Whether one should change behavior in light of DSU
How to avoid a finding of inducement
Considerations when deciding whether to seek and/or rely upon an opinion of counsel to negate intent CAFC Summary: DSU Med. Corp. v. JMS Co., Ltd. En Banc Fed Cir Holds That Induced Infringement Requires Affirmative Intent To Cause Direct Infringement DSU Med. Corp. v. JMS Co., Ltd.
Panel: Rader, Schall, Linn Author: Rader District Court: N.D. Cal. Trial Judge: Jensen Summary: Fed Cir affirms grant of summary judgment of noninfringement as to some claims and infringement as to other claims, trial evidentiary rulings, and denial of post-trial motions related to indirect infringement, damages, and obviousness. In Part III.B., the Fed Cir held en banc that, 35 USC 271(b), “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.” Slip op. 18. The patents-in-suit relate to a guarded, winged-needle assembly to reduce the risk of accidental needle-stick injuries.
En Banc Resolution of conflict precedent regarding intent requirement for induced infringement: “This section clarifies that intent requirement by holding en banc that, … ‘[t]he plaintiff has the burden of showing that the alleged infringer’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringements.'” Slip op. at 14 (brackets in original). As a preliminary matter, induced infringement “necessarily includes the requirement that he or she knew of the patent.” Id. Then,
To establish liability under section 271(b), a patent holder must prove that once the defendants knew of the patent, they “actively and knowingly aid[ed] and abett[ed] another’s direct infringement.” However, “knowledge of the acts alleged to constitute infringement” is not enough. The “mere knowledge of possible infringement by others does not amount to inducement; specific intent and action to induce infringement must be proven.”
Id. at 15 (underline and bracketed text in original; internal citations omitted). The en banc court explained that requiring a “specific intent to encourage another’s infringement,” id. at 16, is consistent with the Supreme Court’s treatment of induced copyright infringement in MGM Studios, Inc. v. Grokster, Ltd., 125 S. Ct. 2764 (2005), and the Federal Circuit case cited in Grokster. For this reason, the Fed Cir held that it is insufficient for an accused inducing infringer to have an “intent to cause the acts that produce direct infringement. Beyond that threshold knowledge, the inducer must have an affirmative intent to cause direct infringement.” Slip op. at 18. “Accordingly, 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.” Id. In light of this ruling, the en banc Fed Cir found no error in the district court’s jury instruction on induced infringement that read:
In order to induce infringement, there must first be an act of direct infringement and proof that the defendant knowingly induced infringement with the intent to encourage the infringement. The defendant must have intended to cause the acts that constitute the direct infringement and must have known or should have known than[sic] its action would cause the direct infringement. Unlike direct infringement, which must take place within the United States, induced infringement does not require any activity by the indirect infringer in this country, as long as the direct infringement occurs here.
Id. at 16 (quoting trial transcript; bracketed text in original).
In their concurrence, Chief Judge Michel and Judge Mayer agreed with the en banc analysis, but argued that there was no conflict in precedent requiring en banc treatment. Moreover, they note that “we do not set forth a new standard here as to what satisfies the ‘knowledge of the patent’ requirement in cases brought under 35 U.S.C. 271(b).” Concurrence at 2.
Panel rulings on the merits of the appeal:
Claim construction and direct infringement: The Fed Cir affirmed the summary judgments based on the correct constructions of claim terms “slidably enclosing” and “slot.” First, the Fed Cir agreed that the accused products did not, as a matter of law, infringe claims with the term “slidably enclosing,” because the accused product did not contain a needle while the properly construed claim term required that a needle be substantially contained at all times. Second, the Fed Cir affirmed the summary judgment that the defendant infringed claims using the term “slot,” because the intrinsic evidence did not support adding the thickness requirement the defendant needed to avoid infringement.
Indirect infringement: The district court properly denied DSU’s motion for new trial on a verdict of no contributory or induced infringement in favor of accused foreign manufacturer ITL.
(i) Contributory infringement: although ITL “acted with the knowledge of the ‘311 patent and knowledge that the component was especially made or adapted for use in an infringing manner,” there was no evidence at trial that the contributory acts had “a direct nexus to a specific act of infringement.” Slip op. at 12-13. Moreover, there was no “evidence of direct infringement to which ITL contributed in the United States,” i.e., no proof that direct infringer JMS ever placed the accused products in the claimed configuration. Slip op. at 13 (underline in original).
(ii) Induced infringement: There was substantial evidence supporting the jury verdict and its conclusion that there was no intent to infringe, including (a) evidence that ITL’s attorney advised ITL that there was no infringement and (b) testimony from one of ITL’s owners that “ITL had no intent to infringe the ‘311 patent.” Slip op. at 19.
(i) Price erosion: The patentee was entitled to lost profits, and thus price erosion, only from the time that co-plaintiff MDS became its exclusive licensee. Because substantial evidence supports the jury’s determination of the date on which the exclusive license started, the district court properly denied a new trial on this issue.
(ii) Additional months of lost profits: The patentee sought damages based on JMS’s alleged “stealing” of the exclusive licensee’s ability to renew a contract with former customer Fresenius. The patentee offered an expert to testify regarding “the hypothetical existence or hypothetical terms of a contract between” the exclusive licensee and Fresenius and regarding damages from JMS’s sales to Fresenius of a non-infringing alternative. Because the expert’s methodology (called “accelerated market entry,” under which MDS would have captured the market but for JMS’s sales of non-infringing alternatives) did not satisfy the Daubert test, the district court properly excluded his testimony.
(iii) JMS’s JMOL challenge to the amount of damages against it: The trial court properly denied JMS’s motion, because substantial evidence supports the jury’s determination of lost profits, the award was not “grossly excessive or monstrous, or based on speculation or guesswork.”
Other motions of new trial by DSU: (i) Applying regional circuit law, the Fed Cir found no abuse of discretion in the admission or exclusion of testimonial or documentary evidence. (ii) Substantial evidence supports the jury verdicts that certain asserted claims are obvious. (iii) The district court did not abuse its “wide discretion” in responding to a jury question regarding hindsight by referring the jurors to the jury instructions on invalidity.
KEY WORDS: INDUCEMENT, CONTRIBUTORY INFRINGEMENT, INDIRECT INFRINGEMENT, LOST PROFITS, PRICE EROSION, DAUBERT, EVIDENTIARY, JURY INSTRUCTION, CLAIM CONSTRUCTION (BROAD AND NARROW), SUMMARY JUDGMENT