CPLRG™ 0021 - SEB S.A. v. Montgomery Ward & Co., Inc. - Feb. 5, 2010

 SEB S.A. v. Montgomery Ward & Co., Inc., 594 F.3d 1360, 2010 U.S. App. LEXIS 2454 (Fed. Cir. 2010) (RADER, Bryson & Linn), cert. granted sub nom. Global-Tech Appliances v. SEB S.A., No. 10-6, 562 U.S. —- (Oct. 12, 2010)


MAJOR ISSUES: active inducement of infringement; knowledge requirement; offer to sell “in the United States”; shipments f.o.b. from China

SUPREME COURT GRANT OF CERTIOARI:  On October 12, 2010, the Supreme Court granted certiorari in this case to review the issue of the knowledge requirement for Section 271(b) active inducement liability.  Global-Tech Appliances v. SEB S.A., No. 10-6, 562 U.S. —- (Oct. 12, 2010).  As usual, the pending Supreme Court decision will attract much attention.   See http://www.patentlyo.com/patent/2010/10/supreme-court-to-hear-case-on-inducing-patent-infringement.html

CROSS-REFERENCES.  On active inducement, see Chisum on Patents 17.04; Chisum Patent Law Digest 5115.40.  On the requirement that a sale or offer to sell be “in the United States, see Chisum on Patents 16.02[5], 16.05; Chisum Patent Law Digest 5111.60, 5120 

1. INDUCEMENT; KNOWLEDGE OF PATENT. A Federal Circuit panel addressed the knowledge-of-the-patent requirement for imposing liability for active inducement of infringement that the en banc court had required in DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006).   For the DSU opinion, see  DSU Medical

     a. DIRECT EVIDENCE NOT REQUIRED.  In SEB, the panel held that “a claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew of the patent-in-suit.”

     b. ACTIVE DISREGARD OF KNOWN RISK. Looking to decisions outside the field of patent law, the panel noted knowledge and specific intent to engage in wrongdoing can comprise active disregard of a known risk.

     c. DELIBERATE INDIFFERENCE.  The panel ruled that “deliberate indifference” is not the same as a negligence, “should have known” standard. Deliberate indifference requires a subject determination that a defendant knew of and disregarded an overt risk.

2. The patent in suit concerned a deep fryer with a skirt and a pan. U.S. Pat. No. 4,995,312.  USPatNo4995312

     a. An accused manufacturer (Pentalpha) had sold accused fryers to three United States-based customers (Sunbeam, Fingerhut and Montgomery Ward) “f.o.b. Hong Kong.”

     b. JURY VERDICT: DIRECT INFRINGEMENT AND INDUCEMENT OF INFRINGEMENT. A jury rendered a verdict that the accused manufacturer committed direct infringement and inducement of infringement. The law and facts supported a verdict based on either theory (direct infringement by sale in the United States and inducement of sales by customers in the United States).

     c. INDIRECT EVIDENCE OF KNOWLEDGE; DISREGARD OF KNOWN RISK THAT A “PROTECTIVE PATENT” COVERED A COPIED PRODUCT. To establish inducement, a patent owner may establish the DSU Medical “knowledge-of-the-patent” requirement without direct evidence of actual knowledge. Here, the evidence before the jury supported a conclusion that the accused infringer “deliberately disregarded a known risk” that the patent owner had a “protective patent” on a product that the accused infringer copied.

           i. PURCHASE PRODUCT IN HONG KONG; COPY “ALL BUT THE COSMETICS.” The accused manufacturer bought the patent owner’s product in Hong Kong and “copied all but the cosmetics.”

           ii. “RIGHT TO USE” STUDY BY ATTORNEY; ATTORNEY NOT INFORMED OF COPYING. The accused manufacturer obtained a “right-to-use” study from an attorney in Binghamtom, New York. The attorney analyzed 26 patents and concluded that the patents not read on the accused manufacturer’s fryer. The accused manufacturer did not tell the attorney that it had copied the patent owner’s product.

           iii. INFRINGER’S PRESIDENT: WELL-VERSED IN U.S. PATENT SYSTEM; NAMED ON 29 PATENTS; UNDERSTOOD THAT PATENT OWNER WAS “COGNIZANT OF PATENT RIGHTS.” The patent owner was “well versed” in the U.S. patent system, being a named on 29 patents. The patent owner and infringer had had “an earlier business relationship” that involved the infringer’s patented products.

     d. NO EXCULPATORY EVIDENCE. In the face of this “considerable evidence of deliberate indifference,” the infringer produced no “exculpatory evidence.”

           i. NO BELIEF THAT A PATENT DID NOT EXIST. The infringer did not contend that it actually believed that a patent did not exist.

           ii. ABSENCE OF PATENT MARKING FROM COPIED PRODUCT The infringer noted that the product it copied did not bear a U.S. patent mark. However, it did not argue that it relied on the lack of mark to form a belief that the product was not patented. Such an argument would “likely lack credibility” unless the infringer explained “why one would expect an SEB deep fryer purchased in Hong Kong to have U.S. patent markings.”

3. FAILURE TO INSTRUCT JURY THAT AN OFFER IN THE UNITED STATES TO SELL GOODS OUTSIDE THE UNITED STATES DOES NOT VIOLATE THE SECTION 271(a) “OFFER TO SELL” PROVISION; NOT A “FUNDAMENTAL ERROR.” The accused manufacturer argued that the district court erred in failing to instruct the jury that “an offer in the United States to sell goods outside of the United States would not violate the `offer to sell’ provision of § 271(a).” Because the accused manufacturer did not timely object to the jury instructions, the alleged flaw must constitute a “fundamental error” to warrant a new trial.

      a. SALES NOT CLEARLY OUTSIDE THE UNITED STATES. Here, the accused manufacturer’s sales did not clearly occur overseas.

       b. The evidence showed only that the manufacturer delivered its products ot its customers f.o.b. Hong Kong or mainland China.”

     c. GOODS SHIPPED F.O.B. . Where goods are shipped “f.o.b.” is not necessarily the location of the sale. See Litecubes, LLC v. Northern Light Products, Inc., 523 F.3d 1353, 1370 (Fed. Cir. 2008).

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