Yesterday the Supreme Court issued its opinion in Global-Tech Appliances, Inc. v. SEB. S.A., 563 U.S. ____, No. 10-6 (May 31, 2011), in which the Court affirmed the patent infringement judgment of the Federal Circuit but identified a new knowledge requirement for the induced infringement statute, 35 U.S.C. § 271(b).  In this 8-1 opinion, the majority (led by Justice Alito) also imported the criminal law doctrine of willful blindness into the civil context, and applied the doctrine in this case to affirm the jury’s patent infringement liability determination.  The Court concluded that willful blindness has been used by almost all Federal circuit courts in assessing a criminal defendant’s non-compliance with the “knowledge” or “intent” requirement found in many criminal statutes, and held that it is an appropriate test to determine whether an alleged patent infringer that deliberately shielded itself from critical facts relating to infringement that are strongly suggested by the circumstances may still violate the induced infringement statute.

Justice Kennedy, in dissent, disagreed that willful blindness was an acceptable substitute for knowledge of infringement and expressed concern regarding the majority’s decision to import a criminal law doctrine into a civil law case.  Kennedy would have remanded the liability issue to the Federal Circuit, to allow it to apply the new knowledge standard for inducement and the willful blindness doctrine to the facts of this case.

The product at issue in Global-Tech is a “cool-touch” deep fryer, a kitchen appliance that insulates a hot metal container that holds oil for deep frying, keeping the plastic surface of the product cool while the oil stays hot.  SEB has owned a U.S. patent on this design since 1991.  In 1997, SEB’s competitor Sunbeam asked Pentalpha (an appliance manufacturer based in Hong Kong and a subsidiary of Global-Tech) to develop a similar deep fryer.  Pentalpha bought one of SEB’s fryers in Hong Kong, which lacked U.S. patent markings, and copied SEB’s fryer design, except for cosmetic features.  Pentalpha then retained an attorney to conduct a freedom-to-operate patent search, but failed to tell the attorney about SEB’s fryer.  The attorney did not uncover SEB’s patent and issued an opinion stating that Pentalpha’s product did not infringe any patents that he found.  Pentalpha sold its fryers to Sunbeam and two other companies, all of whom resold the fryers in the U.S.  In 1998, SEB sued Sunbeam in the U.S. for patent infringement.  Sunbeam informed Pentalpha of the lawsuit, but Pentalpha continued to sell fryers to the other companies, who continued to sell their fryers in the U.S.

After settling the suit with Sunbeam, SEB sued Pentalpha for both direct infringement and induced infringement.  A jury found for SEB on both liability theories and found that Pentalpha’s infringement was willful.  The willfulness finding was later vacated after the Federal Circuit issued its opinion in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007), which changed the legal standard for determining when a party willfully infringed a patent.  The district court denied Pentalpha’s motions for a new trial and for JMOL, and entered judgment for SEB.

The Federal Circuit affirmed the judgment, finding sufficient evidence that Pentalpha “knew or should have known that his actions would induce actual infringements,” despite a lack of direct evidence that Pentalpha knew about SEB’s patent.  Slip Op. at 3.  The Federal Circuit concluded that Pentalpha’s “deliberate disregard[ of] a known risk . . . is a form of actual knowledge” that SEB owned a patent for this technology.  Id. (internal citations omitted).

The Supreme Court granted certiorari to determine whether deliberate indifference is sufficient to meet the actual knowledge requirement of § 271(b).  Ambiguity in the language of the induced infringement statute led the Court to rely on dictionary definitions of the statute terms to determine the state of mind that is required.  The Court “inferred” that a certain kind of intent is required, even though subsection (b) is silent on this point.  The Court identified two potential interpretations of the intent requirement: (1) intent that the part be used in the product (which happens to infringe) OR knowledge of patent and knowledge that part would be used in the patented article.  The Court adopted the second knowledge standard because that standard is universally accepted in § 271(b)’s sister statutory section, the contributory infringement statute (§ 271(c)), and because the petitioner did not ask the Court to overrule or modify that standard in this case.  After clarifying the knowledge requirement of the statute, the Supreme Court rejected the “deliberate indifference” standard that the Federal Circuit had applied and inserted its own alternative standard—the doctrine of willful blindness—and affirmed the induced infringement judgment based on the undisputed factual record.

The Global-Tech case is remarkable for its apparent endorsement of a doctrine for all Federal criminal cases involving knowledge standards, despite the lack of briefing on this issue from the criminal defense bar.  It is also fertile ground for future litigation over the threshold facts that may give rise to a duty to investigate whether patents exist that cover particular technology, in order to defend against a willful blindness allegation.  For instance, if an organization knows that it has three major competitors in a particular market, does that trigger the duty?  What if one competitor is known to have a very large patent portfolio and a robust patent prosecution practice, must a company look for patents that might cover its products?  Or would a duty to investigate potential patent protection arise if that competitor displays a product that looks similar to the alleged infringer’s product at the annual industry trade show?  Future litigants and courts will look for the line that divides parties with insufficient knowledge of facts that would trigger a duty to investigate potential patent coverage from those who know more about potential overlapping technology and have a duty to conduct an investigation.  It seems that the Seagate en banc opinion on willfulness removed the requirement that an accused infringer request and disclose an infringement opinion to protect against a willful infringement finding, and Global-Tech resurrected patent opinion practice to protect against application of the willful blindness doctrine to hold a party accountable for induced infringement.

The question of whether an accused infringer conducted a reasonable patent investigation that is sufficient to defend against an allegation of infringement will also be litigated.  The Supreme Court noted that Pentalpha failed to give the attorney who conducted the freedom-to-operate opinion critical information he needed to evaluate the industry and identify relevant patents.  Organizations and individuals who request clearance opinions have now been cautioned that if they hide relevant information that would help the attorney analyze the patent landscape, they may not be able to rely on that opinion to defend against a willful blindness allegation.

The Global-Tech opinion can be found here.

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