PublishedOctober 7, 2019

New E.D. Texas Ruling Is Vicarious Victory for Trolls

In a decision issued last week, Judge Gilstrap—the “poster boy” for patent trolls’ favorite court, the Eastern District of Texas—has mangled the law on induced infringement, contributory infringement, and willfulness.  The ruling in Motiva v. Sony & HTC contradicts case law and the logic of the statute, cites case law for a proposition it explicitly does not address, and would create a situation in which manufacturers effectively always can be charged with vicarious liability—even though that liability is supposed to require intent not just to do the infringing act, but knowledge of the patent and intent to infringe it.

Knowledge and Inducement Liability

Induced infringement liability stems from 35 U.S.C. § 271(b), making it an act of infringement to actively induce someone else to infringe.  Active inducement, in turn, has been defined as intentionally causing someone else to take an action that you are aware is patent infringement—i.e., you have to know the patent exists and that the act would infringe it.  As the Supreme Court held in 2015, “deliberate indifference to a known risk that a patent exists is not the appropriate standard.”

But the Court left a window slightly ajar—they noted that “willful blindness” can be sufficient to charge an alleged infringer with knowledge of a patent.  Willful blindness, in turn, requires a defendant to “subjectively believe that there is a high probability that a fact exists” and to “take deliberate actions to avoid learning of that fact.”  

HTC allegedly has a policy of instructing its engineers not to review other people’s patents.  And that’s what Gilstrap claims is willful blindness.

In the first week of law school, I learned about the act/omission distinction—and how an omission requires a corresponding duty to act if it is to have a legal implication.  And there’s no obligation to search for patents before placing a product on the market—in fact, if the patent owner hasn’t provided notice to an alleged infringer, they can’t recover pre-notice damages even if the infringement is confirmed in court.  HTC didn’t take a deliberate act to avoid learning of Motiva’s patents, much less of their infringement—HTC decided not to search for patents, something it was under no obligation to do.

HTC’s conduct is exactly what the Supreme Court determined was not sufficient by stating that “deliberate indifference to a known risk that a patent exists is not the appropriate standard.”  Judge Gilstrap ignores that and in the process creates a no-win situation in which a product manufacturer willfully infringes if it does not search for patents—but also willfully infringes if it does search and finds the patent.

That’s not what the law requires.  And it doesn’t stop there—Judge Gilstrap’s error regarding willful blindness infects another aspect of infringement.

Contributory Infringement

Contributory infringement liability stems from 35 U.S.C. § 271(c), making it an act of infringement to sell or import a component that the infringer knows is specially made or adapted for use in an infringing machine or process.  Components that have substantial non-infringing uses do not infringe in this way. (The same test is used in copyright, which is why VCR makers aren’t liable for copyright infringement just because some VCR owners used their VCRs to copy movies.)

Judge Gilstrap commits a fundamental error in his analysis of contributory infringement.  Specifically, he states that the Federal Circuit’s Ricoh v. Quanta case stands for the proposition that “when a defendant has designed a product that does nothing other than infringe an asserted patent, it is at least plausible to infer that the defendant knew of the asserted patent.”

The problem is that Ricoh does nothing of the sort.  In fact, in Ricoh the defendant explicitly admitted it knew of the patent.  The inference Ricoh permits is simply that “intent may be inferred from circumstantial evidence where a defendant has both knowledge of the patent and specific intent to cause the acts constituting infringement.”  But based on this error, Judge Gilstrap infers knowledge of the patent and finds a reasonable allegation of contributory infringement. (He also finds it based on the erroneous willful blindness argument discussed above.)

In other words, combining Judge Gilstrap’s error regarding willful blindness with his error regarding the permitted inferences, the Motiva ruling effectively collapses the contributory infringement requirement of knowledge of the patent into simply requiring that the alleged infringer make an infringing component.  That’s not what the law requires, but it’s certainly what patent trolls would prefer.

Due Process

There’s even a reasonable argument that Judge Gilstrap’s decision could lead to damage awards that violate the Due Process Clause.  The Supreme Court has held that an award of punitive damages is only appropriate if “the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.”  And enhanced damages in patent cases are “punitive, not compensatory.”  Given that willfulness is one of the hallmarks of when enhanced damages are appropriate, the creation of a doctrine that would impose punitive damages on a defendant for not doing what it is under no obligation to do raises serious constitutional concerns.

Judge Gilstrap sees a large portion of the patent cases that flow through district courts each year.  Decisions like this are one small part of why his courtroom is sought after by patent trolls.

Josh Landau

Patent Counsel, CCIA

Joshua Landau is the Patent Counsel at the Computer & Communications Industry Association (CCIA), where he represents and advises the association regarding patent issues.  Mr. Landau joined CCIA from WilmerHale in 2017, where he represented clients in patent litigation, counseling, and prosecution, including trials in both district courts and before the PTAB.

Prior to his time at WilmerHale, Mr. Landau was a Legal Fellow on Senator Al Franken’s Judiciary staff, focusing on privacy and technology issues.  Mr. Landau received his J.D. from Georgetown University Law Center and his B.S.E.E. from the University of Michigan.  Before law school, he spent several years as an automotive engineer, during which time he co-invented technology leading to U.S. Patent No. 6,934,140.

Follow @PatentJosh on Twitter.

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