussion of the Therasense decision can be found in the Nutter client alert found here.

It is anticipated that the Therasense decision, in combination with the heightened pleading standards set forth in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009), may lead to fewer assertions of inequitable conduct in litigation. The Therasense decision will almost certainly lead to litigants seeking more dismissals of issues related to inequitable conduct by summary judgment motions. Although it is not anticipated that the Therasense decision will significantly reduce the patent prosecutor’s burden of citing prior art references to the PTO to comply with an applicant’s duty of disclosure, prosecutors may wish to re-evaluate their current practices, particularly in view of proposed Therasense-based rule changes presented by the PTO. The PTO’s proposed rule changes would place the duty of disclosure materiality standard in-line with the “but-for materiality” standard endorsed by Therasense. Stay tuned to Nutter’s IP Bulletin for further updates once the comment-making period for on the proposed rule changes closes on September 19, 2011.

To read the full text of the Therasense opinion, click here.

To read the PTO’s proposed rule changes related to the duty of disclosure, click here.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

On June 9, 2011, the U.S. Supreme Court issued its much anticipated decision in Microsoft v. i4i. At issue was whether patents would continue to enjoy a strong presumption of validity during litigation. More specifically, whether the clear and convincing evidence standard necessary to invalidate a patent would be overturned. Microsoft had challenged that standard; arguing that a lower standard of “preponderance of the evidence” should be sufficient. The Supreme Court unanimously rejected Microsoft’s argument and affirmed the Federal Circuit’s long-standing strong presumption of proof. As a result, the clear and convincing evidence standard remains, even for prior art not considered by the Patent Office. However, the Supreme Court did note that when new prior art is asserted by a defendant, the jury should be given instruction on that point and also instructed to consider that fact when determining whether an invalidity defense has been proven by clear and convincing evidence.

On Wednesday, the Federal Circuit, sitting en banc, substantially raised the bar for proving inequitable conduct in patent cases with its much-anticipated decision in Therasense, Inc. v. Becton, Dickinson and Co., Nova Biomedical Corp. and Bayer Healthcare LLC. As a result, the Court vacated and remanded a decision finding Abbott Laboratories’ patent for blood glucose test strips unenforceable for inequitable conduct. Writing for a 6-1-4 majority, Chief Judge Randall Rader signaled early in the decision that the Court was determined to stop the “plague of inequitable conduct” that has become an increasing aggravation for patent prosecutors and litigators alike:

While honesty at the PTO is essential, low standards for intent and materiality
have inadvertently led to many unintended consequences, among them, increased
adjudication cost and complexity, reduced likelihood of settlement, burdened
courts, strained PTO resources, increased PTO backlog, and impaired patent
quality. This court now tightens the standards for finding both intent and
materiality in order to redirect a doctrine that has been overused to the detriment
of the public.

The Court reasoned that inequitable conduct must be returned to its roots in a trio of Supreme Court cases that applied the doctrine of unclean hands to dismiss patent cases involving truly egregious, outcome-determinative misconduct in the procurement of patents, such as falsifying affidavits and manufacturing and suppressing evidence regarding prior uses of an invention, the effectiveness of an invention, and an invention’s date of conception. The Court’s decision both provides more certainty regarding the intent element of inequitable conduct, and raises the bar for the materiality element of inequitable conduct to a level that the dissent argues virtually abolishes the inequitable conduct defense. The Court also specifically eliminates the sliding scale analysis previously used to weigh the intent and materiality elements of inequitable conduct.

“Knowing and Deliberate Standard" for Intent to Deceive. First, the majority and the dissent agreed that specific intent is required. An alleged infringer must show, by clear and convincing evidence, that the patentee “made a deliberate decision” to withhold a known material reference from the PTO. That is, there must be clear and convincing evidence that an “applicant knew of a reference, knew that it was material, and made a deliberate decision to withhold it.” What an applicant “should have known” is irrelevant, as is an allegation of negligence or gross negligence. The Court referred to this as “the knowing and deliberate standard.” The Court, including the dissent, also made clear that “[i]intent and materiality are separate requirements.” These two elements can no longer be evaluated on a sliding scale and intent cannot merely be inferred from materiality.

