Foreign manufacturer’s intent to induce infringement in the U.S. inferred from large worldwide market share
| December 7, 2018
Enplas Display Device Corp. v. Seoul Semiconductor Co.
November 19, 2018
Before Newman, Hughes, and Stoll. Opinion by Stoll.
Summary:
The CAFC affirmed the district court’s judgment of no invalidity and of induced infringement, although it vacated most of the damages award. The induced infringement issue was a “close question” because there was no direct evidence that Enplas actually knew that certain lenses it was selling outside the U.S. would be incorporated into TVs sold in the U.S. But the court held that based mainly on Enplas’ large worldwide market share and in the context of its previous relationship with SSC, there was enough circumstantial evidence to meet the specific intent requirement.
Details:
Enplas, the Appellant and accused indirect infringer, is a Japanese manufacturer of plastic lenses used for backlighting displays in flat-screen TVs. SSC, the patentee, is a Korean company that manufactures and sells LEDs. During 2010-2011, Enplas agreed to collaborate with SSC to manufacture lenses for SSC’s light bars. SSC’s patents at issue (U.S. Patent Nos. 6,007,209 and 6,473,554) claim methods of backlighting LED displays and LED displays. SSC’s employees informed Enplas that the end products incorporating Enplas’s lenses would be covered by SSC’s patents. SSC expected an exclusive relationship with Enplas for sales of the lenses.
In 2012, SSC discovered that Enplas had provided the lenses to SSC’s competitors and that the lenses were incorporated into TVs sold in the U.S. SSC notified Enplas that SSC had found lenses manufactured by Enplas in infringing products sold in the U.S. and that therefore Enplas was indirectly infringing the ‘209 and ‘554 patents. Enplas then filed a declaratory judgment action against SSC seeking to have the two patents held invalid and not infringed. SSC counterclaimed asserting induced infringement and seeking damages. In the district court, one of the patents was held not invalid on summary judgment. A jury later found that the other patent was also not invalid and that Enplas had induced infringement, and awarded damages. Enplas appealed.
At the outset, the CAFC recalled that liability for inducement “can only attach if the defendant knew of the patent and knew as well that the induced acts constitute patent infringement.” Although section 271(b), which defines induced infringement, does not mention intent, at least some level of intent is required under CAFC precedent (citing Minn. Mining & Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1304-05 (Fed. Cir. 2002)). Mere knowledge of infringement is not enough. Thus, to succeed on a claim of induced infringement, the patentee must show:
- direct infringement in the U.S.;
- that the alleged infringer encouraged the acts held to be direct infringement; and
- that the alleged infringer knew of the patents and possessed specific intent to encourage the direct infringement of the patents.
Because liability for induced infringement under 271(b) can be imposed based on acts outside of the U.S., as long as the acts of direct infringement are committed in the U.S., the main issue was whether SSC could prove that Enplas had possessed the requisite knowledge and specific intent to induce direct infringement in the U.S.
At trial, SSC presented the following evidence, which Enplas did not dispute:
- Enplas knew of the ‘209 and ‘554 patents,
- during the joint development project, SSC informed Enplas that the end products made with the lenses it manufactured, co-developed, and sold to SSC, i.e., TVs incorporating SSC’s LEDs and Enplas’s lenses, were covered by SSC’s patents,
- Enplas initially manufactured the lenses specifically for SSC, but later sold them to other customers, who sold TVs in the U.S.,
- Enplas has a 50% worldwide market share,
- Enplas provided its customers with product specifications that recommended a configuration covered by the claims of SSC’s patents, so that the products would infringe if products were sold in the US,
- SSC purchased TVs manufactured by competitors and sold by various retailers in the U.S. and determined that they contained the lenses made by Enplas.
Enplas argued that they did not know that its lenses would be incorporated into TVs sold in the U.S., and that the trial evidence did not support a finding that it had specific intent to induce infringement in the U.S.
The CAFC’s analysis relies mainly on the fact that “Enplas knew of its 50% worldwide market share,” which triggers an inference that “Enplas knew of the likelihood that its lenses would end up in the United States.” Furthermore, the court referred to the fact that Enplas provided its customers with product specifications that recommended a configuration that would infringe if products were used in the U.S., as additional circumstantial evidence of intent (citing Microsoft Corp. v. Data Tern, Inc., 755 F.3d 899,905 (Fed. Cir. 2014)) and recognizing that “providing instructions to use a product in an infringing manner is evidence of the required mental state for inducing infringement.”
The CAFC recognized that the induced infringement issue was a “close question” and that the evidence of specific intent was not “overwhelming” since there was no direct evidence that Enplas knew that its lenses would be incorporated into TVs being sold in the U.S. However, there was enough circumstantial evidence of specific intent to constitute substantial evidence for the jury to find for SSC. Therefore, the appeals court affirmed the judgment regarding induced infringement.
The judgment of no anticipation was also affirmed. Over a partial dissent, most of the damages award was vacated because the calculation included non-infringing products in the basis for the reasonable royalty.
Takeaway
Even without direct evidence of actual knowledge that a product will end up on the U.S. market, circumstantial evidence such as (1) knowledge of the patents, (2) providing instructions to use the product, and (3) a large worldwide market share may establish specific intent to induce infringement of a U.S. patent.
