Federal Circuit Clarifies Intent Requirement For Inducing Infringement

Case: DSU Med. Corp. v. JMS Co., Ltd., No. 04-1620, 05-1048, 05-1052 (Fed. Cir. 12/13/06)

The One Sentence Summary: The en banc Federal Circuit clarified that liability for inducing patent infringement requires knowledge of the patent and intent to cause infringement, not just intent to cause acts constituting infringement.

What They Were Fighting About: The Federal Circuit affirmed a judgment of infringement against defendant JMS on a patent infringement claim involving patents for mechanisms that prevent accident needle sticks. The panel also affirmed the jury's conclusion that certain claims were invalid as obvious. The decision also includes en banc consideration and affirmance of the holding that defendant ITL did not contributorily infringe because it did not intend to cause others to infringe.

Federal Circuit Holdings:

• The panel affirmed the trial court's grant of summary judgment of non-infringement on several claims based upon the claim construction that a claim for a guard “slidably enclosing” a needle assembly required that the needle be enclosed within the assembly. The panel agreed with the district court that the terms "assembly" and "enclosing" indicated that the needle must be part of the patented invention. Because the accused product did not contain a needle but rather was a mechanism for locking around a needle, several of the claims were not infringed by the stand alone product.
• The panel affirmed the claim construction of the term "slot" as not requiring any particular thickness. This was confirmed by the specification and the prosecution history. Based upon this holding, the closed shell configuration of the infringing product when sold with a needle infringed certain claims of the patent as a matter of law.
• The panel affirmed the district court's denial of a new trial on the jury's verdict of non-infringement by defendant ITL. ITL had manufactured and supplied the accused product outside of the United States. The accused product infringed only in the closed configuration and ITL had only put the guards in a closed configuration in Malaysia and not in the United States. Thus, the contributory act of infringement as to these sales did not occur in the United States as required by 35 U.S.C. § 271(c). Moreover, as to units of the accused product that were sold in an open shell configuration without a needle enclosed, there was no evidence before the jury that these units were ever put in an infringing, closed shell configuration in the United States. Accordingly, the district court properly denied the motion for new trial.
• The Federal Circuit also issued an opinion en banc to clarify conflicting precedents as to the intent required for inducing infringement. The decision affirmed the holding in Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544 (Fed. Cir. 1990), that "The 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." This requires a showing that the accused infringer actually knew of the patent. The mere possibility that others will infringe a patent is not enough, specific intent and action to induce infringement must be proven. The Federal Circuit held that the district court properly instructed the jury as to the state of mind requirement.
• The panel held that the district court properly denied the motion for a new trial on the issue of inducement to infringe. The jury had evidence that although ITL knew of the patent, it had obtained opinions from attorneys that there was no infringement. This evidence supported the jury's verdict that there was a lack of the necessary specific intent to induce infringement.
• The panel rejected the argument that the jury had improperly failed to award price erosion damages. The panel noted that the lost profits award from the jury did not state what elements were part of the award, and it would be speculation to say that the jury had failed to award any component for price erosion. The panel also found that the jury had evidence as to the start of the date of the contract as to when plaintiff became the exclusive licensee and therefore was entitled to damages.
• The panel affirmed the district court's Daubert ruling that excluded an expert's opinion on the hypothetical existence or hypothetical terms of a contract between plaintiff and a buyer of needle guards. Plaintiff had attempted to prove that the infringing needle guards interfered with a contract with a major purchaser of needle guards, and that the purchaser had thereby ended a long term relationship with plaintiff and had continued to buy later noninfringing products from the defendant. The expert's opinion was properly rejected by the district court because his accelerated market entry theory was based upon hypothesized contracts in hypothesized markets that lacked sound economic grounding. Although damages analysis requires hypothetical reconstruction of a "but for" market place, that reconstruction must include some footing in economic principle. Moreover, the lost profits analysis failed to account for the market entry of an acceptable noninfringing substitute. Thus, the testimony was properly excluded.
• The panel rejected defendant's challenge to the lost profits award from the jury, finding that substantial evidence supported the jury award and that it was not grossly excessive or monstrous or based on speculation or guesswork.
• The panel upheld the jury's verdict finding certain claims to be obvious. There were elements of the claims in the prior art cited and evidence of adequate motivation to combine those references.
• The trial court acted properly in referring a jury question on hindsight back to the jury with an instruction that the jury review the jury instructions on invalidity. Referring the jury back to the instructions that had been accepted by the parties was within the court's wide discretion in responding to a jury's questions.
  
  

Click here to read more.