SEB v. Montgomery Ward: Deliberate Indifference and Inducement

In its recent decision in SEB S.A. v. Montgomery Ward & Co., 594 F.3d 1360 (Fed. Cir. 2010), the Federal Circuit addressed the "specific intent" required to prove inducement of patent infringement. Prior decisions of the Federal Circuit indicated that inducement required a finding that the accused infringer had actual knowledge of the asserted patent. See, e.g., DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006). In the SEB decision, however, the Federal Circuit held that "a claim for inducement is viable even where the patentee has not produced direct evidence that the accused infringer actually knew" of the asserted patent. The Federal Circuit further held that inducement may be proved by evidence that the accused infringer deliberately disregarded a known risk of the existence of the patent.

At trial, the patent holder, SEB S.A. ("SEB"), produced evidence that the accused infringer, Pentalpha Enterprises, Ltd. ("Pentalpha"), designed the accused product (a home-use deep fryer) by copying certain features of an SEB deep fryer that Pentalpha had purchased in Hong Kong. Notably, the SEB deep fryer purchased in Hong Kong was not marked with the asserted patent. After copying the SEB deep fryer, Pentalpha obtained a "right-to-use study" from a patent attorney in New York. The patent attorney analyzed over twenty-five patents and concluded that none of the patents read on Pentalpha’s deep fryer. However, Pentalpha did not inform the patent attorney that it had copied the SEB deep fryer. At trial, the jury found Pentalpha liable for both direct infringement and inducement of infringement.

On appeal, the Federal Circuit considered, among other issues, whether inducement requires a showing that the accused infringer had actual knowledge of the asserted patent. Quoting Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 699 (Fed. Cir. 2008), the SEB panel reaffirmed that inducement requires a showing of specific intent to encourage another’s infringement. The court explained, however, that "specific intent" in the civil context is "not so narrow as to allow an accused wrongdoer to actively disregard a known risk that an element of the offense exists." Significantly, the court cited several non-patent and non-Federal Circuit cases to support the concept of "deliberate indifference," including cases directed to issues such as inmate safety, child pornography, and age discrimination.

Applying the concept of "deliberate indifference" to the patent case before it, the SEB court concluded that the "record contains adequate evidence to support a conclusion that Pentalpha deliberately disregarded a known risk that SEB had a protective patent." The court emphasized that Pentalpha hired a patent attorney to perform a right-to-use study, but did not inform him that Pentalpha had copied SEB’s product. In addition, the court noted that Pentalpha’s president was "well versed in the U.S. patent system and understood SEB to be cognizant of patent rights as well." Accordingly, the court affirmed the finding of inducement based on its conclusion that the record contained considerable evidence of deliberate indifference.

In SEB, the Federal Circuit invoked a "deliberate indifference" standard for claims of inducement of patent infringement. Applying the concept of deliberate indifference, the Federal Circuit indicated that inducement of patent infringement does not require a showing that the accused infringer actually "knew" of the asserted patent.