Induced Infringement Requires Active Encouragement that Results in Direct Infringement

Abstract

To prove induced infringement a patent owner must show the accused infringer actively encouraged infringement, knowing that the acts they induced constituted patent infringement, and their encouraging acts actually resulted in direct patent infringement. Although inducement may be proven via circumstantial evidence, such as advertisements and user manuals, it must be found to have actually occurred.

In Power Integrations, Inc. v. Fairchild Semiconductor Int'l, Inc., the Federal Circuit considered whether proof of induced infringement requires proof that the encouragement of infringement was successfully communicated to the direct infringer and actually resulted in direct infringement.

Background

Fairchild and Power Integrations are competitors in the market for controller chips used in power supplies for various electronic devices, such as cellphones, laptops, and televisions. Power Integrations sued Fairchild for directly and indirectly infringing certain of its power supply patents. Fairchild filed counterclaims against Power Integrations asserting a set of its own power supply patents. After considering the evidence at trial, a jury found both parties liable for infringing at least some of the other’s asserted patents.

On appeal, among other issues raised by both parties, Fairchild argued that (1) the jury’s verdict should be vacated because the jury was improperly instructed that Fairchild may be liable for inducing infringement merely by taking steps to assist or encourage infringement to occur, "regardless of whether the encouragement succeeded, or was even received," and (2) Fairchild could not be liable for induced infringement of U.S. patents because it lacked the required specific intent to bring about infringement in the United States; it sold the accused controller chips to foreign distributors and therefore it had no knowledge of whether the accused controller chips would ultimately end up in the United States and infringe U.S. Patents.

The Power Integrations v. Fairchild Decision

The Federal Circuit agreed with Fairchild that the jury was improperly instructed and concluded that to be liable for induced infringement, Fairchild needed to successfully induce a third party to infringe. The court noted that according to a 2011 Supreme Court decision, the word "induce" means "to lean on; to influence; to prevail on; to move to persuasion." It then reasoned that each of these definitions require successful communication between the alleged inducer and the third-party direct infringer. And it noted that earlier Federal Circuit precedent stated that to prevail on a claim of inducement, patent owners need to show that an accused induced infringer’s "actions led to direct infringement."

Having found that precedent requires actual inducement, and that the district court’s instructions gave the jury an incorrect understanding on this requirement, the court vacated the jury’s finding of induced infringement.

The court next considered Fairchild’s alternative argument that it could not be liable for induced infringement because it only sells the accused controller chips to foreign distributors with no knowledge of whether they will ultimately end up in the United States.

There was no dispute that products containing Fairchild’s chips were in fact imported into the United States. Power Integrations introduced as evidence three representative products containing Fairchild chips that it purchased in the United States—an HP printer, an Acer laptop and a Samsung laptop.

However, Fairchild claimed there was no evidence that it encouraged its accused chips to be incorporated into products bound for the U.S. with the specific intent to induce infringement. The court disagreed, noting that Fairchild was involved in activities related to the use of its products in the U.S.: Fairfield designed its products to meet certain U.S. energy standards, provided demonstration boards containing the infringing chips to customers and potential customers in the United States, and maintained a technical support center in the United States that provided support to customers based in the United States.

The court also rejected Fairchild’s argument that Power Integrations was required to establish a nexus between Fairchild’s inducement and the particular infringing products sold by HP, Acer, and Samsung products. According to the court, established law allows induced infringement to be based on circumstantial evidence of inducement, such as advertisements and user manuals directed to a class of direct infringers, without direct proof that any individual third-party direct infringer was actually persuaded to infringe by such materials. Accordingly, the court found that the representative acts of direct infringement were sufficient to allow a jury to find that Fairchild had induced its customers to infringe as a class. The court therefore remanded for further proceedings on the issue.

Strategy and Conclusion

To prove induced infringement a patent owner must show (1) the accused infringer actively encouraged infringement, knowing that the acts they induced constituted patent infringement, and (2) their encouraging acts actually resulted in direct patent infringement. Although inducement may be proven by circumstantial evidence such as advertisements and user manuals, it must be found to have actually occurred.

Further information

The Power Integrations v. Fairchild decision is available here.