Global-tech Appliances, Inc. v. Seb S.a. and the Creation of a Flexible Blindness Standard for Induced Patent Infringement

• Publication year: 2011

David W. Roadcap⁰

When assigning liability in patent infringement cases, courts have often struggled with the determination of what mental state is necessary to hold a defendant liable. In Global-Tech Appliances, Inc. v. SEB S.A., the Supreme Court determined that knowledge is necessary in cases of induced infringement, but tempered the holding by allowing willful blindness to be a substitute for knowledge. This article argues that the flexibility introduced into induced infringement by willful blindness allows courts to implement a new "flexible blindness" standard. This standard will allow courts to make a fact-centered determination of blameworthiness rather than a difficult examination of the defendant's mental state. In doing so, the assignment of liability will be more reliable and accurate, there will be more deterrence of future acts of induced infringement, and the formal requirement for knowledge will protect innocent parties whose actions aid, but do not induce, infringement.

I. Introduction

Bob, the CEO of Acme Supply, Inc., was informed that a widget with enhanced networking capabilities made by the Granny Smith Corporation was selling well in stores. Bob realized that his company, a major widget component manufacturer, could make a large profit if it became involved in that market. Therefore, he approached the Raspberry Corporation about a deal where Acme would supply widgets for Raspberry to make a product that incorporated their networking technology. Raspberry immediately agreed. A few days after the new product appeared in stores, Acme received a letter from Granny Smith's lawyer claiming that Acme had induced infringement of Granny Smith's networked widget patents. Bob was not surprised that the Raspberry product infringed since he knew that widgets were a competitive field with many patents. Nonetheless, Granny Smith's claim infuriated Bob because he could legitimately claim that neither he nor his employees knew of the patents and because his company only manufactured components that were in the public domain.

Patent infringement can cover a range of activities which society views as having degrees of blameworthiness, and it is often difficult for courts to assign liability in cases where the defendant has a lesser degree of fault.¹ For instance, in the above hypothetical, Acme neither made nor sold infringing products. Still, the company involved itself in a process that led to the introduction of an infringing product into the market. Statutory definitions of infringement allow punishment for induction of infringement,² but courts have had a particularly difficult time determining the level of intent required from the defendant in such induced infringement situations.³ The Supreme Court recently addressed this dilemma in Global-Tech Appliances, Inc. v. SEB S.A.,⁴ in which it clarified ambiguous holdings for induced infringement intent.⁵ In doing so, the Court rejected a pure knowledge requirement by importing the criminal law willful blindness standard into patent law.⁶ The Court thereby made it clear that it will attribute knowledge in induced infringement cases, as is does in criminal cases, when the defendant is aware of a high likelihood of infringement and intentionally avoids gaining actual knowledge of that fact.⁷ This Recent Development argues that the Supreme Court's methodology allows for implementation of a new standard, which this article will refer to as the "flexible blindness" standard, that allows for a more calibrated assignment of liability by reducing the focus on actual intent. This standard is defined as a flexible, fact-based analysis of the circumstances surrounding infringement with the goal of determining whether the actions of the accused infringer suggest sufficient knowledge or willful blindness to justify assigning liability.

This Recent Development outlines the development of and rationale for the flexible blindness standard. Part II discusses the development of different types of patent infringement and the legal standards that need to be met for liability to be assigned for each type. In Part III, this article presents the holding of Global-Tech and its adoption of the knowledge requirement for induced infringement. Part Iv briefly reviews prior suggestions for properly assigning liability in induced infringement cases. Part v fits the Global-Tech holding into the context of these standards and discusses how it can be used as the basis for a flexible blindness standard. Finally, Part vI reviews some induced infringement holdings that have followed Global-Tech in order to determine whether they are consistent with the application of a flexible blindness system.

