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Intellectual Property

Active Inducement of Infringement: Proof of Knowledge of a Patent Is Required

Sanford Warren | May 1, 2007

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Patent infringement litigation comes in several different flavors. The most common type of infringement is direct infringement.

Direct infringement usually goes along the lines of: (1) ABC Company holds a patent on a particular type of titanium sprocket; (2) XYZ Company, unaware of the patent, begins manufacturing, importing, selling, or offering to sell an identical sprocket; (3) ABC sues XYZ. As long as ABC, the patent holder, marked its sprockets with the issued patent number(s) as required by 35 U.S.C. § 287(a), ABC does not need to prove XYZ had any actual knowledge of the patent. Proof of actual knowledge is generally limited to instances where the patent holder seeks treble damages and/or attorney fees for willful infringement or in other exceptional cases.

In addition to direct infringement, several varieties of "indirect" infringement are also recognized under U.S. patent law, including "contributory infringement" under 35 U.S.C. § 271(c) and "exporting of infringing components" under § 271(f). One type of indirect infringement of particular interest is "active inducement of infringement" under § 271(b).

Active inducement to infringe is generally invoked when enforcing patents on the method of using one or more otherwise unpatented compositions, such as pharmaceuticals. In such cases, the consumer or practitioner actually infringes the patent, but only after being "induced," or taught, to do so. It may be difficult, if not impossible, to pursue individual infringers for economic reasons or to maintain good public relations. Therefore, "active inducement of infringement" is a critical tool in preventing competitors from encouraging others to violate a particular patent.

The requirements for "active inducement" of patent infringement were, until recently, never clearly defined by the courts. In particular, it was unclear whether a party actively induces infringement by merely inducing acts that happen to infringe or inducing acts known to infringe. Although the distinction may seem subtle, a requirement that a party "knew" about the patent would make or break many "active inducement" cases. In legalese, this concept is known as "specific intent," requiring the party to have a specific intention for others to infringe the patent, not just a general intent to induce the activities.

Unfortunately, the Federal Circuit provided conflicting guidance on whether "specific intent" was required for active inducement. A large majority of the decisions, including Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544 (Fed. Cir. 1990), suggested inducement required an intent to cause infringement not just an intent for others to commit particular acts that infringe, suggesting knowledge of the patent was necessary for a finding of "active inducement." On the other hand, some cases, such as Moba v. Diamond Automation, 325 F.3d 1306 (Fed. Cir. 2003), and Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464 (Fed. Cir. 1990), have been interpreted as suggesting knowledge of the patent was not required. Therefore, under this alternative standard, only an intent to induce the activities that actually cause infringement was necessary.

At the end of 2006, the Federal Circuit finally appears to have put this uncertainty to rest in DSU Med. Corp. v. JSM Co., Ltd., 471 F.3d 1293 (Fed. Cir. 2006). There, the Federal Circuit, sitting en banc to resolve the conflicting precedent on the standard for active inducement, decided the issue in favor of a party accused of inducing infringement, but having no knowledge of the patent. The court held that a party accused of inducing infringement under § 271(b) required actual knowledge of the patent to be liable for infringement, as required for contributory infringement and following the Supreme Court's reasoning in MGM Studios, Inc. v. Grokster, Ltd., 125 S. Ct. 2764 (2005). While this ruling certainly puts additional burdens on patent holders, a clear rule is certainly more valuable when determining how to proceed after a patent issues, but before building a case for infringement.

What Does this Mean for Patent Holders?

A growing number of patents cover methods of doing something, i.e., the use of an apparatus or composition. Now that the Federal Circuit has set forth a definitive requirement that active inducement requires actual knowledge of the patent, patent holders should look at their public relations efforts with greater scrutiny. While many companies have traditionally issued press releases regarding their newly granted patents, such publicity may need to be taken a step further.

Filing a lawsuit against a competitor who induces infringement of a patent is certainly one way to provide notice. However, patent litigation tends to be quite expensive, and without notice it is difficult, if not impossible, to recover damages for active inducement of infringement that occurred before the lawsuit was filed. While you may be able to prevent the infringer from engaging in future activities, it is a costly proposition with the prospect of recovering few, if any, damages.

The better solution is to take an active role in "educating" competitors about your newly issued patents. Informing competitors about your patent, what it covers, and why it is relevant to their business is certainly cheaper than taking them to court. A friendly letter informing them of your new patent in the form of a press release may be a subtle way to inform other parties. In fact, it may be desirable to include broad language, offering the availability of negotiated licenses to interested parties on a case-by-case basis. Such letters can be useful tools in setting yourself up for success down the road in the event your competitors actively induce infringement of your patents.

What If I Get a Letter about an Issued Patent?

Congratulations! You just received a letter about your competitor's new patent. If it is remotely related to any activities you—or your customers—engage in, then it's time to sit down and take a serious look at your competitor's new patent. You need to look at the disclosure of the patent, what the patent actually claims, and the business implications for yourself, your customers, and your competitors.

The first step is to take an inventory of business activities that could be considered active inducement. Do you engage in the sale of products or materials that might encourage others to infringe the patent? Does the product packaging have labels or instructions that encourage others to infringe the patent? Does the product or material have other non-infringing uses? Finally, do you consult or partner with others in activities that might infringe the patent?

If you answered "yes" to any of the above questions, you should consider taking proactive steps to minimize or eliminate any chance of actively inducing infringement. The easiest, and simplest, solution is to completely cease selling the products or materials, and halting all other activities that would induce infringement. If the product or material is not widely popular, or minimally profitable, this may be a reasonable choice. If all goes well, you should be able to avoid all the headaches and hassles of patent litigation.

Another slightly more complex solution is to modify the product or material so that you avoid active inducement. If the patent is clear about what is—and is not—covered, it may be easy to omit the instructions that encourage others to infringe the patent. A word of caution, though, if the product itself has few, if any, other non-infringing uses or is marketed in a way that implicitly encourages infringement, it may still be active inducement, or even contributory infringement under § 271(c). Depending on the situation, this solution may be risky. In such cases, advice of counsel should be sought.

If the value of the "patented" method is especially important to you or your customers, it may be necessary to get patent counsel involved. Patent counsel can provide valuable advice on validity of the patent if subject to litigation, prior use rights you may have to practice the method, and ways to design around or avoid actively inducing actual infringement. While the involvement of patent counsel can be more expensive than the basic solutions discussed, the old adage, "an ounce of prevention is worth a pound of cure" is certainly applicable in the high-stakes world of patent infringement.

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