GlobalTech v SEB - The Supreme Court Lowers the Standard for Willful Inducement of Infringement

June 2011

Any time the U.S. Supreme Court speaks on a question of patent law, we are well advised to listen and consider the ramifications in day-to-day business. The Court’s May 29, 2011 decision in GlobalTech v. SEB may be one such case. That case resolves a long-standing question concerning the level of intent required for inducing patent infringement, of interest to patent litigators, but the decision  also has important lessons for clients seeking freedom to operate opinions on new products, particularly the need to provide your attorney with all relevant information.

Under U.S. law, liability for patent infringement may occur in several ways. The first way -- direct infringement -- occurs when one actor carries out all of the acts claimed in a single patent claim.  Indirect infringement is a second way, and applies when another legal entity is indirectly involved with direct infringer, such as in a joint venture.

The patent statute provides for two types of indirect infringement. The first type is contributory infringement:

“Whoever offers to sell or sells . . . a component of a patented [invention] …, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement  ... shall be liable as a contributory infringer.” 35 USC §271(c)
 
The second type is called inducing infringement:
 
“Whoever actively induces infringement of a patent shall be liable as an infringer.” 35 USC §271(b)
 
In the case at hand, SEB S.A., a French manufacturer of home appliances, invented a “cool touch” deep fryer for home use with external surfaces that remain cool during the frying process. SEB obtained a U. S. patent and started manufacturing and selling its cool-touch fryer under the well-known “T-Fal” brand.
 
In 1997, Sunbeam Products, a U. S. competitor of SEB, asked a Hong Kong company, a subsidiary of petitioner Global-Tech, Pentalpha Enterprises, Ltd., to supply it with deep fryers. In order to develop a deep fryer for Sunbeam, Pentalpha purchased an SEB fryer in Hong Kong and copied all but its cosmetic features. Because the fryer bought in Hong Kong was made for sale in a foreign market, it bore no U. S. patent markings.
 
After copying SEB’s design, Pentalpha asked an attorney to conduct a right-to-use study, but did not tell their attorney that its design was copied directly from SEB’s. The attorney failed to locate SEB’s patent, and in August 1997 he issued an opinion letter stating that Pentalpha’s deep fryer did not infringe any of the patents that he had found.
 
Pentalpha then started selling deep fryers to Sunbeam for resale in the United States under its Sunbeam trademarks.  SEB then sued Sunbeam for direct infringement and Pentalpha and GlobalTech for inducing infringement.
 
Sunbeam settled out of court.  After a five day trial, a jury found Pentalpha and GlobalTech liable for inducing infringement. GlobalTech and Pentalpha appealed to the CAFC and then to the U.S. Supreme Court.
 
In an 8-1 decision, the U.S. Supreme Court held that inducement requires knowledge that the third party's conduct constitutes an infringement.  This is separate from any intent required to perform the acts themselves (i.e.: making, using, offering to sell, selling, or importing a patented invention).
 
The Supreme Court further held that while deliberate indifference does not satisfy the knowledge required for § 271(b), willful blindness does rise to the level of willfulness. 
 
In reaching this conclusion, the Court looked to criminal law, where defendants cannot escape liability by “deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances.”
 
Willful blindness exists when two requirements are met.  First, "the defendant must subjectively believe that there is a high probability that a fact exists."    Second, "the defendant must take deliberate actions to avoid learning of that fact."   "[T]hese requirements give willful blindness an appropriately limited scope that surpasses recklessness and negligence."   “A willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” 
 
By contrast, a merely reckless defendant is one who knows of a substantial and unjustified risk of such wrongdoing, and a negligent defendant is one who should have known of a similar risk but, in fact, did not.
 
Applying this standard to the case at hand, the Court ruled the Defendants liable for willful infringement, for which SEB may now seek increased damages.
 
