Chapter §17.02 Inducing Infringement Under §271(b)

• Jurisdiction: United States

§17.02 Inducing Infringement Under §271(b)

Section 271(b) pertains to the act of inducing infringement, which is analogous to the act of aiding and abetting a crime.⁸ Inducing infringement requires that the alleged inducer actively and knowingly aided and abetted another's direct infringement.⁹

In this regard, inducing infringement is narrower than direct infringement. "Unlike direct infringement, induced infringement is not a strict liability tort; it requires that the accused inducer act with knowledge that the induced acts constitute patent infringement."¹⁰

While proof of intent is necessary,¹¹ direct evidence of that intent is not required; rather, circumstantial evidence may suffice.¹² To form the requisite intent, the inducer must have knowledge of the patent.¹³

The intent requirement is further analyzed after the following sections, which describe the types of acts typically alleged to be inducing infringement

[A] Acts

[1] Sale of Product Needed to Infringe

A typical inducing infringement scenario involves a manufacturer selling a product that the purchaser will use to directly infringe the asserted claims of a patent in suit. For example, in Toshiba Corp. v. Imation Corp.,¹⁴ accused infringers Imation and other digital video disc (DVD) manufacturers (collectively "Imation") sold recordable blank DVDs that complied with certain industry compatibility standards. The standards required that each disc contain a "lead-in area," a "data area," and a "lead-out" area. When consumer purchasers of the accused discs used them to record digital content such as movies, the purchasers had the option of "finalizing" the discs so as to make them compatible for any standardized DVD player. By selecting the finalizing operation, the end user would cause a "test pattern" of "pits" and "lands" to be written in the lead-in area of the disc. Doing so would infringe the claims of Toshiba's U.S. Patent No. 5,892,751. Notably, the manuals and market materials published by Imation also recommended finalizing the DVDs.

A district court granted summary judgment to Imation of no inducing infringement liability because the purchaser's option to not finalize the DVDs was a "substantial noninfringing use."¹⁵ On this point, the district court had erred as a matter of law. In contrast with contributory infringement under §271(c), "[t]he existence of a substantial non-infringing use does not preclude a finding of inducement [under §271(b)]."¹⁶ The Federal Circuit vacated the summary judgment of no inducing infringement and remanded the case for further proceedings.¹⁷

[2] Provide Instructions, Directions, or Guidance

Inducement cases under 35 U.S.C. §271(b) may involve one actor (the inducing infringer) providing another (the direct infringer) with instructions and information about how to make or use the accused device or carry out the accused process.¹⁸ The inducer must aid or abet the direct infringer but need not necessarily sell a component of the patented invention to the direct infringer.

A good example of inducing infringement by providing instructions and information is Water Techs. Corp. v. Calco, Ltd.¹⁹ Water Technologies' patent in suit was directed to improved bactericidal resins used as disinfectants for purifying water; the company incorporated the resins into a drinking cup and other products useful to campers, backpackers, and travelers. Calco, a competitor of Water Technologies, directly infringed by making and selling products formed from the claimed resins.

Mr. Gartner, a consultant to Calco, provided formulas to Calco, helped the company make the infringing resins, and prepared consumer use instructions. Gartner also owned the trademark POCKET PURIFIER under which Calco's accused products were sold, which gave him a contractual right to approve the construction of the product.

The Federal Circuit in Water Techs. found that the totality of these acts and circumstances made Gartner liable for inducing infringement under §271(b).²⁰ Gartner's activities provided sufficient circumstantial evidence to sustain the district court's finding that his inducement was intentional. As a result, Gartner was held jointly and severally liable with Calco for all damages attributable to Calco's direct infringement.²¹

[3] Corporate Officer Liability

Federal Circuit decisions provide that corporate officers who actively aid and abet their corporation's infringement may be personally liable for inducing infringement under 35 U.S.C. §271(b), whether or not the corporation is the alter ego of the corporate officer. For example, in Power Lift, Inc. v. Lang Tools, Inc.,²² the Federal Circuit held that the legislative history of 35 U.S.C. §271(b) and contemporaneous commentary by a co-author of the statute²³ "suggest[ed] a 'broad' reading of §271(b) which, in our view, may include liability of corporate officials who actively aid and abet their corporation's infringements."²⁴

