Cross-posted by at On the Docket

At issue: The U.S. Supreme Court’s May 31 ruling in Global-Tech Appliances v. SEB

The Supreme Court is routinely called upon to interpret and apply federal statutes which Congress drafted in an ambiguous manner.  Section 271(b) of the federal Patent Act is one of those statutes.  It states: “Whoever actively induces infringement of a patent shall be liable as an infringer.” At issue in Global-Tech was the standard of intent an alleged infringement inducer must possess to violate this section. Is it 1) sufficient that the defendant knew of the outcome that she wished to induce (i.e. production or sale of an item) though she was unaware that the item was patented, or 2) must the plaintiff show the defendant possessed actual knowledge that the item was patent protected? Justice Alito does a nice job explaining the distinction on page four of his majority opinion.

The underlying fact pattern certainly doesn’t make Global-Tech a sympathetic defendant. Plaintiff/respondent SEB had developed and sold a “cool touch” deep fryer in the U.S. Competitor Sunbeam contracted Global-Tech subsidiary Pentalpha to make a comparable, but less expensive, deep fryer. Pentalpha purchased an SEB fryer in Hong Kong and reverse engineered it. The SEB fryer bore no U.S. patent marks, and Pentalpha’s CEO (the unfortunately named) John Sham refrained from telling the attorney he hired to do a patent search that the product his company copied was made by SEB.  The lawyer found no applicable patent, and Pentalpha sold its fryer to Sunbeam, which in turn sold them in the U.S. through Montgomery Ward and other resellers.  The cheaper fryer took market share away from SEB’s product, and SEB in turn sued Global-Tech for patent infringement.

A federal jury and the U.S. Court of Appeals for the Federal Circuit both found for SEB on the grounds that “Pentalpha deliberately disregarded a known risk that SEB had a protected patent.” Global-Tech argued on appeal to the Supreme Court that the Federal Circuit’s use of “willful blindness” theory did not meet with the patent law’s requirement of actual knowledge of a patent.

Justice Alito’s opinion acknowledged the ambiguity inherent in Section 271(b), and looked for guidance to induced infringement decisions issued prior to Congress’s passage of that section of the patent act. That case law proved inconclusive, so Justice Altio next looked to case law applying Section 271(c), which covers contributory patent infringement. Those cases held that knowledge of the existence of a patent being infringed is needed to prove a violation. Justice Alito therefore applied that holding to the context of Section 271 (b): actual knowledge of an existing patent is needed to prove induced patent infringement.

Mr. Sham and Pentalpha had no actual knowledge of SEB’s patent, so they emerge victorious, right? Not so fast, said Justice Alito. Clearly not wanting Global-Tech to benefit from its “see no evil, hear no evil” approach to product development, the majority applied the criminal law concept of willful blindness to the facts (while at the same time finding that the Federal Circuit’s willful blindness test was insufficiently easy for plaintiffs to meet). The formulation Justice Alito used required that a defendant “take deliberate actions” to avoid “knowing about the infringing nature of their activities.”

One surprising outcome of the 8-1 decision, and one of the reasons for Justice Kennedy’s dissent, was that the majority declined to remand the case back to the Federal Circuit to once again examine the record under the new willful blindness standard to make sure enough evidence of knowledge existed to support the trial court’s infringement verdict. The majority refused to do this despite acknowledging that the Federal Circuit’s willful blindness test was “flawed.”

Justice Kennedy also disagreed with the Court’s decision to require actual knowledge of a patent, and then using the criminal law concept of willful blindness to get around the need to show actual knowledge.  He wrote, “Willful blindness is not knowledge; and judges should not broaden a legislative proscription by analogy.”

Is Justice Kennedy’s subtle accusation of judicial activism a valid criticism?