Global-Tech Appliances, Inc. v. SEB S.A.

This case concerns an interpretation of federal patent law, specifically 35 U.S.C. § 271(b), which imposes liability on anyone who “actively induces” patent infringement. Global-Tech argues that no one may be held liable for inducing patent infringement without first having an affirmative intent to encourage the infringement to take place. SEB, on the other hand, believes it is improper to require a patent holder to prove that the alleged infringer actually knew about the patent. The Federal Circuit agreed with SEB and ruled that “deliberate indifference” of a known risk was itself a form of actual knowledge and, therefore, was sufficient to satisfy Section 271(b).

Does existing Supreme Court precedent require proof of actual knowledge to prevail on a claim of patent infringement?

Global-Tech’s argument relies heavily on the Supreme Court’s decision in a 2005 copyright infringement case, MGM Studios, Inc. v. Grokster, Ltd. Global-Tech believes that the Grokster ruling imposes the requirement that an alleged patent infringer must act with an unlawful purpose to be liable for actively inducing infringement. Grokster speaks of “purposeful, culpable expression and conduct” and, according to Global-Tech, an actor who is unaware of a patent’s existence cannot be guilty of such behavior. Global-Tech, quoting Grokster, believes this standard is necessary to demonstrate that the defendant’s actions were indeed unlawful: “[A] showing that infringement was encouraged overcomes the law’s reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use.” Therefore, Global-Tech concludes, a defendant without an unlawful purpose cannot be liable under the statute.

SEB frames the issue largely in terms of what type of knowledge an actor must possess to be liable for inducing infringement. SEB points out that Grokster permitted liability for infringement without evidence that a defendant was actually aware of any specific copyrights. Therefore, SEB says, liability for patent infringement should not require any actual knowledge either. SEB essentially sees Grokster as requiring only “clear expression or other affirmative steps taken to foster infringement.”

The test SEB advocates, then, is essentially one “to distinguish ‘culpable’ behavior from innocent behavior . . . so that those fairly characterized as bad actors would face liability, and those simply engaging in ordinary commerce would not.”

SEB also notes that Grokster involved copyright infringement, not patent infringement. Global-Tech’s position, however, is that Grokster itself supports the view that an unlawful purpose standard is proper in patent law as well as in copyright law; indeed, the Grokster Court cited patent cases in reaching its conclusion. But SEB responds that, even if Grokster does apply to patent litigation, Global-Tech’s actions in this case at least met, if not exceeded, the Court’s Grokster test.

Does the statute’s text suggest what the applicable mental state is?

Global-Tech also relies on statutory grounds, arguing that reading a less stringent mental state into Section 271(b) would strip the following subsection, 35 U.S.C. § 271(c), of all its meaning. Although subsection (c) specifically deals with the trafficking of machine components and similar items, according to Grokster, one who sells such components might also be liable under subsection (b), which describes only someone who “actively induces infringement of a patent.” Global-Tech states that liability under subsection (c), which requires “knowing” that some material “be especially made or especially adapted for use in an infringement of [a] patent,” means that a defendant must have known of the danger of patent infringement. But this standard is less strict than a requirement that the defendant intentionally encouraged an unlawful act, which Global-Tech maintains is applicable to subsection (b)’s description of inducement. Global-Tech believes that although the activity described in subsection (b) may overlap some activity described in subsection (c), the different mental states still allow for the subsections to account for two distinct theories of liability. However, if one reads a weaker mental state, such as deliberate indifference, into subsection (b), Global-Tech believes subsection (b) would completely subsume subsection (c). Therefore, because the Court should give all the statute’s terms full effect and not render any of them meaningless if at all possible, Global-Tech claims that the stricter “purposeful, culpable expression and conduct” test should apply to a defendant’s liability for patent infringement inducement.

SEB interprets the statute’s textual clues in exactly the opposite way. It notes that the text of 35 U.S.C. § 271(a), which describes liability for manufacture, use, and sale of patented inventions without the patent holder’s authority, mentions no mental state at all. Because the Court has read that subsection as entailing strict liability for patent infringement, arguably the same result should apply to the inducement of patent infringement described in subsection (b). But even if inducing patent infringement does require some form of intent, as the Court may have implied in Grokster, SEB would have the Court impose a “lower level of intent” than the subsection (c)'s requirement of a “knowing” violation. It would be improper to apply that same standard to a claim of inducement, SEB argues, because doing so would not honor Congress’s decision to omit the word “knowing” from subsection (b). Finally, SEB observes that 35 U.S.C. § 284 allows a trial court to grant a victorious plaintiff treble damages in patent infringement cases, and 35 U.S.C. § 285 provides for the recovery of attorney’s fees in like situations. Because courts typically do not grant these remedies unless the defendant committed “willful” infringement, SEB contends that “willfulness” cannot possibly be the correct standard for liability under Section 271(b). To conclude otherwise would make attorney's fees and treble damages available to every successful plaintiff, which SEB sees as an illogical result.

Global-Tech also contends that Congress intended the Patent Act to require a purposeful mental state. Global-Tech specifically relies on a Senate report that describes a moral component to the law as evidence that a morally culpable intent, not mere knowledge, is necessary to trigger liability under the statute. SEB views the statute’s legislative history differently, emphasizing that Congress considered a proposal to replace the words “actively induces” with “willfully induces,” but then rejected the change. To SEB, this fact demonstrates Congress’s desire to see liability attach even where defendants did not act with knowledge of the patents and did not actively intend to commit infringement.