Supreme Court Rules That Knowledge Of Patent Is Required For Liability For Inducing Patent Infringement, But Willful Blindness Is Enough

Under section 271(b) of the Patent Act, a defendant in a patent infringement lawsuit may be held liable for inducing the infringement of a patent, i.e., causing another person to directly infringe a patent. However the language of the statute is not clear as to what conduct or intent is required for one to be liable for inducing infringement. Section 271(b) simply provides: “Whoever actively induces infringement of a patent shall be liable as an infringer.”

The U.S. Supreme Court recently grappled with the meaning of Section 271(b) in Global Tech Appliances, Inc. v. SEB S.A.U.S., No. 10-6, 5-31-2011, acknowledging that the statutory language regarding induced infringement is ambiguous, and attempting to clarify the requirements for liability under this section.

In Global Tech, defendant was accused of inducing infringement of a patent for an innovative deep fryer owned by SEB S.A. Defendant had purchased an SEB fryer in Hong Kong (thus it lacked U.S. patent markings), copied all of the fryer’s features except for cosmetics, retained an attorney to conduct a right-to-use study without telling the attorney that it had copied SEB’s design, and ultimately sold its fryers to companies that then resold them in the United States. A jury found defendant liable for inducing infringement and the Federal Circuit affirmed, stating that one may be liable for induced infringement where he “knew or should have known that his actions would induce actual infringements.” At issue before the Supreme Court was whether the standard applied for finding induced infringement (i.e., that defendant knew or should have known) was appropriate.

In considering Section 271(b), the Court explained that the phrase “induces infringement” could merely require that “the inducer lead another to engage in conduct that happens to amount to infringement,” (i.e., no knowledge that the induced act constitutes infringement) or “the inducer must persuade another to engage in conduct that the inducer knows is an infringement.” (Emphasis added.) In other words, as the Court pointed out, the statute fails to give any indication as to what, if any, intent is required for a defendant to be liable for inducing patent infringement.

After considering case law pre-dating enactment of the law on contributory patent infringement (including induced infringement) and finding it conflicting, the Court turned its attention to its decision in Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (“Aro II“). In Aro II, the Court determined the intent required for contributory infringement under Section 271(c). Under Section 271(c), a party is liable for patent infringement where it “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 of such patent . . . .” In Aro II, the Court concluded that for contributory liability to attach under Section 271(c), knowledge of the existence of the patent that is infringed is necessary.

Based on the Aro II decision and the fact that Section 271(b) and 271(c) incorporate a similar ambiguity as to intent, the Court concluded in Global Tech that the same knowledge standard for contributory infringement under Section 271(c) is necessary for induced infringement under Section 271(b). Thus, the Court held that “induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement.” A “deliberate indifference to a known risk that a patent exists is not the appropriate standard under § 271(b).”

The analysis does not end there however. The next step is the determination of what constitutes “knowledge” for liability for inducing infringement. Despite finding a “deliberate indifference” insufficient to meet this knowledge requirement, Global Tech Court went on to affirm the lower court rulings against the defendant in this case finding that the evidence was sufficient to support a finding of knowledge based on the defendant’s “willful blindness.” The Court reviewed the history of the doctrine of willful blindness and concluded that for the doctrine to apply, two requirements must be met: “(1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact.” In justifying the imposition of liability based on a defendant’s willful blindness, the Court distinguished willful blindness from recklessness and negligence explaining: “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 of the critical facts.”

In Global Tech, the facts that sufficed to amount to willful blindness for liability for inducing infringement included defendant’s decision to copy an overseas model of SEB’s fryer (lacking patent markings) and its failure to inform its attorney from whom it sought a right-to-use opinion of that fact. Based on these facts, the Court concluded that defendant “subjectively believed there was a high probability that SEB’s fryer was patented, that [defendant] took deliberate steps to avoid knowing that fact, and that it therefore willfully blinded itself to the infringing nature of [purchasers’] sales.”

In summary, under the Court’s Global Tech decision, one may be liable for inducing infringement if he knew that the acts induced constitute an infringement. While a deliberate indifference to a known risk that a patent exists is insufficient to demonstrate induced infringement, willful blindness is enough.

Supreme Court Upholds “Clear and Convincing” Standard of Proof for Patent Invalidity While Suggesting Juries Be Instructed on the Weight of the Evidence

On June 9, 2011, the Supreme Court in an 8-0 decision authored by Justice Sotomayor, affirmed the long-standing rule that a challenger must demonstrate invalidity of a patent by “clear and convincing evidence.” Microsoft Corp. v. i4i Ltd. Partnership, 564 U.S.__, slip op. at 20 (June 9, 2011).  Microsoft had argued for a more relaxed “preponderance of the evidence” standard in a case where the prior art that formed the basis for the challenge had not been considered by the Patent Office.  While the holding puts to rest speculation over whether the Court would apply the lesser standard of proof, the Court endorsed the use of a jury instruction on the weight to be given prior art evidence that had not been considered by the Patent Office, stating that such an instruction, “when requested, most often should be given.”  Id.at 17.

