By Audrey Millemann
The Court of Appeals for the Federal Circuit has resolved a conflict in its precedents regarding the inducement of patent infringement, and, as a result, made the plaintiff’s burden heavier. In DSU Medical Corporation v. JMS Company, 471 F.3d 1293 (Fed. Cir. December 13, 2006), the court resolved the differences between its prior interpretations of 35 U.S.C. § 271(b) as set forth in Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464 (Fed. Cir. 1990) and Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544 (Fed. Cir. 1990).
The plaintiffs were DSU Medical Corporation, who owns a United State patent for a needle guard assembly device which prevents needle-stick injuries, and its exclusive licensee Medisystems Corporation (MDS). DSU and MDS filed a patent infringement suit against defendants JMS Company and ITL Corporation, in the Northern District of California. ITL manufactured a device similar the patented needle guard in Asia and sold the device to JMS, who distributed throughout the world, including in the United States. The plaintiffs sued JMS for direct infringement as well as for contributory infringement and inducing infringement, due to its sales in the United States. ITL was not sued for direct infringement, as it manufactured the device outside the United States and sold it to JMS in a non-infringing configuration. ITL was sued for contributory infringement and inducing infringement on the grounds that it contributed to and induced JMS’s direct infringement by selling the non-infringing configuration to JMS who then placed the device into its infringing configuration and distributed it in the United States.
The trial court entered an order on claim construction and found that ITL’s device infringed certain of the claims if it was in a “closed-shell” configuration, while it did not infringe in the “open-shell” configuration. At trial, the jury returned a verdict against JMS, finding JMS liable for direct infringement, contributory infringement, and inducing infringement. The jury found in favor of ITL, finding ITL not liable for contributory infringement or inducing infringement.
The plaintiffs moved for a new trial against ITL on the grounds that the jury should have found against ITL on both contributory infringement and inducing infringement. With respect to inducing infringement, the plaintiffs argued that the trial court should have instructed the jury differently on the elements required to prove inducing infringement. The plaintiffs had requested an instruction based on Hewlett Packard that the inducer need only intend to cause the third party to commit the acts that constitute direct infringement. The trial court instructed the jury under Manville, that the defendant must knowingly induce infringement with the intent to encourage the infringement and that the defendant must have intended to cause the acts of direct infringement and known or should have known that its conduct would cause direct infringement. In their motion, the plaintiffs contended that the jury instruction was wrong because it required plaintiffs to prove that ITL had the specific intent to encourage JMS to directly infringe the patent, rather than that ITL merely knew of JMS’s direct infringement.
The trial court denied the plaintiffs’ motion for a new trial, finding that ITL did not intend that JMS infringe. The plaintiffs appealed to the Federal Circuit and the court of appeals affirmed.
The court explained that section 271(b) does not state whether the alleged infringer must intend to induce infringement or merely intend the acts that induce the infringement. The courts prior decisions in Hewlett Packard and Manivlle were in conflict on this issue.
The court analyzed the Supreme Court’s recent decision in Metro-Goldwyn-Mayer Studios v. Grokster, 545 U.S. 913 (2005), a copyright case, which held that the inducer must “take active steps…to encourage direct infringement.” DSU, supra, at 1305. The court quoted the Supreme Court in Grokster: “the inducement rule…premises liability on purposeful, culpable expression and conduct…” Id. at 1306. According to the appellate court, at id.:
“Grokster, thus, validates this court’s articulation of the state of mind requirement for inducement….in Manville, this court held that the ‘alleged infringer must be shown…to have knowingly induced infringement,’…not merely knowingly induced the acts that constitute direct infringement. This court explained its ‘knowing’ requirement: it must be established that defendant possessed specific intent to encourage another’s infringement and not merely that the defendant had knowledge of the acts alleged to constitute inducement. The plaintiff has the burden of showing that the alleged infringer’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringements.”
Further, the appellate court stated, at id.:
“Grokster has clarified that the intent requirement for inducement requires more than just intent to cause the acts that produce direct infringement. Beyond that threshold knowledge, the inducer must have an affirmative intent to cause direct infringement…Accordingly, inducement requirement evidence of culpable conduct, directed to encourage another’s infringement, not merely that the inducer had knowledge of the direct infringer’s activities.”
The facts before the trial court were that ITL had knowledge of DSU’s patent, but had obtained non-infringement opinions of counsel. In addition, ITL’s owner/designer of the device testified that ITL did not intend to infringe the patent. The appellate court found that “ITL did not induce JMS to infringe by purposefully and culpably encouraging JMS’s infringement. To the contrary, the record contains evidence that ITL did not believe its [device] infringed. Therefore, it had no intent to infringe.” Id. at 1307.
The court concluded that the jury’s verdict in favor of ITL was proper as the evidence did not support the required specific intent. Thus, the trial court had not abused its discretion in denying the plaintiffs’ motion for new trial.