On May 31, 2011, the U.S. Supreme Court ruled that a party cannot be liable for indirect patent infringement by inducement unless it had knowledge that the induced acts constituted patent infringement. The Court also held that an inducer’s “willful blindness” to the infringement can constitute such knowledge. Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. __ (2011).

First, relying on its precedent concerning contributory infringement, the Court unanimously interpreted “actively induces infringement” under § 271(b) of the Patent Act as requiring a showing that the inducer has persuaded “another to engage in conduct that the inducer knows is infringement.” The Court explained that § 271(b) shares both a common legal origin, and similar linguistic ambiguities, with the section governing contributory infringement (§ 271(c)).

Second, in an 8-1 holding, with Justice Kennedy dissenting, the Court stated that a defendant may be held liable for inducing infringement if it is willfully blind, i.e., it “takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.”

The Court explained that this “willful blindness” standard for inducement is a more restrictive test than the recklessness-based “deliberate indifference” test previously used by the Federal Circuit. The “willful blindness” test does not permit a finding of knowledge “when there is merely a ‘known risk’ that the induced acts are infringing.” Rather, the inducer must “subjectively believe that there is a high probability” that the induced acts are infringing the patent in question. More significantly, the willful blindness test “require[s] active efforts by an inducer to avoid knowing about the infringing nature of the activities.”

In the case at bar, Pentalpha Enterprises Ltd. deliberately copied the inner workings of SEB S.A.’s top-selling deep-fryer. In affirming the Federal Circuit’s judgment (if not its rationale), the Court concluded that although the Federal Circuit was wrong to apply the “deliberate indifference” test, the evidence in the record was nonetheless sufficient to support a finding that Pentalpha took deliberate actions to avoid knowing that it was inducing infringement of SEB’s patent. In particular, the Court found several instances in which Pentalpha deliberately avoided the fact that the deep-fryer it copied was patented. For example, Pentalpha knew that the fryer had a significant technological advantage over others being sold at the time. Furthermore, it purposely copied a model from an overseas market where U.S. patent numbers are not typically imprinted on the products. And, most glaring, when it sought a right-to-use opinion from a patent attorney, Pentalpha failed to disclose the fact that it had copied SEB’s deep-fryer.

The upshot of this decision is that parties will not be liable for infringement by inducement unless they know they are inducing others to infringe a patent. However, those same parties cannot avoid inducement liability by actively and willfully turning a blind eye to such knowledge.

You can read the full text of the decision by clicking here.

To learn more about this important case and its implications for your patent portfolio or patent litigation, please contact Rob Baron at 215.864.8335 or baron@ballardspahr.com; Marc Segal at 215.864.8843 or segalm@ballardspahr.com; or any other member of our Intellectual Property Department.  

Copyright © 2011 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.