Opinion ID: 209414
Heading Depth: 3
Heading Rank: 3

Heading: Active Inducement

Text: Finally, we consider Ricoh's claim that QSI actively induces infringement under 35 U.S.C. § 271(b), which states that [w]hoever actively induces infringement of a patent shall be liable as an infringer. Specifically, Ricoh claims that QSI induced infringement by its customers (e.g., Hewlett-Packard, Dell, and Gateway) as well as the end-users of the drives. The district court granted summary judgment of no inducement on the grounds that Ricoh had not presented evidence sufficient to create a material issue of fact as to whether QSI possessed the requisite intent that the patents be infringed. Summary Judgment Order, 579 F.Supp.2d at 1124-26. The district court considered several types of evidence of QSI's intent  including QSI's product specification sheets, the fact that QSI fine tunes the firmware [8] used by the accused drives for writing to optical discs using Zone-CLV, a presentation that QSI gave to Dell, website instructions, and the simple fact that defendant Quanta Storage `designs and sells' the accused devices  and concluded that this evidence may establish that QSI may have known that its customers would perform the patented methods, but plaintiff adduces no evidence that Quanta encouraged infringement by its customers. Id. at 1125-26. In its analysis, the court cited the law of this circuit that  [a]ctively inducing, like facilitating, requires an affirmative act of some kind.' Id. at 1125 (quoting Tegal Corp. v. Tokyo Electron Co., 248 F.3d 1376, 1379 (Fed.Cir.2001)). The court then reasoned that a finding of inducement requires that the identified affirmative acts be communicated in some fashion to the alleged direct infringer. E.g., id. at 1125 (Although defendant Quanta `fine tunes' the firmware with respect to [Zone CLV], plaintiff adduces no evidence that customers are informed of this, so it is not clear how this could encourage the customer to do anything.). The court also relied on the proposition that the `sale of lawful product by lawful means, with the knowledge that an unaffiliated, third party may infringe, cannot, in and of itself, constitute inducement of infringement.' Id. at 1122 (quoting Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1276 n. 6 (Fed.Cir.2004)). For the reasons stated below, we conclude that the district court's reasoning was an incorrect application of the law of active inducement. Initially, we note that a finding of inducement requires a threshold finding of direct infringementeither a finding of specific instances of direct infringement or a finding that the accused products necessarily infringe. ACCO Brands, Inc. v. ABA Locks Mfrs. Co., 501 F.3d 1307, 1313 (Fed.Cir.2007); Dynacore, 363 F.3d at 1275-76. However, the district court found that material issues of fact exist as to whether and to what extent direct infringement occurs during the normal use of Quanta drives. Summary Judgment Order, 579 F.Supp.2d at 1122. On this record, we therefore reject Quanta's argument that the district court's summary judgment of no inducement can be affirmed on the alternative basis that Ricoh has failed to make the requisite showing of direct infringement. The issue before us is whether Ricoh has introduced evidence sufficient to create a material issue of fact as to Quanta's intent that its drives be used to infringe the method claims of the '552 and '755 patents. Again, we turn to Grokster and its analysis of the law of active inducement. The Supreme Court began from the premise that when an article is suitable for substantial noninfringing use, an evidentiary showing that the defendant intended that the article be used for direct infringement is required. Grokster, 545 U.S. at 935, 125 S.Ct. 2764. Specifically, liability for active inducement may be found where evidence goes beyond a product's characteristics or the knowledge that it may be put to infringing uses, and shows statements or actions directed to promoting infringement. Id. & n. 10, 125 S.Ct. 2764 (stating that this reasoning applies to § 271(b)). Evidence of active steps ... taken to encourage direct infringement, such as advertising an infringing use or instructing how to engage in an infringing use, show an affirmative intent that the product be used to infringe, and a showing that infringement was encouraged overcomes the law's reluctance to find liability when a defendant merely sells a commercial product suitable for some lawful use. Id. at 936, 125 S.Ct. 2764 (internal quotation marks and citation omitted). Of particular import to this case, the Court then examined whether a showing of intent required evidence that the accused indirect infringer successfully communicated a message of encouragement to the alleged direct infringer and concluded that such a communication is not necessary: Whether the messages were communicated is not to the point on this record. The function of the message in the theory of inducement is to prove by a defendant's own statements that his unlawful purpose disqualifies him from claiming protection (and incidentally to point to actual violators likely to be found among those who hear or read the message). Proving that a message was sent out, then, is the preeminent but not exclusive way of showing that active steps were taken with the purpose of bringing about infringing acts, and of showing that infringing acts took place by using the device distributed. Id. at 938, 125 S.Ct. 2764 (citation omitted). Accordingly, the district court erred to the extent that it discounted Ricoh's evidence of QSI's intent as failing to present evidence that QSI communicated the nature of its actions to alleged direct infringers. Similarly, the court erred in discounting evidence that QSI made a presentation to Dell, which touted the advantages of the Quanta drives, on the grounds that the presentation