II. The Standards of Patent Infringement Law

The fundamental tradeoff at the center of the U.S. patent system is giving inventors exclusive use of their inventions in return for the disclosure of those inventions to the public.⁸ Enforcement of the legal rights granted to inventors is an essential element of validating this bargain.⁹ Courts hold infringing parties liable for a variety of actions, such as using the claimed invention, making the claimed invention, or contributing to others' use of the invention.¹⁰ Early patent cases divided infringement into two categories: direct infringement and indirect infringement.¹¹ However, in the Patent Act of 1952 ("Patent Act"),¹² Congress further divided indirect infringement into the two separate offenses of contributory and induced infringement.¹³ The Patent Act codified the three categories of infringement as direct (35 U.S.C. § 271(a)),¹⁴ induced (35 U.S.C. § 271(b)),¹⁵ and contributory (35 U.S.C. § 271(c)).¹⁶

Direct infringement refers to circumstances in which someone "without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent."¹⁷ This is the conventional and most common form of patent infringement, as it includes all cases where the defendant is personally involved in the infringing action.¹⁸ It is well established and uncontroversial that direct infringement is a strict liability offense.¹⁹ Accordingly, a patent holder can bring suit regardless of the defendant's intentions or any precautions he or she may have taken.²⁰ Indirect infringement determinations, however, are much more complicated, as the defendant's actions and intentions must be analyzed.²¹

Contributory infringement, the first type of indirect infringement, involves a third party whose "behavior . . . encourages, aids, or permits another to directly infringe a patent."²² Historically, contributory infringement has most often involved supplying components of the claimed invention.²³ When examining contributory patent infringement, the courts' primary concern is what conduct is necessary to constitute the infringement.²⁴ Section 271(c) states that in cases of contributory infringement, the party acts "knowing [the supplied component] to be especially made or especially adapted for use in an infringement" of the patent.²⁵ This intent requirement is ambiguous because the statute fails to state whether a party only needs to intend to commit the acts that constitute contributory infringement or whether the party also needs to intend that the third party infringe.²⁶

Induced infringement covers the remaining indirect infringement cases, those where someone "actively induces infringement of a patent" by another.²⁷ The distinction between contributory and induced infringement is summarized by noting that while contributory infringement involves the sale of components or parts to the direct infringer, induced infringement covers "'other acts' that direct, facilitate, or abet infringement."²⁸ The same intent ambiguity that plagues contributory infringement is also seen with induced infringement, as evidenced by the United States Court of Appeals for the Federal Circuit issuing two conflicting standards for induced infringement within one calendar year.²⁹ The Federal Circuit later settled this issue in DSU Medical Corp. v. JMS Co., Ltd.,³⁰ when it confirmed that the third party's intent to infringe is necessary, stating that " 'knowledge of the acts alleged to constitute infringement' is not enough."³¹

A parallel question is whether knowledge of the infringement is necessary to create liability for induced and contributory infringement, or whether a less stringent requirement for the defendant's mental state would be adequate. In Aro Manufacturing Co. v. Convertible Top Replacement Co. (Aro II),³² the Supreme Court held that knowledge was required for contributory infringement under § 271(c).³³ In that case, the Court held that the legislative history of the Patent Act made it clear that the Act codified existing case law,³⁴ and, therefore, the defendant is required to know "that the combination for which his component was especially designed was both patented and infringing."³⁵ Following this holding, one question remained: did this knowledge requirement also apply to § 271(b) and induced infringement? This was the question addressed by Global-Tech in May 2011.

III. Global-Tech's Knowledge Standard for Induced Infringement

Most individuals deem the culpability of someone who intentionally copies a patented design for personal profit to be much greater than that of someone who unknowingly makes and supplies a small component of a product that then infringes a patent. These two extremes of perceived guilt are reflected in § 271, where the categories of infringement are defined and liability is assigned.³⁶ For example, the high culpability of direct infringement is matched by § 271(a)'s strict liability requirements.³⁷ On the other hand, contributing a component for a product that infringes only creates liability when, according to § 271(c), the contributor acts "knowing the [component] to be especially made or especially adapted for use in an...