Recognizing, however, that direct evidence of intent to deceive is rare, the Court held that intent may still be inferred from indirect and circumstantial evidence, but only if it is “the single most reasonable inference able to be drawn from the evidence.” Thus, “when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found.” Nonetheless, as the dissent recognizes, and consistent with earlier case law, the materiality of a reference can still be a factor in determining intent.

“But-For Materiality.” The majority and the dissent parted ways on materiality. The majority significantly raised the bar by rejecting the many conflicting materiality standards, including the “reasonable examiner” standard, developed over the last thirty years in favor of a “but-for materiality” standard. Under this standard, undisclosed prior art is “but-for material if the PTO would not have allowed a claim had it been aware of” that art. (This is precisely the standard advocated by the authors of this article in the amicus brief they filed on behalf of the Boston Patent Law Association.)

The dissent, on the other hand, found the “but-for materiality” standard to be too rigid and out of step with the flexibility inherent in the doctrine’s equitable roots. It championed the much broader definition of materiality in 37 CFR § 1.56, which sets out the duty of disclosure for applicants before the PTO. The dissent complained that the narrow “but-for materiality” standard will effectively eliminate inequitable conduct claims because it gives practitioners little to no incentive to comply with the obligations of Rule 56 by adequately disclosing references to the PTO. The majority on the other hand, viewed Rule 56 as too broad and was skeptical about tying materiality to PTO rules “which understandably change from time to time,” thus leading to uncertainty. In this way, the battle between the majority and the dissent turns on differing views about how much deference to afford to the PTO.

It is important to remember, though, that materiality is measured from the standpoint of the PTO. That is, courts must assess materiality under a “preponderance of the evidence” standard and give claims their broadest reasonable interpretation. Accordingly, it is possible that a district court could find that a reference would have been material to the PTO because it would have invalidated the patent giving the claims their broadest reasonable interpretation, but still find the patent valid after having construed the patent’s claims with more particularity.

The Court also carved out an exception to the “but-for” standard for egregious, affirmative misconduct that would not have caused the PTO to deny a patent. This exception contemplates the sort of conduct that rose to the level of unclean hands in the foundational Supreme Court cases, such as filing an unmistakably false affidavit to support patentability. In such situations, “but-for materiality” need not be proven. The Court took pains to limit this exception, though, by stating that “neither mere nondisclosure of prior art references to the PTO nor failure to mention prior art references in an affidavit constitutes affirmative egregious misconduct claims of inequitable conduct.”

*      *      *

While the strong positions taken by the majority and dissent with respect to materiality could lead to review by the Supreme Court, because inequitable conduct is neithera statutory doctrine nor the subject of Supreme Court precedent, the Supreme Court may pass on granting certiorari here. Regardless, the stricter intent and materiality standards, combined with the heightened pleading standards set forth in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009), should make litigators at least a bit more cautious about alleging inequitable conduct. Those accused of inequitable conduct will now have more fodder for moving to dismiss or seeking summary judgment in light of Therasense.

Prosecutors may wish to re-evaluate current practices for citing references to the PTO. Many applicants have taken to filing Information Disclosure Statements citing numerous references, many of which are at best marginally relevant;Therasense may allow for such policies to be revised. We suggest working with counsel to determine the most appropriate way to approach these decisions.

To read the Federal Circuit's Decision in Therasense, Inc. v. Becton, Dickinson and Co., Nova Biomedical Corp. and Bayer Healthcare LLC, click here.

This advisory was prepared by the Intellectual Property Department at Nutter McClennen & Fish LLP.  For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

May 17, 2011

Centocor Ortho Biotech, Inc. (Centocor) filed a patent infringement suit in the Eastern District of Texas alleging that Abbott's Humira® antibody infringed claims of its U.S. Patent No. 7,070,775 (the '775 patent). After a $1.67 billion jury verdict finding Abbott liable for willful infringement, Abbott moved for judgment as a matter of law (JMOL) on invalidity, noninfringement, damages, and willfulness. The district court only granted the motion for JMOL on willfulness, denying the others, and Abbott appealed. In Centocor Ortho Biotech, Inc. v. Abbott Laboratories, the Federal Circuit reversed and held that the asserted claims were invalid for lack of written description.

