Lack of Intent Must Be Proved for All Times After Learning of a Patent

by McDermott Will & Emery

Bose Corp. v. SDI Techs., Inc.

Addressing the requisite intent required to prove induced infringement, the U.S. Court of Appeals for the Federal Circuit reversed a lower court’s summary judgment of non-infringement, finding that the defendant failed to prove that it relied on an opinion of counsel in good faith at all times after learning of the asserted patent. Bose Corp. v. SDI Techs., Inc., Case No. 13-1347 (Fed. Cir., Mar. 14, 2014) (Clevenger, J.).

Bose accused SDI of inducing infringement of a patent related to playing digital music stored in an audio source device through a separate powered speaker. Bose targeted 144 of SDI’s speaker dock products, which connect to iPhones, iPods or iPads. To play digital music, it must first be converted into analog signals.  In all but one of the accused products, this conversion occurs in the audio source, for example an iPod. In the other accused product, which is wireless, the conversion occurs at the speaker.

The Federal Circuit affirmed the district court’s claim construction requiring that the digital to analog conversion occur at an “interface” in the speaker. Although the specification contemplates that the conversion may occur at the audio source (as in the majority of the accused products), the claim language and a narrowing claim amendment supported the narrower construction.  Accordingly, summary judgment of non-infringement was upheld for all but the wireless accused product.

The Federal Circuit also addressed the district court’s finding that SDI had established it lacked the requisite intent to induce infringement insofar as to the wireless product was concerned. An element of SDI’s defense to the change of inducement was an opinion of counsel that the patent was invalid.  In evaluating this defense, the Court analyzed SDI’s intent over four periods of time.

First, the Federal Circuit found that SDI could not have had intent to induce infringement at the time prior to learning of the patent and agreed that the district court properly found SDI not liable prior to this time.

Second, the Federal Circuit analyzed the three-month period between the time it became aware of the patent and SDI’s meeting with Bose about the patent.  The Court found that the record was silent as to SDI’s state of mind during this period and therefore the record did not support summary judgment in favor of SDI.

Third, the Federal Circuit addressed the meeting between Bose and SDI. Although at the meeting SDI raised the prior art that was the basis of a rejection during reexamination, the record did not demonstrate that SDI relied on advice of counsel in doing so nor did it sufficiently detail SDI’s invalidity position. As a result, the Federal Circuit found that summary judgment in favor of SDI was improper in terms of this event as well.

Finally, the Court addressed the period after SDI received the opinion of counsel, commissioned after the meeting with Bose. Although SDI undisputedly received an opinion of counsel that the asserted patent is invalid, the factual inquiry does not stop there; evidence of a good faith reliance on that opinion is required. In this case, a disputed issue of fact exists as to whether SDI relied in good faith on its opinion of counsel.

The Court also noted that summary judgment for post-verdict liability was improper. Should a jury find the patent valid and infringed, SDI could not credibly argue that it holds a good-faith belief to the contrary. Accordingly, summary judgment improperly absolved SDI of post-verdict liability.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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