Section 282 of the Patent Act of 1952 provides that “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.”  35 U.S.C. § 282. While § 282 expressly places the burden of proof regarding validity of the patent upon an accused infringer, it does not expressly address the standard of proof.  Microsoft argued that the preponderance standard applied generally or, in the alternative, at least where the prior art asserted had not been considered by the Patent Office.  The Court rejected both contentions.

The Supreme Court rejected Microsoft’s first contention by finding that Congress had adopted the heightened standard from the common-law in 1952 when it enacted § 282.  The Court determined that by the time of the 1952 Act, the common law presumption of validity reflected the “universal understanding” that the preponderance standard was insufficient.  That understanding was reflected in the holding of Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1 (1934). In that case, the Supreme Court held that an accused infringer must overcome the presumption of validity by “clear and cogent evidence.” Id.at 2.  Accordingly, the Court held that the codification of the presumption in § 282 brought with it its common-law meaning, including the heightened standard proof, and there was no reason to “drop” the heightened standard simply because §282 does not explicitly recite it.

In arguing for the lesser “preponderance of the evidence” standard of proof when the prior art was not considered by the Patent Office, Microsoft relied in part on the Supreme Court’s dicta in KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 426 (2007), that at least in cases where the invalidating prior art was not before the Patent Office, the presumption of validity “seems much diminished.”

Notwithstanding its earlier observation, the Supreme Court rejected the notion of a variable standard of proof.  The Court acknowledged language found in “numerous courts of appeals” cases before the 1952 Act, that referred to the presumption of validity being “weakened” or “dissipated” when the evidence was not considered by the Patent Office.  However, it explained that such language could not be read as supporting a different standard.  “Instead, we understand these cases to reflect the same common sense principle that the Federal Circuit has recognized throughout its existence—namely, that new evidence supporting an invalidity defense may ‘carry more weight’ in an infringement action than evidence previously considered by the Patent Office.”   Slip op. at 17.  Accordingly, “new evidence” of invalidity may make it “easier” for a challenger to meet the “clear and convincing” standard.

The Court suggested that the weight to be given this new evidence be explained in an instruction to the jury:

[A] jury instruction on the effect of new evidence can, and when requested, most often should be given. When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting the patent. . .  [T]he jury may be instructed to evaluate whether the evidence before it is materially new, and if so, to consider that fact when determining whether an invalidity defense has been proved by clear and convincing evidence.

Id.at 17.  This language will undoubtedly increase the frequency of requests for a specific instruction on the weight of the new evidence and on the use of such instructions.

Justice Breyer, joined by Justices Scalia and Alito, wrote a concurring opinion which emphasizes the need to pay careful attention to the distinction between fact questions and legal questions, noting that the standard only applies to evidence of the facts.  The Court’s opinion, slip op. at 2, does note that the ultimate question of patent validity is a question of law and that the same factual questions underlying the Patent Office’s original examination will also be present in an infringement action.  Id.  While this language is suggestive, the Court’s opinion never expressly states that the standard of proof applies only to the factual questions.  The concurrence thus raises the question of whether a court should refrain from applying the clear and convincing standard to legal conclusions, such as whether given facts render an invention obvious.  Further, the observations of the concurrence may impact the specific questions put to the jury in the form of a special verdict and instructions regarding the standard of proof.

Thus, the development of the patent law may be more affected by dicta from Microsoft Corp. v. i4i Ltd. Partnership than by its holding, which affirms the long-standing “clear and convincing” standard.

Microsoft Corp. v. i4i Limited Partnership et al.: Supreme Court Observations

In Microsoft v. i4i, the U.S. Supreme Court today unanimously (8-0) affirmed the clear and convincing evidence standard for invalidating issued U.S. patents under Section 282 of the Patent Act (1952).  In 2007, i4i sued Microsoft in U.S. District Court for infringement of i4i’s patent. As part of its defense, Microsoft asked for a jury instruction reciting a preponderance of the evidence standard for finding i4i’s patent invalid, rather than the long-standing clear and convincing evidence standard.  The District Court rejected Microsoft’s lower standard of proof, and a jury found that the patent was valid and that Microsoft infringed, awarding i4i a 9 figure damages sum.  Microsoft appealed to Federal Circuit, asserting in particular, that the District Court improperly instructed the jury on the standard of proof for invalidity.  The Federal Circuit affirmed the lower court’s holding and Microsoft petitioned the Supreme Court for certiorari, which was granted.

