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IP/Entertainment Case Law Updates

Global-Tech Appliances, Inc., et al., v. SEB S.A.

In a patent infringement case, the Supreme Court held that to be liable for inducing infringement, a party that actively induces infringement must have knowledge that the induced acts constituted patent infringement, though evidence of willful blindness is sufficient to support a finding of knowledge.

Although this case is a patent infringement inducement case, it may have some impact on the manner in which contributory infringement and inducement are viewed in the copyright context. The Supreme Court affirmed the Federal Circuit’s decision, holding that Petitioners violated 35 U.S.C. § 271(b) by actively inducing infringement by willfully blinding themselves to the infringing sales that they encouraged Respondent’s competitor to make.

Petitioner developed a deep fryer for Respondent’s competitor by buying the Respondent’s overseas deep fryer and copying all but its cosmetic features. The Respondent’s overseas deep fryer bore no U.S. patent markings. Additionally, after copying the design, Petitioners retained an attorney to conduct a right-to-use study, and refrained from telling the attorney that its designed was directly copied. The attorney did not locate Respondent’s patent and issued an opinion later stating that Petitioners’ deep fryer did not infringe any of the patents he had found.

Respondent sued and subsequently settled its infringement claims against the competitor for whom Petitioners developed the infringing deep fryer, and then sued Petitioners for direct infringement and inducing infringement. A jury found for the Respondents on both theories and Petitioners appealed, arguing that there was insufficient evidence to support the finding of induced infringement because Petitioners did not actually know of Respondent’s patent until it received notice of Respondent’s lawsuit against its competitor.

Both the District Court and the Federal Circuit affirmed the judgment. The Federal Circuit found that Petitioners actively induced infringement because there was adequate evidence that Petitioners deliberately disregarded a known risk that Respondents had a protective patent. The Supreme Court affirmed on different grounds, holding that the test for knowledge under §271(b) is not deliberate disregard of risk, and that willful blindness would be sufficient as evidence of knowledge.

Willful blindness is a doctrine traditionally used in criminal law. It requires that (1) the defendant subjectively believes there is a high probability that a fact exists and (2) the defendant takes deliberate actions to avoid learning that fact. 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.” The willfully blind defendant has a scienter that surpasses recklessness and negligence.

For example, in this case, that the Petitioners knew that the Respondent’s product had valuable technology for the U.S. market is evidenced by its decision to copy all but the cosmetic features of the Respondent’s fryer. Additionally, there was evidence that the Petitioners’ CEO knew that overseas models do not bear U.S. patent markings, and deliberately copied the overseas model rather than the U.S. model. The Court found the most persuasive evidence that the CEO neglected to inform the attorney from whom Petitioners sought a right-to-use opinion that the product was a knock-off of Respondent’s deep fryer. Even more telling, the CEO could not provide any evidence to raise doubt to the inference that this was withheld from the attorney to manufacture a claim of plausible deniability in the event Petitioners were accused of patent infringement.

Thus, the Court found that there was sufficient evidence in this case for a jury to conclude that Petitioners subjectively believed there was a high probability that the Respondent’s deep fryer was patented, that Petitioners took deliberate steps to avoid knowing that fact and affirmed the judgment of the Federal Circuit.

Justice Kennedy dissented, writing that willful blindness is insufficient for the statutory knowledge standard, and that the majority should remand to the Federal Circuit to consider whether there is sufficient evidence of knowledge to support the jury’s finding of inducement.

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