Opinion ID: 3066527
Heading Depth: 3
Heading Rank: 5

Heading: Inducement of Infringement

Text: The district court determined that CAT and Firstliner were liable for induced infringement under 35 U.S.C. § 271(b) on account of work done by their licensees. District Court Opinion, slip op. at 45. CAT and Firstliner raise two issues related to their alleged induced infringement. First, they contend that there was a lack of proof with regard to the scienter element of induced infringement. Second, they contend that there was insufficient evidence to sustain the district court’s determination of damages related to the licensees’ use of infringing Process 1. Section 271(b) provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” In order to succeed on a claim of inducement, the patentee must show both direct infringement and a certain level of intent on the part of the alleged inducer that the patent be infringed. Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 668 (Fed. Cir. 1988). However, there is a lack of clarity concerning whether the required intent must be merely to induce the specific acts or additionally to cause an infringement. See Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 553 (Fed. Cir. 1990) (“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.”). But see Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464, 1469 (Fed. Cir. 1990) (“Proof of actual intent to cause the acts which constitute the infringement is a necessary prerequisite to finding active inducement.”). Nevertheless, we need not resolve any ambiguity in the case law on this point because there is sufficient evidence to support the district court’s finding under either standard. The district court relied on Manville and applied the stricter standard for induced infringement, requiring that “the alleged infringer’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringement.” District Court Opinion, slip op. at 40 (citing Manville, 917 F.2d at 553). In finding the requisite intent, the court noted a response to a questionnaire submitted by one of CAT/Firstliner’s licensees. Id. at 47. The licensee claimed to have used infringing Process 1 in 100 percent of its contracts and that, with regard to how it acquired knowledge of the impregnation process, “[w]e expected to get directives from [Firstliner] representatives, and we did.” Id. at 47-48. The district court thus concluded that defendants taught their licensees to use Process 1. Additionally, Firstliner did not begin its licensing program until 1992, which was after the original June 1991 trial. CAT and Firstliner’s licensing activity thus occurred with full knowledge that Process 1 had been accused of infringing the ‘012 patent. On this evidence, the court determined that the intent requirement was met. Intent is a factual determination particularly within the province of the trier of fact and may be inferred from all of the circumstances. Water Techs., 850 F.2d at 669. We review factual determinations by the court for clear error. Tegal Corp. v. Tokyo Electron Am., Inc., 257 F.3d 1331, 1345-46 (Fed. Cir. 2001). “A finding is ‘clearly erroneous’ when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948). There is evidence in the record to support the district court’s finding that CAT/Firstliner induced infringement of the ‘012 patent and we are not left with the definite and firm conviction that a mistake has been committed. We now turn to the method the district court used to arrive at the quantum of damages. To assess damages, the court had to make findings as to the percentage of CAT/Firstliner licensees that were instructed to use infringing Process 1. The issue before us is whether the district court correctly determined the extent to which defendants CAT and Firstliner instructed their licensees to use the infringing Process 1, thereby inducing infringement under 35 U.S.C. § 271(b). Specifically, the issue is whether the district court’s method for determining the percentage of licensees who were instructed to use infringing Process 1 was flawed. The parties agreed to resolve this aspect of the lawsuit by licensees’ questionnaire answers, subject to correction by deposition if either party so desired. District Court Opinion, slip op. at 45-46. It appears that the district court resolved this issue on the basis selected by the parties, and properly exercised its discretion in so doing. Accordingly, we affirm the district court’s ruling on this point. Defendants assert that the district court clearly erred in its methodology in determining the extent to which CAT/Firstliner instructed their licensees to use infringing Process 1. Primarily, defendants argue that plaintiffs failed to carry their burden of proof with respect to the royalty revenue received by defendants CAT and Firstliner from use of the accused Process 1. Plaintiffs respond that the parties stipulated to a procedure for establishing the extent to which CAT and Firstliner instructed their licensees to use Process 1. Plaintiffs argue that the district court, having resolved the issue in the manner selected and stipulated to by the parties, should be given full deference as the factfinder in the case. As part of the stipulated procedure for determining the extent of induced infringement, a formal questionnaire was prepared and distributed to CAT/Firstliner’s licensees. Only two licensees responded. The first licensee said it was instructed to use Process 1; the second licensee said it was instructed to use Process 2. The district court noted that the response to the questionnaires was “admittedly less than satisfactory.” District Court Opinion, slip op. at 46. However, the court judged that the poor response “was due in no small part to actions of Defendants in publishing statements in trade publications and in disseminating letters which implied that the finding of this Court would be reversed.” Id. at 46-47. The court concluded that “[b]ecause this limited statistical sampling was caused by no fault of Insituform, the Court will not, as Defendants have requested, limit Insituform’s damage claim for lack of supporting proof. Instead, the Court will rely on these questionnaires in making its determination regarding the extent to which the licensees used the infringing methods and were induced to do so by the Defendants.” Id. at 47. Accordingly, the district court determined that half of CAT and Firstliner’s licensees were instructed to use infringing Process 1, while half used non-infringing Process 2. “[C]ertain subsidiary decisions underlying a damage theory are discretionary with the court, such as . . . [determining] the methodology for arriving at a reasonable royalty [citations omitted]. Such decisions are, of course reviewed under the abuse of discretion standard.” SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir. 1991). “[A court] may . . . adopt in its discretion a reasonable way to determine the number of infringing units. Such subsidiary choices are left to the court’s sound discretion under our precedent.” Id. at 1165 n.2. “Discretion, in this sense, is abused if the record contains no basis on which the district court rationally could have made its decision or if the judicial action is arbitrary, fanciful, or clearly unreasonable.” Datascope Corp. v. SMEC, Inc., 879 F.2d 820, 827-28 (Fed. Cir. 1989). We do not believe that CAT/Firstliner has shown an abuse of discretion in this case. Accordingly, we will not disturb the district court’s ruling that at least half of defendants’ licensees used Process 1, while the other half used Process 2. District Court Opinion, slip op. at 48.