Authored by Jia (Wenjia) Lu and Roger D. Taylor
Under U.S. patent law, one is liable for directly infringing a patent if he “without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports to the United States any patented invention during the term of a patent.” If the accused product does not contain all the limitations of the patent claims, or if the accused company does not sell or import the product into the United States, it does not directly infringe a patent. However, the foreign company may still be liable for induced infringement if it actively induces others to infringe.
A Chinese company that makes, uses, or sells its products only in China could still find itself in a lawsuit in the United States if its products are later exported to the United States and used in an infringing manner. For example, a Chinese company may manufacture products and export them to a company in the United States, which then incorporates them into a larger device and then sells that larger device in the United States. In this instance, the Chinese company may face a charge of indirect infringement. Finally, a Chinese company may be liable for induced infringement based on the printed instructions of a product that it sells, even if the product itself does not infringe a patent--in other words, the instructions may contain information about how to use the product in an infringing manner.
The CAFC recently clarified a new and powerful defense against a charge of induced infringement. In Commil USA, LLC v. Cisco Systems, Inc., June 25, 2013, petition for rehearing en banc denied October 25, 2013, the Court held that a good-faith belief that a patent is invalid is a valid defense against a charge of induced infringement, and also raised the standard for showing the intent required for proving induced infringement.
A specific intent to encourage patent infringement is required to be liable for induced infringement. The specific intent was satisfied by a defendant who knew or should have known that his actions would induce actual infringement. That is, a company which did not willfully induce infringement but was reckless or negligent in actions that led to actual infringement could be found liable for induced infringement.
The Court in Commil held that a good-faith belief in the invalidity of a patent may negate the requisite intent for induced infringement. Specifically, the court said that evidence of a good-faith belief of a patent’s invalidity is admissible and should be considered by the fact-finder. The Court had long recognized a good-faith belief of no infringement to be relevant evidence in defending against induced infringement claims, but before Commil, the Court had never indicated that a good-faith belief of invalidity was also relevant evidence.
This ruling effectively establishes a new and powerful defense to induced infringement. A company which knows of a patent that potentially could be asserted against its products can now take affirmative steps to guard against a later charge of induced infringement. For example, an opinion from competent patent counsel that a patent or certain of its claims are invalid would likely provide the good faith basis for a belief in invalidity of the patent or claims, and thus provide a defense to a later charge of induced infringement. This is a logical and helpful outcome. It is logical because if a defendant believes that a claim or patent is invalid, then there can be no argument that the defendant encouraged infringement of that claim or patent, as an invalid claim or patent by definition cannot be infringed. It is helpful because it provides to companies a way to evaluate potential risk and establish a good faith believe that their products do not infringe valid patent rights.
In an equally helpful ruling, the Commil court held that to show the required intent for induced infringement, actual knowledge or willful blindness is required. It also explained that willful blindness is different than recklessness and negligence. The Court based its finding on the Supreme Court decision in Global-tech Appliances v. SEB S.A. There the Supreme Court defined willful blindness as the deliberate undertaking of actions to avoid confirming a high probability of wrongdoing. It contrasted willful blindness with a reckless defendant, which is one who merely knows of a substantial and unjustified risk of such wrongdoing, and a negligent defendant, which is one who should have known of a similar risk, but in fact did not.
Under this new standard, Chinese companies that become targets for induced infringement claims are more likely to successfully rebut the intent requirement for showing induced infringement. As long as the company did not deliberately take actions to “avoid confirming a high probability of wrongdoing” and actually did not know the “critical facts” of inducing infringement, the plaintiff will likely fail in an induced infringement claim against the company.
Many patent jury verdicts and some of the largest patent jury verdicts involve damages for induced infringement. In Commil for example, the issue for induced infringement was worth over $60 million, a majority of damages in the case. Thus, a company could avoid a large fine if it obtains a favorable invalidity opinion before it releases a product in the United States. The opinion can be used to show that the company had a good-faith belief that the patent was invalid and thus did not induce infringement.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm’s clients.
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