Knowledge Not Enough for Induced Patent Infringement

A retailer’s Rule 12(b)(6) motion to dismiss a claim of induced patent infringement has been granted where the only allegation of intent to induce infringement rested on the retailer’s alleged knowledge that the product’s user manual instructed customers to perform infringing acts.  Tierra Intelectual Borinquen, Inc. v. ASUS Computer Int’l, Inc., No. 2:13-CV-38-JRG (E.D. Texas March 3, 2014).

The plaintiff’s complaint alleged that both Asus and OfficeMax infringed claims of U.S. Patents No. 7,350,078, 7,725,725, and 8,429,415, based on sales of the ASUS TF700 Transformer Pad Infinity.  In particular, the plaintiff alleged that OfficeMax induced infringement.  However, the only “mechanism of inducement” pled in the complaint was “that the TF700 User Guide instructs users to perform acts which infringe the ‘078, ‘725, and ‘415 Patents.”  Further, the only way in which OfficeMax could “be inferred to have provided the” user guide to customers was by the user guide being “included in the box with the device as produced and delivered to OfficeMax by Asus for retail sale.”

Judge Gilstrap first considered whether the user guide could plausibly support a claim for induced infringement, and concluded that it could.  The plaintiff did not need to “allege that the User Guide instruct users on how to perform acts which infringe each step of the claimed method with specificity.”  At the pleading stage, it was enough that the claimed methods could “plausibly be infringed by users following the instructions in the User Guide.”

However, more problematic for the plaintiff was the question of whether “a retailer alleged to have no particular involvement in the preparation or distribution of the TF700 User Guide, may be held liable for induced infringement based solely upon its alleged knowledge that the Guide, in combination with the TF700 itself, induces infringement of the patents in suit.”  The court held that, on these facts, without any further allegations, the specific intent required to induce infringement had not been pled.

Reviewing the law of induced infringement, the court stated that “courts typically allow juries to construct the required intentionality out of evidence that the defendant deliberately exploits the potential for the product to be used in infringement.”  (Emphasis in original.)  That is, a defendant’s knowledge “plus some other factor indicating the defendant’s desire to” induce infringement is generally sufficient.  The law requires “purposefulness,” and not mere knowledge.

Judge Gilstrap provided an economic rationale for the law’s intent requirement.  Retailers should have “a safe harbor” in which to “trade even potentially infringing goods so long as they do not cross the line into active encouragement of infringement.”  Analogizing to tort law as applied to gun manufacturers, the court stated that useful products should be available even if they could be turned to a “nefarious” purpose.  Additionally, the safe harbor usefully promoted “fluid and efficient trade in a market economy that often divides the tasks of production and distribution.”  It would be inefficient to force “market participants to assess potential liability before purchasing potentially infringing devices and selling them to the next potential buyer.”

Accordingly, “OfficeMax would not be liable if it merely knew that the Asus TF 700 were capable of infringing [the patents in suit] and sold the product anyway.”  Further, the plaintiff’s allegations were insufficient that OfficeMax “not only knew of the potential for infringement, but also knew that another party to the case was actively inducing infringement by including instructions on” how to infringe in the user guide.  (Emphasis in original.)  OfficeMax took “no affirmative steps to induce infringement,” but “simply continued its business as usual” when it learned of Asus’s alleged “infringing behavior.”  OfficeMax is the “classic neutral reseller.”  It was “invidious” to suggest that OfficeMax should have stopped selling the accused product on receiving notice of induced infringement.

The court granted OfficeMax’s motion to dismiss claims of induced infringement without prejudice, and granted sua sponte leave for the plaintiff to amend its complaint.

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