The technology at issue in this case involved antibodies to human TNF-α, overproduction of which can lead to several autoimmune diseases. Centocor and Abbott both developed antibodies to neutralize human TNF-α using different approaches. Centocor started with a mouse antibody that had high affinity and high neutralizing activity, and then modified it to make it look more human to reduce the problem of immunogenicity. Centocor filed a patent application disclosing its A2 mice antibodies and chimeric antibodies, with mouse variable regions and human constant regions, in 1991. Centocor subsequently filed several continuation-in-part (CIP) applications. The asserted claims of the '775 patent, directed to human variable regions, were first filed in 2002 and claimed priority to an application filed in 1994.

Abbott pursued an alternative path, engineering a fully human antibody that did not have immunogenicity problems, and worked to improve the binding affinity and the neutralizing activity. Abbott filed a patent application disclosing their fully human antibody in 1996. The patent issued in 2000 as U.S. Patent 6,090,382, and Abbott obtained regulatory approval to market Humira® in 2002. Centocor's claims to fully human antibodies were not filed until after this time, and ultimately issued in 2006 as the ‘775 patent.

The Court stated that the pivotal issue in the case was whether the ‘775 patent provided adequate written description for the claimed human variable regions using the test as confirmed in Ariad. As noted above, the asserted claims of the ‘775 patent directed to human variable regions were not filed until 2002, after Abbott had already patented a fully-human antibody to TNA-α. Since Abbott’s claims were filed in 1996, Centocor relied on the priority claim to the 1994 CIP application, which meant the asserted claims of the ‘775 patent needed to find written description support in the 1994 CIP application. 

The specification of the 1994 CIP application did not disclose a fully human antibody or a single human variable region. The court found that a few sprinkled references to human antibodies or human variable regions did not reasonably suggest that Centocor was in possession of these antibodies. Nor was the fact that a fully human antibody could be made sufficient to show that the inventors of the ‘775 patent possessed such an antibody. At best, the specification described a plan, when what was required is constructive possession. The written description requirement does not demand either examples or an actual reduction to practice, but it does demand that one of skill in the art can “visualize or recognize” the claimed antibodies based on the specification’s disclosure.

One of Centocor’s arguments was that an earlier Federal Circuit decision, Noelle v. Lederman, 355 F.3d 1343 (Fed. Cir. 2004), and the United States Patent and Trademark Office’s written description guidelines support the view that disclosing a protein, in this case human TNF-α, provides adequate written description for any antibody that binds to that protein. The Court clarified that this reasoning only applies to disclosure of newly characterized antigens where creation of the claimed antibodies is routine. Here, both the human TNF-α protein and antibodies to it were already known. The claimed invention in the instant case is a class of antibodies containing a human variable region that have the particularly desirable therapeutic properties of high affinity, neutralizing activity, and A2 specificity. Claiming antibodies with specific properties can result in a claim that does not have written description support, even if the human TNF-α protein is disclosed, since antibodies with those properties have not been adequately described. 

The Court overturned the jury award, finding that there was inadequate written description for the fully human antibody and noting that Centocor could not “overreach the scope of [its] contribution to the field of art as described in the patent specification.” While this case does not represent any significant departure from existing written description law, it does underscore a predicament in the “unpredictable” arts:  while narrow claims tend to limit the value of patent protection, broad claims may be susceptible to invalidity attack on written description grounds. Some commentators view this decision as indicative of a trend at the Federal Circuit to use the written description requirement to prevent overreaching by holders of broad, pioneering biotech patents, a trend which may soon expand into the more “predictable” arts.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

The divided infringement defense, also known as the joint infringement defense, requires that a single party infringe every limitation of a patent claim in order to establish a basis for liability. Therefore, no liability (direct or indirect) can be found where some elements of a patent claim are infringed by one party and others are infringed by a second party, except where the first party provides direction or control to the second party.

