December 3, 2013
Commercial Times
Authored by Gary C. Ma and Ming-Tao Yang
If you are a component supplier who has limited direct sales to the United States, your risk for patent infringement in the United States may be a lot lower than before. This is particular important because the United States has seen an exponential increase in the number of patent lawsuits being filed each year—almost doubling in the past four years. More and more Taiwan companies, even ones that rarely sell or import products into the United States, are being named as defendants in these lawsuits. Patentees include component suppliers to seek damages primarily from induced infringement, which occurs where one party acts to direct or cause another to perform an act of direct infringement, such as selling allegedly-infringing products in the United States. For example, a Taiwan company that sells components to a customer in China may be accused of induced infringement if those components are ultimately incorporated into downstream products being sold in the United States.
Indirect infringement liability can become significant and catch companies by surprise, because a company that rarely does business in the United States can be liable for the activities of its downstream customers in the United States. Two decisions in 2013, however, may reduce risks associated with induced infringement. The Federal Circuit in Commil USA, LLC v. Cisco Systems, Inc. held that not only does a good faith belief of non-infringement potentially negate the intent required for induced infringement, but evidence of an accused inducer’s good faith belief of invalidity may as well. The Commil decision followed in the footsteps of the Supreme Court’s Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011) decision, which held that a defendant must have actual knowledge of, or be "willfully blind" to infringement (a standard more commonly applied in criminal cases), in order to be liable for induced infringement. Neither recklessness nor negligence is sufficient for finding induced infringement, and one who has done the proper analyses or reasonably relies on opinions of counsel to support a belief of non-infringement, invalidity, or both, may avoid or reduce risks of indirect infringement liability in later litigation.
Second, the bar for proving damages against a foreign defendant has also risen. In Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., the Federal Circuit held that plaintiffs cannot establish defendants’ U.S. sales by simply estimating damages using worldwide market and sales data and must develop and proof those sales result from the defendants' activities. This development, along with recent decisions by the same court that limit the instances where damages calculations can be based on the price of an end-user product, make it much more difficult for plaintiffs to seek inflated damages against component suppliers outside the United States.
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