In its argument to the Supreme Court, Microsoft argued that either (1) a defendant in a patent infringement action need only convince the jury that an issued patent is invalid by a preponderance of the evidence standard, or (2) alternatively, that at the very least, the preponderance of the evidence standard should apply to evidence that was never considered by the PTO during examination.  The Supreme Court in its decision rejected both of Microsoft’s arguments.

In its decision, the Court first focused on the language of Section 282, which specifies that “[a] patent shall be presumed valid” and “[t]he burden of establishing invalidity of a patent … shall rest on the party asserting such invalidity.”  Microsoft had argued that Federal Circuit precedent establishing a clear and convincing evidence standard was not supported by the 1952 Act because Section 282 did not explicitly set forth that standard.  The Supreme Court noted that, while the statute includes no express articulation of the standard of proof, the statute does use the term “presumed valid,” which has a settled meaning in the common law.  Relying on its long-standing decision in Radio Corporation of America (RCA) v. Radio Eng’g Labs., Inc., 293 U.S. 1 (1934), the Court found that the common law jurisprudence dating back to the 19th century reflects that Microsoft’s proposed preponderance standard of proof “was too ‘dubious’ a basis to deem a patent invalid.”  According to the common law, the Court held, “a defendant raising an invalidity defense bore a ‘heavy burden of persuasion,’ requiring proof of the defense by clear and convincing evidence.”

The Court also noted that the Federal Circuit has interpreted Section 282 to require this clear and convincing evidence standard for nearly 30 years. And while Congress has amended the patent laws several times since the Patent Act was passed, “the evidentiary standard in § 282 has gone untouched.”  The Court concluded that Congress is well aware of the Federal Circuit’s treatment of the statute, but thus far has not amended the statute, and further that “[a]ny re-calibration of the standard of proof remains in [Congress’s] hands.”

The practical implications of the decisions are many.  First and foremost, the decision preserves the status quo, which in turn maintains the strength of U.S. patents and current patent enforcement mechanisms, particularly as they relate to innovation, business certainty, and job creation.  The Court has also sent a clear signal that, in view of well-established jurisprudence, if the standard is to change, it must be done by Congress, as any such change would have a profound ripple effect on the entire patent system.

Supreme Court Leaves Standard for Patent Invalidity Unchanged

Earlier today, the U.S. Supreme Court issued its much-anticipated opinion in Microsoft Corp. v. i4i L.P. The Court had granted certiorari to consider the question of whether section 282 of the Patent Act, 35 U.S.C. § 282, requires a defense of patent invalidity to be proven by clear and convincing evidence. Contrary to what many commentators were expecting, the Court left the burden of proof for invalidity defenses unchanged-defendants still must prove any invalidity defense by clear and convincing evidence.

The Court focused on early cases cited by the plaintiff/appellee, including a 1934 opinion written by Justice Benjamin N. Cardozo that stated “there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.” Based on such decisions, the Court determined it was well understood prior to the passage of the current Patent Act in 1952 that the presumption of validity could be overcome only by clear and convincing evidence. Accordingly, when Congress enacted section 282, which set forth a presumption of validity, the Court found that Congress intended to adopt the existing burden of proof for overcoming the presumption. The Court held that “[u]nder the general rule that a common-law term comes with its common-law meaning, we cannot conclude that Congress intended to ‘drop’ the heightened standard proof [sic] from the presumption simply because [section] 282 fails to reiterate it expressly.”

The Court did not accept Microsoft’s alternative argument that the burden of proof should be different for invalidity defenses based on prior art references not considered by the U.S. Patent and Trademark Office (PTO) in granting an asserted patent. The Court did, however, recognize the “commonsense principle” that “new evidence supporting an invalidity defense may ‘carry more weight’ in an infringement action than evidence previously considered by the PTO. . . . Simply put, if the PTO did not have all material facts before it, its considered judgment may lose significant force.” Thus, the Court noted that “a jury instruction on the effect of new evidence can, and when requested, most often should be given. When warranted, the jury may be instructed to consider that it has heard evidence that the PTO had no opportunity to evaluate before granting a patent.”

Justice Breyer (joined by Justices Scalia and Alito) also filed an interesting concurrence stressing that the clear-and-convincing standard applies only to factual issues relating to invalidity defenses, and not to legal questions. “Where the ultimate question of patent validity turns on the correct answer to legal questions-what these subsidiary legal standards mean or how they apply to the facts as given-today’s strict standard of proof has no application.” The concurring Justices thus urged district courts to keep these issues separate “by using instructions based on case-specific circumstances that help the jury make the distinction or by using interrogatories and special verdicts to make clear which specific factual findings underlie the jury’s conclusions.” For years, some members of the U.S. Court of Appeals for the Federal Circuit have been urging district courts and litigants to use verdict forms and jury interrogatories that ask for more detail about the factual findings underlying decisions on issues such as obviousness, but those efforts have met with mixed results. It will be interesting to see whether these comments from three Supreme Court Justices will have any significant effect on how patent cases are actually tried.