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Metro-Goldwyn-Mayer Studios v. Grokster is obviously one of the most important copyright law decisions in recent memory. Less obviously, it has the potential to influence patent law significantly. In fact, the U.S. Supreme Court’s June 27 decision may change the direction of inducement infringement law and spur an overall increase in harmonization between patent and copyright jurisprudence. A key issue in high-stakes patent cases is often whether the defendant is liable for inducement infringement pursuant to ��(b) of the Patent Code. The doctrine of inducement infringement provides that an entity that does not directly infringe a patent can still be liable for patent infringement if it encourages others to directly infringe a patent. Inducement infringement claims arise frequently because many patents are written to cover the use of a product rather than its manufacturer. The classic inducement infringement case accuses a product maker of inducing its customers to infringe through the use of the product. It is obviously far more manageable to sue one defendant that makes a product for inducement infringement than it is to sue the potentially millions of consumers that use a product for direct infringement. Thus, many big cases turn on the scope of inducement infringement liability. Although usually eager to harmonize its case law when possible, the Federal Circuit U.S. Court of Appeals has itself acknowledged a sharp split in its inducement infringement jurisprudence. As the court has explained, there are two lines of cases that each set a different intent standard for inducement infringement. The first line of cases is most closely identified with the Federal Circuit’s 1990 panel decision in Hewlett-Packard v. Bausch & Lomb, 909 F.2d 1464. The so-called HP standard is interpreted to support a broad scope of inducement liability because it provides for a lower intent standard. Under the HP standard, a defendant could be held liable so long as it encouraged the acts that formed the basis for the infringement claim, regardless of the defendant’s belief about the legality of the acts. The HP standard requires only “proof of intent to cause the acts” that constitute infringement to establish inducement infringement. The HP standard has generally been interpreted to mean that a defendant may be liable for inducement infringement even if it has a good faith belief that the encouraged acts do not infringe a valid patent. The second line of cases is most closely identified with the Federal Circuit’s panel decision in Manville Sales v. Paramount Systems, 917 F.2d 544, which was decided later in 1990. The so-called Manville standard is generally interpreted to support a narrower scope of inducement liability because it provides for a higher intent standard. Under the Manville standard, a defendant that encourages others to infringe will not be held liable for inducement infringement unless it “knew or should have known” that the encouraged acts would infringe a valid patent. The Manville standard has been interpreted to mean that a defendant must have a culpable intent before it is liable for inducement infringement. Accordingly, a good faith belief that the encouraged acts are not infringing, supported by, for example, competent advice of counsel to that effect, could insulate it from an inducement infringement finding. In short, Federal Circuit inducement infringement law is fractured. The intent required to prove inducement infringement is very different depending on which line of cases is followed. Even within each line of cases, room remains to argue over the specifics of the intent requirement. The unstable condition of inducement infringement law in the patent area returns us to Metro-Goldwyn-Mayer Studios v. Grokster, 05 C.D.O.S. 5620. The Grokster decision has the potential to influence the intent standard in patent cases for three reasons: (1) the Supreme Court has long viewed patent and copyright law together and relied on one as a source of authority for the other because of the “historic kinship” between them and Grokster re-emphasizes that close relationship; (2) the Grokster case specifically relies on patent law as the source of its inducement infringement rule-making, calling it the “model” for its copyright decision; and (3) the Grokster opinion characterizes patent law in the area of inducement infringement in the course of adopting it for copyright law. In Grokster, the essence of the court’s ruling was that, just as it had borrowed the law of contributory infringement from the patent area in the Sony Betamax copyright case, it would borrow the law of inducement infringement from the patent area to resolve the Grokster copyright dispute. Contributory infringement imposes liability for merely supplying a product or service to others who engage in the actual direct infringement if the product or service has no substantial noninfringing uses. Inducement infringement, by contrast, potentially imposes liability on an entity that supplies a product or service that does have substantial noninfringing uses if the entity also encourages such products or services to be used in an infringing fashion. The court concluded that, although Grokster may not be liable for contributory infringement because there were arguably substantial noninfringing uses for its file swapping service, it could be liable under an inducement infringement theory of the kind applied in patent cases. Specifically, the court ruled that there was substantial evidence that Grokster had an affirmative intent to induce infringement because it was affirmatively promoting infringement of protected musical works � and proud of it. According to the court, this evidence could have supported the conclusion that Grokster had an intent “to bring about infringement,” and had an “unlawful objective” in doing so. The court repeatedly made clear that the touchstone of inducement infringement is “culpable” intent and an “unlawful objective.” Indeed, the court termed inducement infringement “fault-based liability” and stated it requires an “intent to bring about infringement.” In Grokster, some argued fervently that an inducement infringement type rule for copyright would discourage legitimate activities because it potentially exposes to liability the development and distribution of products and services which have legitimate noninfringing uses. In rejecting this argument, the court relied heavily on its conclusion that inducement infringement requires a culpable state of mind and an unlawful purpose such that those with an innocent mind would not be exposed to liability: “The inducement rule, instead, premises liability on purposeful, culpable expression and conduct, and thus does nothing to compromise legitimate commerce or discourage innovation having a lawful promise.” Justice David Souter’s focus on culpable intent in the Grokster opinion strongly suggests that the court embraces what is known in patent law as the Manville standard for inducement infringement liability. As explained above, the Manville standard requires a culpable intent to encourage a legal wrong, as compared to the HP standard, which imposes inducement infringement liability merely for encouraging infringing acts even if one does not believe such acts are infringing. Because the court is purporting to adopt for copyright law the inducement infringement doctrine from patent law, it is fair to conclude that the court understood patent law to require the higher standard of “culpable” intent. In addition, because the Grokster decision rests on policy grounds involving the protection of “legitimate commerce” and promotion of “innovation” it may be harder for lower courts addressing patent cases to ignore the Supreme Court’s application of the higher “culpable” intent standard in copyright law. While there is significant appeal to this reading of Grokster, some believe there is room for debate as to whether it affects the intent standard in patent law at all. Grokster does not mention Manville � or HP for that matter. Nor does it explicitly purport to resolve an existing and well-known split of authority. Finally, and perhaps most significantly, Grokster is a copyright case, not a patent case, so one could argue that any statement related to patent law is dicta. At a minimum, Grokster has the potential to “reset” Federal Circuit law regarding the intent standard for inducement infringement in the patent area. The Federal Circuit applies the rule that earlier panel decisions govern over later panel decisions. Thus, a Federal Circuit panel is not supposed to deviate from prior panel decisions. Because the Federal Circuit itself describes inducement infringement law as split, it is not clear how one intent standard could properly be selected authoritatively over another short of consideration of the issue by all active Federal Circuit judges in a rare en banc hearing. Yet, importantly, Grokster could cause a Federal Circuit panel, or even a district court, to treat pre-existing Federal Circuit law in this area as superseded by the principles set forth by the Supreme Court in Grokster. For creative advocates, this creates an opening to gain advantage for a client. For judges, this creates an opportunity to harmonize and clarify the law. In the bigger picture, for all its undeniable significance to copyright law, Grokster may be remembered most as a milestone in a historical trend toward the more conscious sharing of principles between patent and copyright case law. David C. Thompson is a student at Stanford Law School who was a summer associate at Weil, Gotshal & Manges. He would like to thank Edward Reines, a partner in the Silicon Valley office of Weil, Gotshal, for his contributions to this article. � Practice Center articles inform readers on developments in substantive law, practice issues or law firm management. Contact Associate Editor Candice McFarland with submissions or questions at [email protected].

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