Tag Archives: Supreme Court Patent Decisions

Supreme Court Issues Global-Tech Decision Setting Inducement to Infringe Patent Standard

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

Yesterday, the Supreme Court issued its decision in Global-Tech Appliances, Inc. v. SEB S.A. (No. 10-6), which affirmed the Federal Circuit’s decision that Pentalpha Enterprises, Ltd. induced infringement in violation of 35 U.S.C. § 271(b) under a willful blindness theory. Justice Alito wrote the decision for the 8-1 Court, and Justice Kennedy dissented.

The Global-Tech decision is one of a number of recent Supreme Court decisions in the patent arena. In this case, the Court considered what level of knowledge a party must have to actively induce infringement of a patent under § 271(b). The statute states “Whoever actively induces infringement of a patent shall be liable as an infringer.” The Court found that inducement is an active enterprise that requires the taking of affirmative steps to bring about a desired result.

The Court recognized that there are two plausible readings of this statute: (1) one can be liable for merely leading another to perform acts that happen to lead to infringement or (2) one can be liable only for leading another to perform acts that the inducer knows is infringement. After tracing the history of contributory infringement, the Court rejected the first approach and concluded that § 271(b) requires knowledge that the induced acts constitute patent infringement. This knowledge requirement can be satisfied not only with direct knowledge or belief that the acts constitute infringement, but also with willful blindness to this fact.

The Court recognized that this willful blindness standard could easily be confused with recklessly or indifference, so it took some care to distinguish these concepts. Willful blindness has two basic requirements: “(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 this fact.” In other words, “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.” In contrast, recklessness only involves knowledge of a substantial and unjustified risk of wrongdoing without the deliberate actions. Negligence is even further removed, as it involves a defendant that should have been aware of a risk but who was not aware.

The Court rejected the Federal Circuit’s formulation that permitted a finding of knowledge when there was simply a known risk of induced infringement without active efforts by the inducer to avoid acquiring actual knowledge.

What does this case mean?

Going forward, this case confirms that liability for indirect infringement requires some intent or knowledge of infringement, as opposed to just the facts that might happen to give rise to infringement. It is not enough for liability that an inducer expects or intends that another act in a certain manner unless the inducer knows that those actions will likely result in infringement of a patent. Normally, this will require some actual knowledge of the relevant patents. The exception was addressed in this case, though.  An inducer cannot willfully blind itself from finding out whether relevant patents exist. Going forward, there will undoubtedly be additional district court and Federal Circuit decisions that flesh out what is and is not willful blindness and what is and is not deliberate actions.

Parties that produce products or direct others to act in ways that arguably intrude on another’s patent rights can take some proactive steps to protect themselves from liability for indirect infringement. Because induce to infringe requires knowledge that the acts constitute infringement, obtaining a competent opinion letter from a qualified patent attorney should preclude liability. As this case makes clear, though, the patent attorney must be given relevant knowledge about the field of the product or service in order to conduct a reasonable search. The patent opinion must not be simply a false effort to create plausible deniability.

facts of the case and its disposition

Despite determining that the Federal Circuit applied the wrong standard, the Supreme Court affirmed its decision, finding that under the facts, Pentalpha willfully blinded itself to the infringing acts.

SEB invented and patented a “cool-touch” deep fryer whose outside surfaces remained cool during use. Sunbeam Products, Inc. asked Pentalpha (a wholly-owned subsidiary of Global-Tech) to provide it with deep fryers. Pentalpha purchased an SEB deep fryer in Hong Kong that was not marked with the US patent numbers, which is not unusual for products sold overseas. Except for the cosmetic appearance, Pentalpha copied SEB’s design.

Pentalpha retained a US patent lawyer to conduct a patent search, but did not inform the lawyer that Pentalpha had copied SEB’s design. The patent lawyer did not locate SEB’s patents, so he issued a non-infringement opinion letter. Pentalpha then sold its deep fryer to Sunbeam. After SEB sued Sunbeam, Sunbeam notified Pentalpha of the lawsuit. Despite having notice of the lawsuit, Pentalpha continued selling its deep fryer to other customers.

SEB sued Pentalpha after settling with Sunbeam under direct and indirect infringement theories. After a 5-day trial, the jury found that Pentalpha willfully infringed SEB’s patents. Pentalpha appealed, arguing that it had no actual knowledge of infringement. The Federal Circuit rejected Pentalpha’s argument and affirmed the jury’s finding, reasoning that Pentalpha deliberately disregarded a known risk.

As discussed above, the Supreme Court affirmed, finding that there was no legitimate reason for Pentalpha to not tell its patent attorney that it copied SEB’s design. The only reason the Court could find for Pentalpha doing this was to manufacture a claim of plausible deniability, which was tantamount to willful blindness. The Court saw no need to remand on these facts, although the dissent felt that was the more appropriate action.

Oral Arguments in Microsoft v. i4i Limited on the Burden of Proof for Invalidity

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

The United States Supreme Court heard oral arguments today in Microsoft Corp. v. i4i Limited Partnership, Case No. 10-290, a case that calls into question what the proper burden of proof is to invalidate a patent claim. Microsoft challenges the long-standing standard of clear and convincing evidence and argued today that the proper standard of proof is merely by a preponderance of the evidence. Both i4i and the government argued that clear and convincing status quo should be maintained.

As is their custom, the Justices peppered both sides with questions about what the burden should be, and the Justices did not seem to clearly favor either side. While initially arguing in its briefs that the Court should adopt a hybrid approach—clear and convincing evidence for anything considered by the Patent Office during prosecution and preponderance for everything else—that position was largely ignored today during oral arguments. Instead the parties and the Court focused on a uniform standard and what it should be.