The divided infringement defense has grown more popular in recent years, paralleling the rising importance of system and method claims used to describe cutting edge computer software and business method inventions. The attention continues to build with the Federal Circuit’s recent decision to review the issue en banc in the case of Akamai Technologies, Inc. v. Limelight Networks, Inc.

In Akamai, the patents at issue involve streamlining the delivery of content on the web to a user’s computer display. The method claims under consideration recite not only steps taken by Akamai as a content delivery network provider, but also steps taken by its customers to utilize Akamai’s services. As a result, no single entity can be said to infringe every limitation of the claims. Although the jury issued a multi-million dollar verdict in favor of Akamai on divided infringement grounds, the U.S. District Court for the District of Massachusetts granted the defendant’s motion for judgment as a matter of law (JMOL) of noninfringement, finding that the defendant did not exercise sufficient direction or control over its customers to give rise to divided infringement. The court cited the earlier decisions in BMC Resources, Inc. v. Paymentech LP and Muniauction, Inc. v. Thomson Corp. as controlling. The District Court’s opinion was affirmed in a decision by a three judge panel of the Court of Appeals for the Federal Circuit in 2010.

Since the Federal Circuit’s affirmation, the court has issued two other precedential divided infringement opinions. The first, in Centillion Data Systems, LLC v. Quest Communications International, Inc., concerned the application of the divided infringement defense to a system claim rather than a method claim. The court held that the defense applies equally and requires a single defendant to use, or compel others to use, every claimed element in a system. The court noted, however, that a single defendant need not possess or even directly interact with every element; liability can be found where a single defendant puts the invention into service and obtains a benefit from it.

The second decision, McKesson Technologies, Inc. v. Epic Systems Corporation, also found no infringement based on the divided infringement defense. In this case, the patent claims at issue concerned a method for delivering instructions from a health care provider to patients over the internet. The Federal Circuit held that, because patients were not in a contractual or agency relationship that obligated them to perform the recited method steps, Epic could not be liable for infringement.

The rehearing of the Akamai case en banc is sure to keep divided infringement in the news for some time. Practitioners looking to avoid the pitfalls of the divided infringement defense should consider the method claim drafting strategies discussed in Nutter’s IP Bulletin in 2009 following the BMC and Muniauction decisions. Indeed, a common sentiment from the Federal Circuit is that the burden lies with patent prosecutors to appropriately define the boundaries of the invention—and that properly drafted claims (i.e., those that can be infringed by a single party) can sidestep this issue entirely.

This advisory was prepared by Nutter's Intellectual Property practice. For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

March 22, 2011

Induced infringement applies to the sale of products necessary to perform a claimed process – even when the product has non-infringing uses – if the product was sold with express instructions for use in the infringing manner.  Asserting induced infringement has also become an effective weapon for U.S. patent holders against foreign manufacturers when the patent covers a product sold by the foreign manufacturer to a U.S. distributor for importation into the U.S.  Increasingly, federal courts have disregarded defenses raised by foreign manufacturers who assert that their sale was outside of the U.S. and that they should not be held liable for the distributors’ actions.

While active inducement of infringement has traditionally required that the actor “knew or should have known” that his actions would induce infringement, thereby requiring actual knowledge of a U.S. patent that covers the infringing process or product, this “state of mind” requirement is being reexamined by the U.S. Supreme Court in the case of Global-Tech v. SEB S.A.  

This case centers around Global-Tech’s agreement to manufacture deep-fryers to be sold in the U.S. by Sunbeam.  After Global-Tech purchased several deep-fryers (including SEB’s “Cool Touch” fryer, which was not marked with any U.S. patents), Global-Tech reverse-engineered and manufactured deep-fryers that were very similar to SEB’s “Cool Touch” product for sale to Sunbeam.  SEB sued both Sunbeam (the U.S. distributor) for direct infringement and Global-Tech (the foreign manufacturer) for induced infringement.  Even after Sunbeam and SEB settled the direct infringement claim, SEB continued to pursue the induced infringement claim against Global-Tech.