What does this mean to clients who want to know if their new product infringes any patents? As usual, expect your counsel to thoroughly search the prior art and investigate the technical facts concerning the configuration of your product. But you must also help them understand the circumstances surrounding development of the product. Who was involved with its conception? Is the new product copied and/or even just modeled after a competitor’s product? Do you know of a competitor that is selling a similar product, even outside the U.S.?   Is that product patented in the U.S.?  Your counsel will need to know all of these things, in order to give you a competent opinion that will withstand scrutiny of a court, should that day ever come.
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June 2011

Any time the U.S. Supreme Court speaks on a question of patent law, we are well advised to listen and consider the ramifications in day-to-day business. The Court’s May 29, 2011 decision in GlobalTech v. SEB may be one such case. That case resolves a long-standing question concerning the level of intent required for inducing patent infringement, of interest to patent litigators, but the decision  also has important lessons for clients seeking freedom to operate opinions on new products, particularly the need to provide your attorney with all relevant information.

Under U.S. law, liability for patent infringement may occur in several ways. The first way -- direct infringement -- occurs when one actor carries out all of the acts claimed in a single patent claim.  Indirect infringement is a second way, and applies when another legal entity is indirectly involved with direct infringer, such as in a joint venture.

The patent statute provides for two types of indirect infringement. The first type is contributory infringement:

“Whoever offers to sell or sells . . . a component of a patented [invention] …, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement  ... shall be liable as a contributory infringer.” 35 USC §271(c)
 
The second type is called inducing infringement:
 
“Whoever actively induces infringement of a patent shall be liable as an infringer.” 35 USC §271(b)
 
In the case at hand, SEB S.A., a French manufacturer of home appliances, invented a “cool touch” deep fryer for home use with external surfaces that remain cool during the frying process. SEB obtained a U. S. patent and started manufacturing and selling its cool-touch fryer under the well-known “T-Fal” brand.
 
In 1997, Sunbeam Products, a U. S. competitor of SEB, asked a Hong Kong company, a subsidiary of petitioner Global-Tech, Pentalpha Enterprises, Ltd., to supply it with deep fryers. In order to develop a deep fryer for Sunbeam, Pentalpha purchased an SEB fryer in Hong Kong and copied all but its cosmetic features. Because the fryer bought in Hong Kong was made for sale in a foreign market, it bore no U. S. patent markings.
 
After copying SEB’s design, Pentalpha asked an attorney to conduct a right-to-use study, but did not tell their attorney that its design was copied directly from SEB’s. The attorney failed to locate SEB’s patent, and in August 1997 he issued an opinion letter stating that Pentalpha’s deep fryer did not infringe any of the patents that he had found.
 
Pentalpha then started selling deep fryers to Sunbeam for resale in the United States under its Sunbeam trademarks.  SEB then sued Sunbeam for direct infringement and Pentalpha and GlobalTech for inducing infringement.
 
Sunbeam settled out of court.  After a five day trial, a jury found Pentalpha and GlobalTech liable for inducing infringement. GlobalTech and Pentalpha appealed to the CAFC and then to the U.S. Supreme Court.
 
In an 8-1 decision, the U.S. Supreme Court held that inducement requires knowledge that the third party's conduct constitutes an infringement.  This is separate from any intent required to perform the acts themselves (i.e.: making, using, offering to sell, selling, or importing a patented invention).
 
The Supreme Court further held that while deliberate indifference does not satisfy the knowledge required for § 271(b), willful blindness does rise to the level of willfulness. 
 
In reaching this conclusion, the Court looked to criminal law, where defendants cannot escape liability by “deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances.”
 
Willful blindness exists when two requirements are met.  First, "the defendant must subjectively believe that there is a high probability that a fact exists."    Second, "the defendant must take deliberate actions to avoid learning of that fact."   "[T]hese requirements give willful blindness an appropriately limited scope that surpasses recklessness and negligence."   “A willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” 
 
By contrast, a merely reckless defendant is one who knows of a substantial and unjustified risk of such wrongdoing, and a negligent defendant is one who should have known of a similar risk but, in fact, did not.
 
Applying this standard to the case at hand, the Court ruled the Defendants liable for willful infringement, for which SEB may now seek increased damages.
 
What does this mean to clients who want to know if their new product infringes any patents? As usual, expect your counsel to thoroughly search the prior art and investigate the technical facts concerning the configuration of your product. But you must also help them understand the circumstances surrounding development of the product. Who was involved with its conception? Is the new product copied and/or even just modeled after a competitor’s product? Do you know of a competitor that is selling a similar product, even outside the U.S.?   Is that product patented in the U.S.?  Your counsel will need to know all of these things, in order to give you a competent opinion that will withstand scrutiny of a court, should that day ever come.

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