Friday, June 3, 2011

Supreme Court Says It's Still Inducement Even If You Proactively Took Steps To Make Sure You Weren't Infringing

A blog post by Skip Oliva alerts us to a very troubling Supreme Court ruling in a patent lawsuit that is going to have massive, dangerous unintended consequences -- as pointed out by the lone dissenter, Justice Kennedy. Effectively, the ruling claims that even if you had no idea that a patent existed, if you sell products to other businesses for resale, and it later turns out that those products infringed on a patent, you could be liable for "inducement" to infringe. It's hard to see how this makes any sense at all.

First, the facts of the case. SEB created a deep fryer and got a patent on it. Entirely separate from this, Sunbeam decided it wanted a certain type of deep fryer that apparently had similarities to what SEB made. This isn't surprising. As we've discussed before, it's quite common that multiple individuals/companies have the same idea at the same time. Sunbeam contracted out to appliance maker Pentalpha to make a deep fryer to its own specifications. Pentalpha, in researching the market, came across an SEB deep fryer that had no US patent markings on it, and built its own deep fryer, potentially using some of what it learned from the SEB deep fryer. Separately, it asked an attorney to do a patent search to see if its own deep fryer violated any patents -- and the attorney's search turned up nothing.

Eventually, SEB sued Sunbeam, who eventually settled. After that, SEB went after Pentalpha claiming inducement to patent infringement, claiming that Pentalpha was "inducing" anyone who resold this model of deep fryer (by this point, the company had a few other customers besides Sunbeam) to infringe on SEB's patent. Logically, this makes no sense. Pentalpha had no knowledge of the patent in question and even had a lawyer do a search which failed to turn up anything. While you could claim that Pentalpha was guilty of straight up patent infringement, claiming "inducement" seems ridiculous.

Not to the courts, however. Following both the District Court and the Appeals Court (CAFC, natch), the Supreme Court found that the inducement claim holds, citing "willful blindness."

This is the point where you shake your head in disbelief.

How could this possibly be willful blindness when the company literally went out and hired someone to do a patent search which came up blank? And then, even if you grant the premise that there was "willful blindness" in finding the patents (even though they looked), the Supreme Court went even further in saying that "willful blindness" was the equivalent of full-on knowledge of that which you were being blind to. That's because for inducement to apply, the accused has to have actual knowledge that the product is infringing. Think about that for a second. Willful blindness normally means that you purposely chose not to seek out some information because you didn't want to know the answer. But that's very different than saying that's the equivalent of having that knowledge in the first place. And yet, that's what the court did here.

Justice Kennedy's dissent is reasonably worried about the majority's ruling here:
Yet the Court does more. Having interpreted the statute to require a showing of knowledge, the Court holds that willful blindness will suffice. This is a mistaken step. Willful blindness is not knowledge; and judges should not broaden a legislative proscription by analogy. See United States v. Jewell, 532 F. 2d 697, 706 (CA9 1976) (en banc) (Kennedy, J., dissenting) (“When a statute specifically requires knowledge as an element of a crime, however, the substitution of some other state of mind cannot be justified even if the court deems that both are equally blameworthy”) In my respectful submission, the Court is incorrect in the definition it now adopts; but even on its own terms the Court should remand to the Court of Appeals to con-sider in the first instance whether there is sufficient evidence of knowledge to support the jury’s finding of inducement.
Later he notes that, even if a company were to assume that something likely is patented, it can later do research and conclude otherwise, as was done here. Thus, to claim that there was "knowledge" of infringement, to the level to reach inducement is a massive stretch. Kennedy highlights just how problematic this is, in that it now allows juries to pretend they can step into someone's mind to determine if they "knew" something, based solely on the fact that they sought not to find out that information:
Circumstantial facts like these tend to be the only available evidence in any event, for the jury lacks direct access to the defendant’s mind. The jury must often infer knowledge from conduct, and attempts to eliminate evidence of knowledge may justify such inference, as where an accused inducer avoids further confirming what he already believes with good reason to be true. The majority’s decision to expand the statute’s scope appears to depend on the unstated premise that knowledge requires certainty, but the law often permits probabilistic judgments to count as knowledge.
And this will likely have impacts beyond just patent law. The "inducement" concept is specifically written into patent law... but not into copyright law. In fact, the case law "invention" of inducement in copyright law relied heavily on what was in patent law. That means... this ruling almost certainly would be equally applicable to copyright law as well. Considering all the concerns people already have about orphaned works, think of the massive chilling effects and unintended consequences here. If someone were to make use of a work which they believed to be free of copyright, and even if they had a lawyer declare it free of copyright... if a jury then decides magically instead that they were "willfully blind" and should have known that the work was covered, they may now be liable for inducement as well! That's a massive extension of inducement theory.

Even worse, this appears to go beyond just the realm of intellectual property. Justice Kennedy was particularly spooked by the fact that this ruling -- in a very narrow area of civil law -- likely also applies to criminal law, without any thought at all given to what this might mean in the criminal context:
The Court appears to endorse the willful blindness doctrine here for all federal criminal cases involving knowledge. It does so in a civil case where it has received no briefing or argument from the criminal defense bar, which might have provided important counsel on this difficult issue.
Yes, based on this particular ruling in a patent case, "willful blindness" may be the equivalent of "actual knowledge," which makes no sense at all. Honestly, it seems the only truly "willful blindness" in this case is from the eight justices who seem to be totally blind to the massive chilling effects this will have.

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