After a jury trial, Global-Tech was found to have induced infringement by selling to Sunbeam products that Global-Tech knew would be resold in the U.S.  The trial judge, however, did not instruct the jury that they were required to find that the defendant had knowledge of the patent-in-suit when they sold the infringing goods to Sunbeam.

On appeal, the Federal Circuit affirmed the decision of the district court.  In doing so, the Federal Circuit moved away from its previous requirement that the inducer have knowledge of the infringed patent, and instead held that “deliberate indifference” by Global-Tech was enough to meet the standard for actively inducing infringement.  The Federal Circuit noted that Global-Tech reverse-engineered the SEB design, but did not check to see if the product was covered by SEB’s U.S. patents.  More damning was testimony that Global-Tech asked a U.S. attorney to render a clearance opinion for their deep-fryers, but failed to notify the attorney that their product copied SEB’s design.

The Supreme Court granted certiorari and heard oral arguments in the case on February 23, 2011.  Global-Tech’s brief relied heavily on the Supreme Court’s 2005 decision in MGM Studios v. Grokster.  Although Grokster was a copyright case, the Court in Grokster relied on the provisions in 35 U.S.C. § 271(b) directed to actively inducing patent infringement as a guide for interpreting the meaning of “inducing” copyright infringement.  Global-Tech argued that Grokster requires that inducement requires “purposeful, culpable expression and conduct” that encourages infringement.  Global-Tech further argued that a relaxed “deliberate indifference” standard would stifle competition by preventing some foreign manufacturers from bringing their product to market to choose to avoid the expense of a full U.S. patent clearance search. A number of influential companies with overseas operations, such as General Motors, Microsoft, Cisco, Intel and Hewlett Packard have sided with Global-Tech and filed amicus briefs opposing the “deliberate indifference” standard.  Internet service providers, such as Google, Yahoo, Comcast and Facebook, have also lined up in support of Global-Tech’s position.

SEB, on the other hand, argued that nothing in jurisprudence or 35 U.S.C. § 271(b) requires that an inducer of infringement have specific knowledge of the infringed patent.  Moreover, if Congress had intended to include a knowledge requirement, it would have used the language found in 35 U.S.C. § 271(c) that requires knowledge to succeed in a claim for contributory infringement.

During oral arguments, the Federal Circuit’s “deliberate indifference” standard did not appear to sit well with the Court as it seemed to excessively lower the threshold for liability.  Chief Justice Roberts expressed concern that such a relaxed standard for actively inducing infringement “would bring the semiconductor industry to halt.”  He noted that there were 420,000 U.S. patents directed to semiconductors such that if you do virtually anything in that field, “you’re going to hit a semiconductor patent owned by somebody.”  

Although the Justices seemed uncomfortable with the “deliberate indifference” standard, the Court seemed equally unimpressed by Global-Tech’s pleas of innocence.  Indeed, several of the Justices appeared to regard the patent clearance opinion sought by Global-Tech as a sham.  While predicting the outcome of Supreme Court decisions based on oral arguments is often a dubious endeavor, the overall tenor of the hearings suggested that the Court supports the ultimate result that Global-Tech should be liable for inducing infringement, although for reasons that differ from the Federal Circuit’s conclusion that Global-Tech was deliberately indifferent to the existence of SEB’s patent rights.  In fact, Justice Breyer posed several alternative standards during oral arguments including “conscious disregard” and “willful blindness” of SEB’s U.S. patent rights.  “Willful blindness” may indeed be where the Supreme Court ends up as they did in the recent case of United States v. Santos, 553 U.S. 507 (2008).  In Santos, which also turned on the issue of “intent” (but in a non-patent context), the Court applied the “willful blindness” standard and held that “willful blindness arises when a party, aware of a high probability of a fact, deliberately avoids learning the truth.”

The final decision by the Supreme Court in Global-Tech v. SEB S.A. could lower the standard for patentees to show active inducement of infringement.  Nutter attorneys will continue to monitor progress of this case and provide updates in future advisories.      

This advisory was prepared by Nutter's Intellectual Property practice.  For more information, please contact your Nutter attorney at 617-439-2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances.  Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.