In so holding the appellate court rejected the argument of Wendell Lang, the president, founder, majority owner, and director of adjudicated willful infringer Lang Tools, Inc., that "a corporation, which can act only through its officers and agents, cannot be said to have been 'induced' by its officers to do certain acts."²⁵ In other words, the Federal Circuit in Power Lift rejected Wendell Lang's contention that because the acts of a corporation's officers are, in law, the acts of the corporation, finding individual liability on the part of Mr. Lang as a corporate officer would in effect have meant finding "liability for self-inducement, a meaningless concept."²⁶

Unpersuaded by Wendell Lang's reasoning, the Federal Circuit in Power Lift affirmed a district court's entry of judgment against both Lang Tools and Wendell Lang, individually, based on a jury's interrogatory answer that Wendell Lang had actively induced his corporation's willful infringement of Power Lift's U.S. Patent No. 4,305,467 ('467 patent). The patented invention was a device utilized to lift equipment, such as a blow-out preventer, during oil and gas well drilling operations. The Federal Circuit concluded that Wendell Lang "based [the accused Lang Tools'] lift system on inspection of the [patentee] Power Lift blow-out preventor system which was already in field use." Lang's son was seen measuring dimensions of the Power Lift system. While the Lang Tools' system was "not identical to Power Lift's system, it was based thereon."²⁷

When Power Lift thereafter contacted Wendell Lang to offer him a license under the '467 patent, Mr. Lang refused, stating that "before he would pay [Power Lift a nickel, he'd see [Power Lift] in the courthouse."²⁸ Wendell Lang decided not to stop production of Lang Tools' system. The resulting infringement lawsuit was filed shortly thereafter.

The Federal Circuit concluded that "Lang's decision to continue production after notice was clear and convincing evidence of willfulness."²⁹ Finally, the Federal Circuit sustained the district court's decision to hold Wendell Lang and Lang Tools jointly and severally liable for Power Lift's attorney fees and costs under 35 U.S.C. §285.

Notably, the Federal Circuit in Power Lift and other decisions did not invoke the principles of piercing the corporate veil.³⁰ However, other Federal Circuit decisions hold that those principles are relevant when a corporate officer has been charged with direct infringement under §271(a).³¹

More recent decisions suggest that at least some Federal Circuit judges consider the application of different rules for officer liability in the direct infringement and inducing infringement contexts to be an issue still in need of resolution. In the Federal Circuit's 2010 decision in Wordtech Sys., Inc. v. Integrated Networks Solutions, Inc.,³² the appellate court stated:

In Power Lift, Inc. v. Lang Tools, Inc., we explained that the history of the 1952 Patent Act supported "a 'broad' reading of §271(b) which, in our view, may include liability of corporate officials who actively aid and abet their corporation's infringement." 774 F.2d 478, 481 (Fed.Cir.1985). We noted that regional circuits previously held officers liable for inducement without piercing the corporate veil. E.g., Int'l Mfg. Co. v. Landon, Inc., 336 F.2d 723, 729 (9th Cir.1964). The differing rules for officer liability under §§271(a) and 271(b) and the treatment of officer liability as distinguished from owner liability in our precedent are important issues that cannot be resolved on this record and are left for another day. ³³

[4] Generic Pharmaceutical Labeling

[a] General Principles

A series of Federal Circuit cases in the Hatch-Waxman Act pharmaceutical context have considered potential §271(b) inducing infringement liability on the part of generic drug manufacturers. Specifically, these cases look at whether the U.S. Food and Drug Administration-approved labeling and/or instructions accompanying generic drug products can encourage direct infringement by others (i.e., physicians and/or their patients), and whether the generic manufacturer has demonstrated the necessary intent to cause that direct infringement. The individual cases are extremely fact-specific, and the Circuit's decisions have oscillated between pro-patentee and pro-generic approaches.

Consider a typical scenario. A generic drug manufacturer may attempt to avoid patent infringement liability by seeking Food and Drug Administration (FDA) approval to distribute its copycat drug only for previously FDA-approved uses ("indications") that are not (or are no longer) patent-protected. Assume that the FDA approves the generic's application and the generic drug is launched, bearing a label referring only to the non-patented use. Such a label, from which the generic has "carved out" any patented uses, is sometimes referred to as a "skinny label."³⁴

The patentee/"branded" pharmaceutical manufacturer may assert that the generic's label at least implicitly encourages physicians to use...