Indirect Patent Infringement

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Indirect Patent Infringement

The most common form of indirect patent infringement is when a distributor sells an infringing device that was manufactured by another party.  While the manufacturer has committed direct patent infringement, the distributor has committed indirect patent infringement.

Direct vs Indirect Patent Infringement

An act of direct infringement involves a third party selling, producing, offering to sell, using or importing an invention that has been registered federally.   A direct infringing act doesn’t have to be willful or malicious. If two parties simultaneously create the same invention unaware of the other’s work, for instance, the one who doesn’t patent their work will be infringing.

Unlike these actions, indirect patent infringement doesn’t require the use, production or other vital aspects of direct violations. In fact, the infringer never even has to come in contact with an invention or utilize a protected mechanism to be found liable. Indirect infringement cannot occur, however, without a directly infringing act taking place.

An indirect patent infringement can only occur if someone influenced or contributed to another party’s direct infringement. This can happen in a variety of ways. The following are just a few examples that could result in patent litigation:

  • Selling items that are only used in the production of patented items.
  • Selling infringing items produced by a third party.
  • Having a third party manufacture patented items without a license.
  • Selling instructions on how to construct a patented product.
  • Distributing generic items with instructions that aid in infringement.

In each of these situations, the infringer is assisting others in committing infringement. All these behaviors are actionable in court. Unfortunately, provisional patent holders don’t typically have this option since rights aren’t granted until patent issuance.

The one exception – whether direct or indirect patent infringement is occurring – relates to willful intent. If the infringer had actual notice of the pending application and the pending application is “substantially identical” to the issued patent, they may be held financially liable.

Does Indirect Infringement Have to Be Willful?

Direct infringement is a strict liability violation. This means willfulness to infringe a protected invention isn’t necessary for someone to be held responsible.  In contrast, indirect violations require that defendants know about the patent in question.

If knowledge of the patent exists and there was some direct infringment, a finding of indirect patent infringement is likely. Without this knowledge or direct infringing activities taking place, liability is difficult to prove.

Courts have been granting further rights, however, to patent holders in recent cases. “Willful blindness,” for instance, occurs when a company has a policy of not searching active patents in an effort to avoid culpability. If this can be proven, then their actions may be viewed as willful. The Supreme Court also decided that infringement based on a belief in patent invalidity doesn’t negate willfulness.

Due to this evolving case law, evidence of actual knowledge of a valid patent isn’t required to prove intent. In each of these situations, a finding of willful indirect patent infringement can result in increased damages – including attorney fees.

Contributory Infringement

Whenever someone sells, offers to sell or imports a part or component used exclusively for a patented product without consent, they are guilty of patent contributory infringement. The culpable party doesn’t need to be involved in the manufacture, sale or use of the patented item itself to be held liable. Simply knowing that the patent exists and providing items to assist in patent infringement is enough to establish legal wrongdoing.

This doesn’t mean that providing any part or component used for a patented purpose constitutes indirect infringement. If the item in question is utilized for substantial non-infringing use – even if the final user is exploiting it for an infringing purpose – it’s not likely that the seller/importer will face consequences for any violations occurring.

There have been instances where parties attempt to exploit loopholes in the law, and this has resulted in either new case law or statutes. Liability cannot be avoided, for instance, by adding additional features to a product that allow for non-infringing use after the fact.

Like other instances of indirect infringement, you can hold all involved parties accountable via patent litigation. Both the direct and indirect infringers are liable for damages – although the costs they face could vary drastically based on the ability to prove intent.

Induced Infringement

Anyone who aids, encourages or otherwise causes another party to commit direct infringement is guilty of induced infringement. As is the case with contributory violations, there is no need for the defendant to be directly involved in the infringing act. By taking actions that lead to patent infringement, a person can be found liable.

In many cases, the direct infringer may have no knowledge that their actions are unauthorized. The entity engaged in indirect patent infringement may have made a point of not sharing this information in order to profit.

Indirect Patent Infringement Damages

The most common outcome in patent infringement cases is a patent injunction. This is especially the case if there were no damages, and in these instances litigation can typically be avoided altogether with a patent cease and desist letter.

When litigation linked to indirect patent infringement becomes necessary, though, there are several forms of patent infringement damages a patent owner may receive. The type of compensation you receive will depend heavily upon the level of evidence presented.

Reasonable Royalties

The most common form of damages awarded for violations of a patent registration are ‘reasonable royalties.’ These are calculated based on what the courts believe is a fair market value for a license at the time of infringement. This is the simpler of evidentiary standards to meet regarding indirect patent infringement damages.

These calculations are typically done in one of two ways. The hypothetical negotiation creates a legal fiction that the plaintiff and defendant willingly entered into a licensing discussion prior to any violation. This process is highly fact-based and will take into account things like established royalties, patent duration and extent of use by the infringer.

The analytical approach, on the other hand, looks at projected profits from the infringer when their actions began. Potential expenses and other costs are also considered to calculate an appropriate prediction of profitability. The court then decides what percentage of this profit can be directly attributable to the patented item.

Lost Profits

Court awards based on lost profits are rarer, but they’re typically also higher than reasonable royalties. The rarity in their use stems from a higher level of evidence required. Plaintiffs must show a direct causal relationship between the patent infringement and lost profits. Since infringers can claim that your invention wasn’t the sole consideration among consumers, this can be a difficult burden to prove.

In many cases, the plaintiff must show (1) the demand for their product, (2) an absence of non-infringing alternatives on the market, (3) an ability to take advantage of demand through marketing and production, and (4) the profit that would’ve been earned absent of infringement. If these can be proven in court, the awards could be substantial.

Design Patent Damages

If you own a design patent that’s infringed upon, you may also be entitled to damages. Once it’s proven that the infringer had the intent of profiting from the sale of your design or items that featured your design, you may be entitled to all their earnings in a claim of design patent infringement.

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If you are involved in an indirect patent infringement matter, please feel free to contact today for a consultation.

 

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