August 27, 2013

Indirect Patent Infringement - ABA YLD 101 Practice Series

By Andrew R. Sommer

The Patent Act provides a patentee with a cause of action against those that infringe a patent claim by making, using, offering to sell, selling, or importing a patented invention into the United States without the patentee’s authorization. The phrase “patented invention” requires each claim limitation be found (either literally or equivalently) in the allegedly infringing product. 1 This is direct infringement, and it is a strict liability tort.

But the Patent Act does not stop there. In addition to giving a patentee the right to exclude others from directly infringing a patent, the statute allows patentees to pursue causes of action against those contributing to or inducing direct infringement by others. This is indirect infringement, and, unlike direct infringement, it is not a strict liability tort. Regardless of the form the indirect infringement takes, the law requires a patentee prove direct infringement to establish liability for indirect infringement.

I. The Origins of Indirect Infringement
Induced and contributory infringement may be better understood from their historical origins. Before the Patent Act of 1952 patent infringement was a creature of common law. Shortly after patent claims were first required by the Patent Act of 1836, the Supreme Court held in Prouty v. Ruggles that a patentee must show that all limitations of a claim are included in an accused instrumentality (either literally or equivalently) to be able to demonstrate direct infringement. Consequently, manufacturers avoided infringement by selling key parts of a patented product or by selling parts of patented products and by providing instructions on an infringing use of those products. If individual suits against consumers for direct infringement were the sole means for excluding others from practicing the patented invention, the promise of exclusionary rights would be an empty one. Enforcement costs are simply too high for patentees.

The courts addressed this problem by drawing on the long-standing common law doctrine of joint tort feasors. This doctrine, resulting in joint and several liability, gave patentees the vehicle to maintain the exclusionary rights promised by the patent grant. This doctrine became known as “contributory infringement.” Through decades of case law, contributory infringement took two forms. The first form was where the accused infringer sold non-staples or non-commodities for use in a patented combination. The second form was where the accused infringer sold what was possibly a staple or commodity, but encouraged direct infringement. Over time, courts applied these doctrines somewhat inconsistently, allowing patentees to use the patent right to exclude too much. This gave rise to the over-corrective doctrine of patent misuse. To restore the balance of the patent system’s incentives to inventors (and benefits to the public) with the burden the system places on the public in the form of the patentee’s right to exclude, Congress passed the Patent Act of 1952, which codified both forms of “contributory infringement” under separate subsections: active inducement and contributory infringement. 2

II. Inducement of Infringement Under § 271(b)
Since 1952, the Patent Act has provided a patentee with a cause of action against those who actively induce infringement. The statute provides: “Whoever actively induces infringement shall be liable as an infringer.” 3 Behind this simple statutory language lies a rather complex body of case law.

In addition to requiring the patentee to prove direct infringement, one who actively induces infringement knowingly performs some act intending to cause someone else to infringe a patent. 4 Thus, the infringer must possess a specific intent to cause the direct infringement. 5 This requires actual or constructive knowledge of the patent alleged to be infringed. 6 At least where the accused infringer is selling a product capable of noninfringing uses, some act beyond the sale must be shown to prove inducement. Instructions, advertising, control over design or manufacturing, or otherwise encouraging infringing uses of staple products may be evidence of intent to induce infringement even where staple articles are sold. 7 And, a patentee need not have direct evidence of intent to induce infringement; circumstantial evidence may suffice. 8

That section 271(b) requires a patentee prove intent to establish active inducement may present thorny issues. As yet-to-be-appointed Judge Rich noted shortly after enactment of the Patent Act of 1952, those thorny issues will need to be solved “as they arise in the light of the purpose of Section 271, which is to afford adequate protection to valid patents against those who are clearly seeking to benefit from piracy, especially in situations were enforcement against direct infringers is impractical.” 9 The law of inducement has continued to evolve case-by-case.

III. Contributory Infringement Under § 271(c)
Unlike section 271(b), section 271(c) is clearer in articulating the cause of action it provides. That subsection requires (1) the sale of a component for a patented item; (2) that the component sold be a “material part of the invention,” (3) knowledge that the part be “made or especially adapted for use in an infringement,” and (4) that the component be a non-staple article (i.e., the component cannot have substantial non-infringing uses) 10

As a general matter, litigation has centered on questions of whether the accused infringer had knowledge that the combination was patented and infringing, and whether the product sold was a staple or commodity. With respect to the knowledge requirement, the Federal Circuit has stated: “Although not clear on the face of the statute, subsequent case law held that § 271(c) required not only knowledge that the component was especially made or adapted for a particular use but also knowledge of the patent which proscribed that use.” 11 In at least one case, the requisite knowledge was inferred in a contempt proceeding were the accused infringer admitted infringement and sold the component in a two-supplier market where the only available market for the component was in an infringing system. 12

Whether a component is a staple or commodity is suitable for substantial noninfringing use is a question of fact. While some cases suggest that the burden of proving a component is a staple or commodity falls on the accused infringer, 13 the Federal Circuit has indicated that this is the patentee’s burden. 14 When determining whether a component is a staple or commodity, courts look at the component that is accused of being used to infringe, even if that component is embedded in a larger device that has non-infringing uses. 15 The Federal Circuit’s rationale for this rule, which exhibits some tension with prior cases such as Hodosh v. Block Drug Co., is that “an infringer ‘should not be permitted to escape liability as a contributory infringer merely by embedding [the infringing apparatus] in a larger product with some additional, separable feature before importing and selling it.’” 16

1 Prouty v. Ruggles, 41 U.S. 336 (1842).
2 See generally Giles S. Rich, Infringement Under Section 271 of the Patent Act of 1952, 21 Geo. Wash. L. Rev. 521 (1953).
3 35 U.S.C. § 271(b) (2008).
4 See generally P.J. Federico, Commentary on the New Patent Act, 75 J. Pat. & Trademark Off. Soc’y 161 (1993) (reprinted from Title 35, U.S.C. Ann (1954, Ed.)).
5 See, e.g., DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006) (en banc in relevant part)..
6 SEB S.A. v. Montgomery Ward & Co., Inc., -- F.3d --, 2010 WL 398118 (Fed. Cir. Feb. 5, 2010).
7 See, e.g., Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 934-940 (2005) (drawing on patent law to decide question of inducement of copyright infringement); Ricoh Co., Ltd. v. Quanta Computer, Inc., 550 F.3d 1325, 1340-43 (Fed. Cir. 2008).
8 Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 668 (Fed. Cir. 1988).
9 See Rich, supra n.__ at 542.
35 U.S.C. § 271(c) (2008).
10 Hewlett-Packard Co. v. Bausch & Lomb, 909 F.2d 1464, 1469 n.4 (citing Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 485-86 (1964)).
11 See Preemption Devices, Inc. v. Minnesota Mining & Mfg. Co., 803 F.2d 1170, 1174 (Fed. Cir. 1986).
12 See, e.g., CFMT, Inc. v. Steag Microtech Inc., 14 F.Supp.2d 572, 592 (D. Del. 1998).
13 See Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1320 (Fed. Cir. 2009).
14 See Lucent, 580 F.3d at 1320-21; Ricoh Co. Ltd. v. Quanta Computer, Inc., 550 F.3d 1325, 1336-40 (Fed. Cir. 2008).
15 Lucent 580 F.3d at 1320 (quoting Ricoh, 550 F.3d at 1337).


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About the Author

Senior Associate at Howrey LLP.  Any views expressed herein are those of the author and are not intended to reflect those of Howrey LLP or its clients.

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