Commentary: Bad facts swing pendulum to rare Federal Circuit affirmance

By Ronald Mann
on Jun 1, 2011 at 5:28 pm

When the Court granted review in Global Tech Appliances, Inc. v. SEB S.A., the case 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 something funny happened on the way to the United States Reports, as the Court ultimately issued an opinion affirming the judgment of the Federal Circuit.  Moreover, that opinion is likely to have broad implications not only for patent law, but also for scienter requirements in criminal cases. 

The question presented by this case was the state of mind necessary for imposing liability under Section 271(b) of the Patent Act, which concisely provides that “[w]hoever 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 joined issue was whether induced infringement can be “active” for purposes of Section 271(b) if the defendant does not know of the particular patent.  Global Tech’s principal argument was that it could not 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.  SEB countered the evidence of Global Tech’s conscious efforts to reverse-engineer the fryer was enough to affirm the Federal Circuit’s decision, which had upheld the jury verdict in favor of SEB.

Although the Court rejected the Federal Circuit’s analysis, it nonetheless upheld its decision at the same time.  First, the Court unanimously concluded that Section 271(b) requires actual knowledge of the patent.  Thus, the Court rejected the Federal Circuit’s holding that deliberate indifference to the risk of infringement is enough.  Although debatable, that part of the opinion was not surprising.  The statute was plainly ambiguous and it made some sense for the Court to rely on the parallel analysis of Section 271(c) in the Court’s 1964 decision in Aro Manufacturing Co. v. Convertible Top Replacement Co. 

But the remainder of the opinion is quite interesting.  Adopting a suggestion from the oral argument, the Court (with only Justice Kennedy dissenting) held that the judgment of the Federal Circuit nevertheless could be affirmed on the basis of Global Tech’s willful blindness.   Echoing Justice Alito’s sentiments at oral argument, the Court voices its dissatisfaction with Global Tech’s strategy of seeking a patent opinion from a lawyer without identifying the company whose appliance Global Tech copied:  “[W]e cannot fathom what motive [Global Tech’s representative] could have had for withholding this information other than to manufacture a claim of plausible deniability in the event that his company was later accused of patent infringement.”  (Of course, whether the Justices are well-placed to understand the norms of customary behavior for manufacturers is debatable). 

The decision is likely cast a long shadow over strategic IP planning in the years to come, in no small part because of the steps that the Court took in its analysis to reach its result.    First, the Court has to construe the knowledge requirement that it has just discovered in Section 271(b) to be satisfied by willful blindness (doctrinally, a step harder to prove than the deliberate indifference standard accepted by the Federal Circuit).  What is novel about this (and what will make this one of the most commonly cited decisions of the Term) is the Court’s explanation for the first time that criminal statutes which require proof of knowing or willful conduct are satisfied by proof of willful blindness.  Although most of the courts of appeals had reached that conclusion in criminal cases, the Court resolved this substantial question of criminal law here for the first time in a civil patent case without receiving briefs or argument on the question.  [This is the point at which Justice Kennedy parted ways from the majority.]

Second, the Court had to conclude that the facts in this case satisfied the willful blindness standard.  In the Court’s words (now establishing the standard for all federal criminal law), willful blindness requires proof that the defendant subjectively believes that there is a high probability that a fact exists.  But there was little in the record to justify a “high probability” that SEB had patented the fryer in question.  The record did establish that Global Tech copied SEB’s fryer, and that SEB’s fryer had been commercially successful, but that is a long way from establishing a “high probability” that the aspects of the fryer copied by Global Tech were protected by valid patents.  Among other things, it would have been reasonable for Global Tech to think that SEB might not have patented the particular features that Global Tech copied.  Surely most features of technology on sale in American markets are not protected by current patents, and the record includes no evidence about the patenting proclivities of French companies in the kitchen appliance sector. The Federal Circuit and the trial courts it supervises will surely struggle to apply this opinion in areas (like software) in which patterns of patent protection are reliably irregular.

Third, the Court upheld the judgment of the court of appeals even though the trial court understandably instructed the jury under a considerably more lenient standard than the standard articulated by the Court; the Court’s brief answer is that Global Tech failed to raise that objection to the instruction in the courts below.  But that is a weak answer indeed in a case in which the Court affirms a jury verdict on the theory that the evidence satisfies a legal standard not presented by the patentee at any stage of the litigation.  Surely it would have been more customary to remand the case to the Federal Circuit with instructions to consider the case under the new standard.

They say that hard cases make bad law, but perhaps this is an example of a case in which a case seemed so easy that the Court’s drive to justify affirmance made bad law.