disclosed an algorithm rather than one of the claimed methods. The potential relevance of the presentation is two-fold. First, the presentation is relevant to the extent it indicates QSI possessed the requisite intent that its drives be used to perform the infringing methods. Second, the presentation is relevant to the issue of whether it encouraged Dell to use the drives in an infringing manner. That the presentation may have failed to communicate any information regarding the patented methods or the possibility of infringement does not render it irrelevant as evidence of QSI's intent. We further conclude that the district court incorrectly analyzed other circumstantial evidence presented by Ricoh in this case. In DSU Medical Corp. v. JMS Co ., this court explicitly relied on Grokster to clarify that specific intent to cause infringement is required for a finding of active inducement: It must be established that the defendant possessed specific intent to encourage another's infringement and not merely that the defendant had knowledge of the acts alleged to constitute inducement. The plaintiff has the burden of showing that the alleged infringer's actions induced infringing acts and that he knew or should have known his actions would induce actual infringements. 471 F.3d 1293, 1306 (Fed.Cir.2006) (en banc as to Section III.B) (emphasis in original) (quoting Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 (Fed.Cir.1990)). DSU Medical further relied on Grokster to reaffirm the sufficiency of circumstantial evidence to prove specific intent. Id. (`While proof of intent is necessary, direct evidence is not required; rather, circumstantial evidence may suffice.' (quoting Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 668 (Fed.Cir.1988))). Moreover, both DSU Medical and Grokster relied on prior decisions of this court establishing that specific 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. See MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1378 n. 4 (Fed.Cir.2005); Water Techs., 850 F.2d at 668-69 (inferring intent from knowledge of the patent and control over the manufacture of the infringing product and citing 4 Donald S. Chisum, Patents § 17.04[4][d], at 17-52 (1984) for the proposition that design of infringing product may constitute active inducement). At the outset, QSI does not dispute that it had knowledge of the '552 and '755 patents. Under Grokster, Water Technologies, and DSU Medical, QSI may therefore be liable under § 271(b) if it had specific intent to cause infringement of the '552 and '755 patents by the manner in which the drives are caused to be used. See MEMC, 420 F.3d at 1378 n. 4. Applicable to this analysis, Grokster recognized that a failure to remove or diminish infringing features of a distributed product is relevant to a party's intent that those features be used for direct infringement. 545 U.S. at 939 & n. 12, 125 S.Ct. 2764 (noting that evidence of a failure to act, however, must be accompanied by other evidence of affirmative acts); see also id. at 940 n. 13, 125 S.Ct. 2764 ([T]he distribution of a product can itself give rise to liability where evidence shows that the distributor intended and encouraged the product to be used to infringe.). Ricoh's focus on the separability of the allegedly infringing functionality from the noninfringing functionality of the Quanta drives may, therefore, be relevant to whether QSI had a specific intent to encourage another's infringement. In particular, QSI's role as the designer and manufacturer of the optical drives in question may evidence an intent sufficiently specific to support a finding of inducement. As indicated above, Water Technologies inferred a specific intent to cause infringement from a defendant's knowledge of the patent and control over the design or manufacturing of the product used for direct infringement. 850 F.2d at 668-69. Moreover, Grokster recognized that providing instruction on how to engage in an infringing use show[s] an affirmative intent that the product be used to infringe. 545 U.S. at 936, 125 S.Ct. 2764. In this case, QSI has incorporated into its optical drives software that instructs the hardware to perform a series of steps. Ricoh asserts that the only function of certain software components is to instruct the drives to perform its patented methods. See, e.g., Schlesinger Declaration at 11. Ricoh thus argues that QSI's specific intent that the '552 and '755 patents be infringed is shown by this affirmative act of incorporating components whose sole purpose is to cause the drives to operate in a manner that infringes the '552 and '755 patents under normal circumstances. To the extent that the drives do contain components which are in fact separable from those used to implement noninfringing functions, and to the extent that the components do not in fact have a purpose other than the performance of infringing functions under normal use conditions, such evidence would create a material issue of fact regarding QSI's intent that its drives be used to infringe the '552 and '755 patents, which could not be decided on summary judgment. Finally, although we have endeavored to articulate the legal principles under which Ricoh's inducement claims should be analyzed, we are unable to determine whether issues of material fact exist in the first instance. Because the court discounted Ricoh's evidence on purely legal bases, we decline to assess the factual sufficiency of that evidence as it impacts Quanta and NU's motion for summary judgment. Accordingly, Ricoh's inducement claim against QSI is remanded for further consideration consistent herewith. We further note that on remand, the issues and proofs regarding QSI's inducement of the manufacturer customers (e.g., Dell) may be different from those regarding its inducement of end-use customers, and the outcome on remand may be different for these groups.