Archives for September 2011

Willful Blindness: The New Standard for Knowledge in Active Inducement of Patent Infringement

In a decision earlier this year that will have ramifications in numerous areas of the law where “knowledge” must be proven, the U.S. Supreme Court applied the doctrine of willful blindness to satisfy the knowledge element for a claim of active inducement of patent infringement. Although the willful blindness doctrine has been well established in criminal law and adopted by every federal court of appeals but one, the Global-Tech Appliances decision marks the first time the Court has approved the doctrine.

In a dissenting opinion, Justice Kennedy noted that the Court appeared to endorse the willful blindness doctrine for all federal criminal cases without receiving briefing or argument on this important issue from the criminal defense bar.

Under the willful blindness standard, the plaintiff must prove 1) the defendant believed that there is a high probability that a fact exists and 2) that the defendant took deliberate actions to avoid learning of that fact.  Using this standard, the Court defined a willfully blind defendant as “one who takes deliberate actions to avoid confirming a high probability of wrong doing and who can almost be said to have actually known the critical facts.”

In the case at bar, Pentalpha copied one of SEB’s deep fryers that was made for sale in Hong Kong and thus lacked any U.S. patent markings. Although Pentalpha retained an attorney to perform a patent search, Pentalpha did not inform the attorney that that the design was a copy of SEB’s design.  The attorney did not find SEB’s patent and issued an opinion that Pentalpha’s deep fryer did not infringe on any of the patents he had found.

Subsequently, Pentalpha began selling the knock-off deep fryers to Sunbeam in Hong Kong.  Sunbeam then imported and sold the fryers in the United States.  SEB sued Sunbeam for patent infringement and Sunbeam notified Pentalpha of the claim.  After settling with Sunbeam, SEB then sued Pentalpha for infringing its U.S. patent by actively inducing Sunbeam and other purchasers of Pentalpha fryers to sell them in the U.S. in violation of SEB’s patent rights.

Pentalpha argued that it had no knowledge of the patent, and thus, SEB could not prove the knowledge required to recover for active inducement of infringement of the patent.  The Federal Circuit held that the knowledge element was satisfied because of Pentalpha’s deliberate indifference to a known risk that a patent existed covering SEB’s fryer.

The Supreme Court rejected the deliberate indifference standard because it does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities.  The Court also criticized the standard because it permits the finding of knowledge where there is merely a “known risk” that the induced acts are infringing.

Instead, the Court applied the willful blindness standard to affirm the holding of the Federal Circuit that Pentalpha had actively induced infringement of the patent by Sunbeam.  In reaching its decision, the Court found it significant that Pentalpha knew of  SEB’s superior product and knew that SEB’s fryer embodied advanced technology that would be valuable in the U.S. market.  The Court also pointed out that Pentalpha decided to copy an overseas model, knowing that products made for overseas markets usually do not bear U.S. patent markings.  Even more significant, according to the Court, was Pentalpha’s decision not to inform its patent attorney that the Pentalpha fryer was a copy of SEB’s fryer.

The Court could not fathom any other motive that Pentalpha had for withholding this information “other than to manufacture a claim of plausible deniability in the event that his company would later be accused of patent infringement.” Thus, the Court held that the evidence was more than sufficient for the jury to decide that Pentalpha subjectively believed that there was a high probability that SEB’s fryer was patented, that Pentalpha took deliberate steps to avoid knowing that fact, and therefore, Pentalpha had willfully blinded itself to the infringing nature of Sunbeam’s sales.

Although the willful blindness standard adopted by the Court is more restrictive than the Federal Circuit’s deliberate indifference standard, it is still not necessary to prove that the alleged infringer had actual knowledge that the product was covered by a patent.  The Court’s approval of the willful blindness standard as an alternative to proving actual knowledge could have wide reaching consequences, even outside the context of patent infringement.  The decision has already been cited in criminal cases, bankruptcy cases and in cases involving the False Claims Act.