Thursday, December 14, 2006

Partial En Banc Decision Clarifies Intent Requirement for Induced Infringement

DSU Medical Corporation v. JMS Co., Ltd. (04-1620), December 13, 2006

DSU sued JMS for infringing 2 of their patents covering guarded, winged-needle assemblies that reduced the risk of needle-stick injuries. DSU also sued Australian company ITL that manufactured a sheathing structure that was used by JMS to produce the infringing needle assembly. ITL manufactured the sheathing structures ("the Platypus") in Malaysia and Singapore before shipping them to JMS in the U.S.

The jury found JMS directly liable for patent infringement, but found ITL did not engage in contributory infringement or inducement to infringe. One of the key factors was the manner in which the Platypus was manufactured by ITL: in the "open shell" configuration, the structure did not meet all the limitations of DSU's patent claims. However, once the structure was placed in a "closed shell" configuration, the structure began to read on DSU's patent:

The catch here was that the Platypus left ITL's factories in a "open shell" configuration, and JML was assembling the needle sets in a "closed shell" configuration prior to importation into the U.S. While there was evidence that other "open shell" configurations were shipped to the U.S. by ITL, there was no direct evidence showing anyone had actually closed the sheaths and used them as an act of direct infringement:

Upon review of the record, this court perceives, as well, an absence of evidence of direct infringement to which ITL contributed in the United States . . . ITL only contributed to placing the Platypus into the closed-shell configuration in Malaysia; not in the United States. Section 271(c) has a territorial limitation requiring contributory acts to occur in the United States.
The court decided to clarify the intent requirement for induced infringement en banc. Specifically, the court perceived that there was conflicting precedent between two specific cases:

• Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464, 1469 (Fed. Cir. 1990) - "[p]roof of actual intent to cause the acts which constitute infringement is a necessary prerequisite to finding active infringement" (i.e., proof of intent to cause infringing acts is all that is required in order to establish inducement of infringement).

• Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 554 (Fed. Cir. 1990) - "[t]he plaintiff has the burden of showing that the alleged infringerÂ’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringements" (i.e., with knowledge of the patent, the alleged infringer knew or should have known his actions would induce actual infringement).

Relying on the Supreme Court's Grokster copyright case, the CAFC held that the Manville approach was the correct one for inducement:
Although this court stated "that proof of actual intent to cause the acts which constitute the infringement is a necessary prerequisite to finding active inducement," Hewlett-Packard, 909 F.2d at 1469, 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. In the words of a recent decision, inducement requires "'that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement.'" . . . [A]ccordingly, inducement requires evidence of culpable conduct, directed to encouraging another's infringement, not merely that the inducer had knowledge of the direct infringer's activities.

In a concurring opinion, Chief Judge Michel and Judge Mayer agreed with the decision, but noted that there is no actual conflict between Hewlett-Packard and Manville, and thus, there was no need for intervention by the full court.

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