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Thursday, June 2, 2011

Legally Blind?: Supreme Court Attempts To Clarify The Willful Blindness Doctrine

Willful blindness is one of my favorite topics to teach. My current go to case on the doctrine is Nunley v. United States, 2009 WL 2386674 (9th Cir. 2009), in which (1) a man asked Larry Nunley to haul a large quantity of marijuana in his truck; (2) Nunley refused but left the keys to his truck with the man while he watched the Super Bowl for 3 hours; and (3) Nunley returned to his truck, saw a new container in it, and drove off without opening the container. The opinion is 2 pages on Westlaw and a nice and quick way to teach students the basics of willful blindness.

Now, however, via our sister blog, White Collar Crime Prof Blog, by Professor Ellen Podgor, comes word of the Supreme Court's important opinion in Global-Tech Appliances, Inc. v. SEB S.A., 2011 WL 2119109 (U.S. 2011), and a new tool to teach the topic as the Court attempts to clarify the specifics of the doctrine.

In SEB S.A.,
SEB invented a "cool-touch" deep fryer, that is, a deep fryer for home use with external surfaces that remain cool during the frying process....SEB obtained a U.S. patent for its design in 1991, and sometime later, SEB started manufacturing the cool-touch fryer and selling it in this country under its well-known "T–Fal" brand.
In 1997, Sunbeam Products, Inc., a U.S. competitor of SEB, asked petitioner Pentalpha Enterprises, Ltd., to supply it with deep fryers meeting certain specifications. Pentalpha is a Hong Kong maker of home appliances and a wholly owned subsidiary of petitioner Global–Tech Appliances, Inc. 
In order to develop a deep fryer for Sunbeam, Pentalpha purchased an SEB fryer in Hong Kong and copied all but its cosmetic features. Because the SEB fryer bought in Hong Kong was made for sale in a foreign market, it bore no U.S. patent markings. After copying SEB's design, Pentalpha retained an attorney to conduct a right-to-use study, but Pentalpha refrained from telling the attorney that its design was copied directly from SEB's.
The attorney failed to locate SEB's patent, and in August 1997 he issued an opinion letter stating that Pentalpha's deep fryer did not infringe any of the patents that he had found. That same month, Pentalpha started selling its deep fryers to Sunbeam, which resold them in the United States under its trademarks. By obtaining its product from a manufacturer with lower production costs, Sunbeam was able to undercut SEB in the U.S. market.

Litigation ensued, with S.E.B. eventually bringing an action against Pentalpha, claiming, inter alia, that Pentalpha violated 35 U.S.C.A. § 271(b), which states that "[w]hoever actively induces infringement of a patent shall be liable as an infringer." At the close of trial, the jury found that Pentalpha violated § 271(b),and the district court denied Pentalpha's post-trial motions seeking a new trial or judgment as a matter of law, in which Pentalpha claimed, inter alia, "that there was insufficient evidence to support the jury's finding of induced infringement under  § 271(b) because Pentalpha did not actually know of SEB's patent...."

The Federal Circuit thereafter affirmed, finding

that induced infringement under § 271(b) requires a "plaintiff [to] show that the alleged infringer knew or should have known that his actions would induce actual infringements" and that this showing includes proof that the alleged infringer knew of the patent....Although the record contained no direct evidence that Pentalpha knew of SEB's patent before April 1998, the court found adequate evidence to support a finding that "Pentalpha deliberately disregarded a known risk that SEB had a protective patent."...Such disregard, the court said, “is not different from actual knowledge, but is a form of actual knowledge."

The United States Supreme Court thereafter granted cert, and Pentalpha claimed "that active inducement liability under § 271(b) requires more than deliberate indifference to a known risk that the induced acts may violate an existing patent." 

Pentalpha won this battle but lost the war, with the Court that finding that "deliberate indifference to a known risk that a patent exists is not the appropriate standard under § 271(b)" but ultimately concluding that the evidence "was plainly sufficient to support a finding of Pentalpha's knowledge under the doctrine of willful blindness." In reaching this conclusion, the Court had several interesting things to say about the willful blindness doctrine:

•"The traditional rationale for this doctrine is that defendants who behave in this manner are just as culpable as those who have actual knowledge;"

•"It is also said that persons who know enough to blind themselves to direct proof of critical facts in effect have actual knowledge of those facts;" and

•(1) English law first recognized the doctrine of willful blindness in the mid-19th Century; (2) while not using the term "willful blindness," the Supreme Court first endorsed a similar concept in Spurr v. United States, 174 U.S. 728 (1899); (3) the Model Penal Code later incorporated the doctrine; (4) the Court has since used the MPC's definition of willful blindness in some due process cases; and (5) every federal circuit, "with the possible exception of the District of Columbia Circuit, has fully embraced willful blindness, applying the doctrine to a wide range of criminal statutes.".

