Argument preview: Court to consider standard for secondary patent liability

At first glance, Global Tech Appliances, Inc. v. SEB S.A. (to be argued February 23) has 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 Circuits 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 a closer look suggests there might be more here.

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 facts are simple enough.  The plaintiff is SEB, a large French appliance manufacturer that is justifiably proud of a patent it holds on a design for a deep-fat fryer that has a cool external surface.  Deep-fat fryers that SEB manufactured under that patent were widely successful in the United States market.  The defendants (petitioner Global-Tech and a variety of affiliates) are a group of companies that design and manufacture appliances, largely in China.  [Although petitioners refer to themselves collectively as Pentalpha, it makes more sense here to use the named petitioners name Global-Tech.]  After Sunbeam requested that Global-Tech manufacture a deep-fat fryer, Global-Tech purchased several deep-fat fryers in Hong Kong, studied them, and developed a proposal that incorporated some of the most desirable features of those fryers, as well as a few new features of its own.  SEBs fryer was one of those that Global-Tech examined.  After settling on a design for a fryer, Global-Tech obtained a patent opinion from its United States attorney indicating that the proposed fryer would not infringe any United States patents.  Of some importance Global-Tech did not disclose to the attorney the specific manufacturers whose fryers it had examined, and the attorney did not locate SEBs patent.

When Sunbeam began distributing the Global-Tech fryers in the United States, SEB sued Sunbeam and Global-Tech.  Sunbeam settled, but the litigation with Global-Tech continued.  Global-Techs liability for direct infringement (under Patent Act § 271(a)) was dubious because Global-Tech did not make or sell the fryers in the United States (it delivered them to Sunbeam in China).  Thus, the case has centered on its responsibility for inducing Sunbeams alleged infringement in the United States (under Patent Act § 271(b)).

Global-Tech took the position that its actions could not be active inducement because it had not known about SEBs patent.  SEB took the position that Global-Techs admitted copying of its product from SEBs was sufficient to satisfy the requisite state of mind.  A jury found for SEB.  On appeal, Global-Tech argued that liability was flatly inconsistent with the Federal Circuits recent en banc decision in DSU Med. Corp. v. JMS Co. Ltd. (2006), which stated that liability under Section 271(b) required knowledge of the allegedly infringed patent.  The panels opinion concluded that Global-Techs conduct amounted to deliberate indifference without explaining clearly how liability could be reconciled with DSU.  The Court granted review, responding to a petition that treated the panel decision as creating a conflict with the Courts decision in Grokster (a case involving copyright law) and an intra-circuit conflict with the en banc decision in DSU.

The heart of Global-Techs argument is a bright-line rule that liability under Section 271(b) requires in all cases knowledge of the patent alleged to be infringed.  The strongest support, ironically, is the Courts recent decision in Grokster.  Grokster considered the standard for secondary liability under the Copyright Act, which does not include any codification of cases on that subject.  The Grokster Court responded by importing the doctrine of secondary liability developed in cases under the Patent Act.  Crucial for Global-Techs argument is the Grokster Courts description of the patent standard as requiring an affirmative intent that the product be used to infringe and purposeful, culpable expression and conduct.  Relying on that understanding of Section 271(b), it is easy for Global-Tech to contend that the Federal Circuits deliberate indifference standard is much more lenient than the purposeful and culpable conduct Grokster understood patent law to require.

SEBs bottom-side brief emphasizes two points.  First, it argues that the standard of intent Global-Tech proposes amounts to a requirement of willfulness.  Because several standards in the Patent Act directly require willfulness, and because the language of Section 271(b) does not directly require willfulness, it puts some strain on the statute to interpret Section 271(b) as requiring such a high standard.  SEB also canvasses the facts of this particular case in support of a variety of narrow possible bases for affirmance.  Responding to the likelihood that the Court will be troubled by the potential for mischief in the Federal Circuits lax deliberate indifference standard, SEB emphasizes, for example, the unquestioned copying that occurred here: few infringement cases involve proof that the defendant unquestionably designed its product by copying the defendants product.

As is typical of patent cases in recent years, the Court confronts a large stack of more than a dozen amicus briefs, many of which reject the Federal Circuits approach as excessively favorable to the patentholder.  Space does not permit me to summarize all of them, but several are noteworthy.  Given the Courts recent attention in patent cases to academic writings, the most important brief probably is the brief that Mark Lemley files on behalf of more than forty professors.  Generally, he argues that the structure of Section 271 is inconsistent with the Federal Circuits decision.  In the academics view, the low standard of intent in Section 271(b) would make that section swallow the much more detailed provision on contributory infringement that follows (Section 271(c)).

Other noteworthy filings include one by Tom Hungar at Gibson, Dunn (on behalf of Comcast, Microsoft and several other large IT companies).  Hungars brief provides an excellent summary of the cases that were codified in Section 271(b), designed to show that the Federal Circuits reading of the statute is inconsistent with Congressional intent.  Given the importance of the early cases to the Courts decision in Bilski, this brief is likely to be important to at least some of the Justices.  And finally, there is a filing with typical verve from Eben Moglen on behalf of the Software Freedom Law Center, pointing out the risk to independent software developers of a standard that exposes them to liability for patents of which they have no reason to be aware.