Argument recap: Court sympathetic to Federal Circuit standard on induced infringement

By Ronald Mann
on Feb 24, 2011 at 9:36 am

When the Court granted review in Global Tech Appliances, Inc. v. SEB S.A. (argued February 23) it had all the classic features of recent cases from the Federal Circuit.  The Federal Circuit adopts a broad pro-patentee rule that imposes large risks on businesses.  The Supreme Court, giving no credence to the Federal Circuit’s institutional expertise in patent law, grants review in the absence of a circuit conflict.  Academics and businesses weigh in, predominantly on the side of the alleged infringer.  The Supreme Court predictably reverses.  But the argument certainly did not go in that direction.

The issue in this case is the state of mind necessary for imposing liability under Patent Act § 271(b), which concisely states: “Whoever actively induces infringement of a patent shall be liable as an infringer.” The plaintiff SEB (the respondent in this case) holds a patent on a design for a deep-fat fryer; the defendant Global Tech (here, the petitioner) reverse-engineered SEB’s fryer and marketed a competing fryer.  The central question on which the parties join issue is whether induced infringement can be “activ[e]” for purposes of Section 271(b) if the defendant does not know of the particular patent.  Global Tech’s principal argument is that it cannot be said to have “actively” induced infringement because it obtained a legal opinion that its product did not infringe and because it was not aware of SEB’s patent.

The Justices were hostile to Global Tech from the opening minute of the argument. Scalia and Ginsburg quickly emphasized how easily a well-advised infringer could avoid gaining knowledge of a particular patent.  Justice Scalia was particularly exorcised at Global Tech’s failure to tell its patent attorney that it had reverse-engineered a particular product:  “I find that really incredible that, in an honest attempt to find whether there was any patent infringement going on, you wouldn’t even tell the patent attorney that you’ve reverse-engineered somebody else’s product.”

At that point, Justices Sotomayor and Alito entered the fray, challenging Global Tech’s argument that even willful blindness was insufficient to justify liability in the absence of knowledge of the particular patent.  They suggested that even if the Court adopted an actual knowledge standard (as Global Tech requests), the Court should nonetheless find willful blindness as a matter of law based on Global Tech’s failure to advise its patent attorney of the source of its technology.

The Justices devoted little time to the arguments in the briefs.  Thus, Justice Kennedy at one point asked Global Tech’s counsel to address the question presented, whether deliberate indifference was enough for inducement liability.  Global Tech’s counsel tried to argue that the Federal Circuit standard would lead to liability in “almost every situation.”  But Justice Alito almost immediately sidetracked him, suggesting that a plain-language reading of the statute would require liability whenever a manufacturer induces the making, using, or selling of an infringing invention, without regard to any state of mind.

The Justices also turned briefly to the Grokster standard for secondary liability, but Justice Kagan emphasized her view that Grokster is not useful in a case in which knowledge of the patent is the issue.  Instead, she agreed that any sort of knowledge would necessarily make willful blindness a basis for liability. 

The Justices promptly returned to the willful blindness standard when SEB’s counsel rose.  He happily conceded to Justice Kagan that a willful blindness standard would be acceptable to him.  He emphasized, however, that the absence of any reference to knowledge in Section 271(b) meant that the correct reading (similar to Justice Alito’s earlier inquiry) of the statute would require nothing more than a negligence (“known or should have known”) standard.

However, Justice Breyer, with limited support from Chief Justice Roberts, asked for assistance in how to define the state of mind narrowly enough to protect innocent actors.  Not surprisingly given the first forty minutes of the argument, SEB’s counsel responded that the Court could require willful blindness, which would both afford a judgment for his client and protect innocent actors.  The Justices seemed much less certain that the existing jury instructions were onerous enough to justify affirmance on the basis of that standard, but none of them expressed any support for the reading advanced by Global Tech, which would have required knowledge of the patent.  As suggested above, several seemed attracted to the idea of holding that the facts established willful blindness as a matter of law (which would allow affirmance without regard to any problem with the jury instruction).

Perhaps the most interesting feature of the argument is the Justices’ lack of interest in the other question that dominated the briefs: the proper relation between Sections 271(b) and 271(c).  A strong academic amicus brief from Mark Lemley argued that the structure of the section required a high intent standard for Section 271(b).  But the Justices seemed to find the question uninteresting: they saw little reason to choose between the argument that the absence of a knowledge requirement in 271(b) meant that it should have a lower standard; and the argument from amici that structure required a higher standard.  So the case is certainly not over, but if anything safely can be predicted, it is that the Justices’ opinions will not look much like the briefs they received from the parties and amici.