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Supreme Court Raises the Bar for Inducing Infringement

Rejecting the existing standard, the Supreme Court held in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. ___ (May 31, 2011), that inducement of infringement requires either actual knowledge of infringement, or “willful blindness” regarding such knowledge.  The decision clarifies 35 USC Section 271(b), “whoever actively induces infringement of a patent shall be liable as an infringer.”  The Court rejected the existing standard of deliberate indifference to a known risk, finding 271(b) requires actual knowledge that induced acts constitute patent infringement.  Notably, the Court found actual knowledge could be demonstrated under the doctrine of “willful blindness.”

Willful blindness, a theory more common in a criminal context, occurs when a person, believing a fact highly probable, takes deliberate actions to avoid confirming that fact.  In a patent context, induced infringement by willful blindness may be found if a party subjectively believes infringement is highly probable, yet avoids investigating that probability.  The ability to demonstrate knowledge through willful blindness notwithstanding, the Court’s decision requiring actual knowledge or its equivalent is likely to make indirect infringement more difficult to prove.

The Federal Circuit Addresses Spoilation

The Federal Circuit visited the topic of spoilation, the destruction of evidence related to pending or reasonably foreseeable litigation, in two recent opinions involving patents owned by Rambus Technology for computer memory standards.  As explained below, under Micron and Hynix, courts may more easily find spoilation on a mere contingency of litigation, particularly when an accused party is in control of those contingencies.  At the same time, district courts may not impose dispositive sanctions, as the lower Micron court did, without a detailed inquiry into the degree of fault and prejudice and the availability of lesser sanctions.

In Micron v. Rambus (No. 2009-1263 (Fed. Cir. May 13, 2011)), the court addressed document destruction in light of a business strategy Rambus adopted of licensing manufacturers complying with its technical standards, while pursuing legal action against companies adopting a competing standard.  Litigation was contingent on Rambus’ failure to extract license fees from target companies.

Knowing of Micron’s potentially infringing activities, Rambus took certain steps in preparation for litigation prior to shredding the documents in question.  Rambus also, as plaintiff, controlled the decision to commence litigation.  For these reasons, the Circuit found no clear error on the district court’s part in finding spoilation, despite contingencies yet to occur that might preclude litigation.

In Hynix v. Rambus (No. 2009-1299, -1347 (Fed. Cir. May 13, 2011)), the Circuit discussed the requirement that litigation must be reasonably foreseeable to trigger a duty to preserve evidence.  There, the district court found no duty to preserve documents relevant to litigation because events upon which litigation was contingent, while likely, had not yet occurred.  The Circuit rejected the lower court’s reasoning, finding “it would be inequitable to allow a party to destroy documents it expects will be relevant in an expected future litigation, solely because contingencies exist, where the party destroying documents fully expects those contingencies to be resolved.”  The Circuit remanded the case to the district court for additional proceedings as to the reasonableness of Rambus’ actions.

In both cases, the court found dispositive sanctions inappropriate where a court has not considered whether a lesser sanction would deter future spoilation, protect an injured party’s interests, and remedy the prejudice suffered by that party.  Second, in neither case did the court hold the specific actions of developing a licensing and litigation strategy, and retaining counsel to perform licensing and patent prosecution work to be in anticipation of litigation.

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