Can you be held liable for “inducing” infringement of a patent if you have no knowledge of that patent and you sell a non-infringing product which someone else puts to an infringing use?

According to a recent Federal Circuit opinion, one can be found liable for inducing infringement of a patent by acting with “deliberate indifference” as to the existence of the patent even if one does not have actual knowledge of the patent. SEB v. Montgomery Ward & Co., Inc.

Evidence of such indifference may include circumstances where the accused is a sophisticated market participant, knowledgeable about patents, and generally aware that a competitor patents its products.

In addition, the protection often afforded by a clearance opinion of counsel–to insulate one from charges of intentionally inducing someone else to infringe–may be eviscerated if one does not disclose important evidence to opinion-writing counsel (e.g., that features of the accused product were copied from the patented product).

But is it fair to find someone liable for intentionally inducing infringement of a particular patent even if he does not know of the existence of that patent?

Before delving into this question, let’s consider the various ways a defendant can be found liable for patent infringement. First, there is garden variety “direct infringement,” where a defendant makes, uses, sells or offers to sell an infringing product or method in the U.S.

Alternatively, one can be found liable for contributory infringement, where a defendant provides a component especially made for an infringing process or product that is not a staple article of commerce. And to be liable for contributory infringement, someone must have engaged in direct infringement, e.g., the accused sells a specially designed part to a manufacturer who incorporates it into an infringing machine, which is sold in the U.S.

Finally, even if the component you sell has non-infringing uses, you may be liable if you knowingly aid and abet another’s direct infringement. Such “inducement” of infringement can arise even where the accused inducer does not sell the accused product directly to the direct infringer (e.g., there is a middle-man).

But a patent owner must demonstrate not only that the inducer had intent to induce the specific acts constituting infringement but also that the defendant had knowledge of the very patent infringed.

In the SEB case, the Court held that “deliberate indifference” to the existence of a patent is sufficient to meet the requirement of actual knowledge of the patent. SEB had charged Pentalpha Enterprises, Ltd. with infringing its patent directed toward construction of a deep fryer with a well-insulated outer skirt.

Among the facts considered by the Federal Circuit in affirming the determination of the trial court that Pentalpha was guilty of deliberate indifference was that the company flat-out copied SEB’s fryer and did not tell its lawyer that it had done so. True, as a matter of patent law, it is entirely legal to copy someone else’s design as long as the copied product is not covered by a valid patent. In reaching its conclusion, the court implied that if the opinion-writing counsel had been informed of the copying, the lawyer would have been more likely to identify the patents covering the copied fryer.

In the Court’s view, Pentalpha presented no exculpatory evidence about its intent in copying SEB’s fryer. The trial judge even found suspicious defendant’s selection of patent counsel stating, “There are a zillion patent attorneys in New York City, [yet] [t]hey go to this guy in the middle of nowhere to do this patent search.” This complete lack of exculpatory evidence is unusual and may provide a basis for distinguishing it from cases that follow.

So, this brings us back to the question of whether it is fair to find someone liable for intentionally inducing infringement of a particular patent even if he does not know of the existence of that patent.

For most types of patent infringement, the patent owner need not prove the defendant’s bad intent. However, because it seems unfair to hold someone liable for inducing infringement for selling a component which has non-infringing uses, the law requires the patent owner to support such a claim with proof of bad intent.

Because intent is difficult to prove, the Federal Court has sought to balance the scales by allowing patent owners to infer intent from the defendant’s deliberate indifference to known risk. When considered in the context of the law of infringement as a whole, it does seem fair that, under certain circumstances, an accused party can be liable for intentionally inducing infringement of a patent of which he has no knowledge.

The take-away? Even if you are selling non-infringing components or products, you may be well-served to consult with patent counsel in relation to the uses to which you believe your customer may put your component or product.

Pentalpha has now filed a request with the Federal Circuit for rehearing en banc. The American Intellectual Property Lawyers Association and the Federal Circuit Bar Association plan to file amicus briefs in support of Pentalpha. Stay tuned.