Justice Breyer noted the tension that exists between not giving legitimate inventions the protections they deserve and giving protection to inventions that do not deserve it. Counsel for i4i particularly stressed the need for protecting inventors and their inventions. In particular, he reminded the Justices that an inventor must completely describe his or her invention to the public in order to obtain a patent, which prevents the inventor from protecting his or her invention in other ways. The Justices also focused on the exact language of the statute (35 U.S.C. § 282) and the Court’s prior cases addressing the burden of proof. The parties also discussed how to instruct a jury about prior art that the Patent Office did consider.

  • A copy of the transcript can be downloaded here.
  • The Supreme Court docket for this case is located here.
  • The various briefs can be found here.

A decision is expected later this summer. Note that Chief Justice Roberts did not participate in the oral argument.

i4i v. Microsoft: Patent Case of the Year? Supremes to Decide

Posted by Henry M. Sneath, a principal, shareholder and IP Group Chair, and  Robert Wagner, an intellectual property attorney, both at Picadio Sneath Miller & Norton, P.C.  in Pittsburgh, Pennsylvania.

All of a sudden, the burden of proof in patent invalidity claims is under review. Where did that come from? i4i beat Microsoft in an infringement case in Texas and now Microsoft wants to change the battlefield rules. They have appealed to the Supreme Court, which will hear argument this  Monday April 18, 2011, that the burden of proof on patent validity challenges should be lowered from “clear and convincing” to “preponderance of the evidence.” Clear and convincing means that the proof must be substantially more likely than not, that the evidence is true.” This is less than “beyond a reasonable doubt” employed in criminal cases, but more stringent than “preponderance” which means simply “more likely than not.” Judges will frequently tell the jury that this inquiry is best visualized like the ‘scales of justice’, and if the evidence tips ever so slightly in favor of one party, then the burden of “preponderance” is met. “Clear and convincing” is a much steeper burden than preponderance – at least according to the law. Microsoft believes that it is much too steep for patent invalidation evidence.

The issue arose at trial in Texas when Microsoft wanted to introduce the prior art of i4i’s own previously designed and used software, which Microsoft claimed invalidated the i4i patent in suit (on sale bar). By the time the lawsuit was filed, the original source code for this prior work was lost, so Microsoft had to rely on circumstantial evidence about what the prior art did. Ultimately, they did not win before the jury or the Courts, and they argued that this was because of the high burden of proof (clear and convincing).

Originally, Microsoft contended that there should be a lower burden of proof (preponderance) only for items not considered by the PTO. It did not attempt to lower the bar for everything. The case has now morphed into an overall attack on the burden of proof in all cases, not just where the PTO has not considered the prior art in question. Microsoft proposes that everything should be preponderance, and, only as a fallback, that things not considered by the PTO need only be proved by a preponderance.

We think the arguments are fairly compelling that the standard needs to apply to everything equally, whatever that standard may be. A hybrid approach where invalidity based on some items need only be proved by a preponderance, while other items would require clear and convincing will simply be unworkable.

Among the problems we see (and the numerous amicus briefers saw) with the hybrid approach are:

1. What counts as being considered by the PTO? If it was disclosed? If it was specifically mentioned by the examiner?

a. If it is everything disclosed in the record, patentees will absolute deluge the PTO with references, which will make the examiner’s job more difficult and will result in references being buried and examinations taking longer.

b. If it is only things discussed by the examiners, that will be unfair to patentees. Examiners are not required to address every reference. They only have to discuss the most relevant ones. Thus, a duplicative reference that still is important may not be mentioned, even though it contains material that the examiner thought highly relevant. Now that reference will be evaluated under a lower burden.

c. Also, examiners frequently look at a number of references in their searches that are never identified in the record. Do these count? How would you find out what was looked at?

2. What do you do with invalidity positions that involve some references that were considered and some that were not?

3. What do you do with a reference that was considered for one basis (anticipation), but not another (obviousness)?

We  think it likely that the Supreme Court will adopt a blanket approach, either preponderance or clear and convincing. If it maintains the status quo, which we think is the better argument, nothing will change in the patent world. As far as we know, this has not been a pressing or disputed issue for years. If they do change to a preponderance standard, we expect that there will be a significant shift in Courts granting summary judgment motions for invalidity. We’re not sure that juries really pay much attention to preponderance or clear and convincing, although it might make a difference in a few cases.

We think that the major corporations siding with Microsoft hope that a change will make it easier to beat back troll (NPE) cases. In particular, larger corporations are likely to be able to afford to draft better patents with more prior art searching that the individual inventors cannot do or afford. We think that they are banking on their own patents’ strength not being affected too much, but with the perhaps underfunded trolls taking a hit. Overall, a shift to preponderance will only weaken patents and their enforceability. It will likely also encourage competitors to take more risks in creating products that arguably infringe; knowing that their burden of proof for invalidity has gone down significantly. We think it is hard to say whether companies will stop applying for patents. In the end, for some products the only thing you can do to protect them is to get a patent. There really aren’t many alternatives for products that are easily reverse engineered.

For ongong coverage of this Supreme Court argument, please check back with us regularly. You may also want to follow a great source for Microsoft news at the Nick Eaton’s Microsoft Blog from Seattle PI: http://blog.seattlepi.com/microsoft/2011/04/14/microsoft-i4i-at-supreme-court-patent-law-at-a-crossroads/

Henry Sneath                  Robert Wagner