Therefore, according to the Court,

Given the long history of willful blindness and its wide acceptance in the Federal Judiciary, we can see no reason why the doctrine should not apply in civil lawsuits for induced patent infringement under 35 U.S.C.A. § 271(b)

This then left the question of whether the "deliberate indifference" test applied by the Federal Circuit complied with the proper willful blindness standard, and the Court found that it did not. Instead, it found that

While the Courts of Appeals articulate the doctrine of willful blindness in slightly different ways, all appear to agree on two basic requirements: (1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact. We think these requirements give willful blindness an appropriately limited scope that surpasses recklessness and negligence. Under this formulation, a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts....By contrast, a reckless defendant is one who merely knows of a substantial and unjustified risk of such wrongdoing,...and a negligent defendant is one who should have known of a similar risk but, in fact, did not.... (emphasis added).

The Court then found that

The test applied by the Federal Circuit in this case departs from the proper willful blindness standard in two important respects. First, it permits a finding of knowledge when there is merely a “known risk” that the induced acts are infringing. Second, in demanding only "deliberate indifference" to that risk, the Federal Circuit's test does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities.

That said, the Court still concluded that "[t]aken together, this evidence was more than sufficient for a jury to find that Pentalpha subjectively believed there was a high probability that SEB's fryer was patented, that Pentalpha took deliberate steps to avoid knowing that fact, and that it therefore willfully blinded itself to the infringing nature of Sunbeam's sales." 

Meanwhile, Justice Kennedy wrote a strongly worded dissent, contending that "[w]illful blindness is not knowledge; and judges should not broaden a legislative proscription by analogy." According to Kennedy, the majority's opinion was based upon two justifications, neither of which was justified:

First, the Court appeals to moral theory by citing the "traditional rationale" that willfully blind defendants "are just as culpable as those who have actual knowledge."...But the moral question is a difficult one. Is it true that the lawyer who knowingly suborns perjury is no more culpable than the lawyer who avoids learning that his client, a criminal defendant, lies when he testifies that he was not the shooter?...he answer is not obvious. Perhaps the culpability of willful blindness depends on a person's reasons for remaining blind....Or perhaps only the person's justification for his conduct is relevant.... This is a question of morality and of policy best left to the political branches. Even if one were to accept the substitution of equally blameworthy mental states in criminal cases in light of the retributive purposes of the criminal law, those purposes have no force in the domain of patent law that controls in this case. The Constitution confirms that the purpose of the patent law is a utilitarian one, to "promote the Progress of Science and useful Arts," Art. I, § 8, cl. 8.

Second, the Court appeals to precedent, noting that a "similar concept" to willful blindness appears in this Court's cases as early as 1899....But this Court has never before held that willful blindness can substitute for a statutory requirement of knowledge. Spurr v. United States, 174 U.S. 728, 735, 19 S.Ct. 812, 43 L.Ed. 1150 (1899), explained that "evil design may be presumed if the [bank] officer purposefully keeps himself in ignorance of whether the drawer has money in the bank or not, or is grossly indifferent to his duty in respect to the ascertainment of that fact." The question in Spurr was whether the defendant's admitted violation was willful, and with this sentence the Court simply explained that wrongful intent may be inferred from the circumstances. It did not suggest that blindness can substitute for knowledge. Neither did Turner v. United States, 396 U.S. 398, 90 S.Ct. 642, 24 L.E.2d 610 (1970), or Leary v. United States, 395 U.S. 6, 89 S.Ct. 1532, 23 L.E.2d 57 (1969). As the Court here explains, both cases held only that certain statutory presumptions of knowledge were consistent with due process....And although most Courts of Appeals have embraced willful blindness, counting courts in a circuit split is not this Court's usual method for deciding important questions of law.

Moreover, he pointed out

The Court appears to endorse the willful blindness doctrine here for all federal criminal cases involving knowledge. It does so in a civil case where it has received no briefing or argument from the criminal defense bar, which might have provided important counsel on this difficult issue.

Obviously, SEB S.A. is now a case that must be mentioned when teaching willful blindness, and there are several nice things about it:

•it is only 13 pages on Westlaw, and easily edited;

•it has a clear and concise fact pattern;

•it contains a thorough discussion of the history of the doctrine;

•it succinctly states the two basic requirements of the doctrine; and

•the different narratives in the majority and dissenting opinions should enable compelling class discussions

So, what effect will SEB S.A. actually have in practice? Will most circuit merely find that their prior precedent is consistent with SEB S.A., as the majority seems to suggest, or is Justice Kennedy correct that there is more of a circuit split and that the majority's opinion is more revolutionary that its language suggests? Stay tuned.

-CM

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