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Punishing Culpable Infringement: Contribution and Indemnification in Co-Infringement Claims

Published onApr 04, 2011
Punishing Culpable Infringement: Contribution and Indemnification in Co-Infringement Claims

Henry Ford’s model of streamlined production through the specialization and division of labor revolutionized capitalist production forever. The full effect of it is being felt today with the increasing globalization of international commerce such that products are quite literally compilations of various parts produced in different parts of the world. This global-Fordist model has a unique impact on intellectual property disputes:  downstream manufacturers are at risk of intellectual property infringement claims even though the original infringing act occurred in upstream production.  In other words, a downstream manufacturer who incorporates (knowingly or not) an infringing gadget into its ultimate product faces possible infringement litigation. This risk is created due to the variety of claims expressly and impliedly created by the intellectual property statues that allow intellectual property owners to target actors all along the stream of commerce.

Facing this form of liability, many infringers have sought to shield themselves from these claims by seeking indemnification or at least contribution from co-infringers. However, neither federal common law nor the statutory patent scheme provides any cause of action for indemnification or contribution from co-infringers.

We will examine the Patent Act and its various statutory causes of actions that allow patentees to sue not only those directly responsible for infringement but also those who “induced” or “contributed” to the ultimate infringement.

Infringement Claims

Only the owner of a rightful patent interest may sue for infringement because the statute only authorizes a “patentee” to sue for infringement. 35 U.S.C. 281 (1994). These claims are divided into three categories: (1) direct infringement, (2) inducing infringement; and (3) contributory infringement. 35 U.S.C. 271(a)-(c) (1994). Direct infringement arises under 35 U.S.C. 271(a):  “whoever without authority makes, uses or sells any patented invention, within the United States during the term of the patent therefor, infringes the patent.” Inducing infringement arises under 35 U.S.C. 271(b): “actively induces infringement of a patent.” This requires proof of “intentional” infringement. And finally, contributory infringement arises under 35 U.S.C. 271(c): “Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for noninfringing use.”

  1. Indemnification:

No statutory basis exists for an indemnification claim because the Patent Act does not provide a right of indemnification. David Hricik, Remedies of the Infringer:  the Use by the Infringer of Implied and Common Law Federal Rights, State Law Claims, and Contract to Shift Liability for Infringement of Patents, Copyrights, and Trademarks, 28 Tex. Tech. L. Rev. 1027, 1047 (1997). As explained by Hricik, neither the express statutory language nor the legislative history or purpose behind the Patent Act provides a basis for establishing an indemnification claim. Congress was simply concerned with preventing infringement and allowing patentees the right to pursue whichever infringer it choose, whether direct, inducing or contributory.

In Jack Frost Laboratories, Inc. v. Physicians & Nurses Manufacturing Corporation, the defendant in a patent infringement action filed a third-party complaint for indemnification. 1995 U.S. Dist. LEXIS 6413, *1 (S.D.N.Y. May 12, 1995). The court held that the Patent Act did not provide a separate basis for claiming indemnification because “Congress did not ‘give courts rule-making power to fashion remedies not provided for by [the patent] statute’.” Id. at *10. Thus, indemnification was not required.

  1. Contribution:

The Patent Act also does not provide any express right to contribution. In Adams & Associates, LLC v. Dell, Inc., the defendant filed a third-party complaint against another patent infringer for contribution. 2008 U.S. Dist. LEXIS 80139, *1 (D. Utah Oct. 9, 2008). The court held that “there is no right of contribution for joint infringers under the Patent Act or the federal common law.” 12-13. See also Motorola v. Varo, Inc., 656 F. Supp. 716, 717-18 (N.D. Tex. 1986) and Construction Tech., Inc. v. Lockformer Co., 781 F. Supp. 195, 201 (S.D.N.Y. 1990) (holding that no right of contribution exists in patent law). However, the court left open the question of whether a state liability act could give rise to a contribution claim. As an answer to that possibility, the court in Chemtron v. Aqua Products, Inc. v. Viking Injector Co. held that no claim for contribution may arise under federal patent laws and none may arise under state laws as it is preempted by federal law. 143 F.R.D. 504 (S.D.N.Y. 1992).

Policy Against Indemnification and Contribution

Policy also cuts against recognizing a right to indemnification since an intentional tort feasor cannot usually be indemnified. See, e.g., Anderson v. Local Union No. 3, Int’l Bhd. Of Elec. Workers, 582 F. Supp. 627, 633 (S.D.N.Y. 1984). Just as with indemnification, “an intentional wrong-doer generally may not obtain contribution.” Rest. (Second) of Torts 886A(3). The theory here is simple:  intentionality forecloses finger-pointing because the party intended to do harm and should be unable to blame someone else for the injury the party intended to inflict.

A Possible Exception:

Inducing infringement and contributory infringement claims differ from direct infringement claims in a very fundamental way that might create a policy exception for finding a right to indemnification and contribution for direct infringers not available to inducing or contributing infringers.

It is well established that to hold a party responsible under either an inducing or contributory infringement claim, a direct infringement claim must first exist. Aro Mfg. Co. v Convertible Top Replacement Co., 377 US 476 (1964). In this way, we can talk about inducing or contributory claims as “supplementary” to a more basic direct infringement claim; whereas a direct infringement claim may be independently asserted, inducing and contributory infringement claims must rely on the existence of some initial direct infringement claim.

However, these supplemental claims have an added knowledge requirement not found in the direct infringement claim. Under the inducing infringement claim, a claimant must show: (1) that a direct infringement has occurred; and (2) that the accused infringer knowingly induced infringement or had the requisite intent. Mere knowledge of potential or actual infringement is not enough. Liability for inducement is premised on purposeful, culpable expression and conduct. ‘Proof of actual intent to cause the acts which constitute the infringement is a necessary prerequisite to finding active inducement’.” Commissariat a L’Energie Atomique v. Samsung Electronics Co., 524 F. Supp. 2d 534, 544 (D. Del. 2007).  Likewise, under the “contributory infringement” cause of action, a patentee must show that the contributory infringer had knowledge that the combined, final product for which the contributory infringer’s component part was designed, was both patented and infringing. See Aro Mfg. Co. v Convertible Top Replacement Co., 377 US 476 (1964).

In contrast, the “direct infringement” claim contains no knowledge requirement. Thus, “direct patent infringement can occur even though the defendant has a reasonable and good faith belief that it was not infringing any patent.”   David Hricik, 28 Tex. Tech. L. Rev. at 1056. See also 35 U.S.C. 271 (1994).

Because of this vital difference between the types of claims, the policy argument against allowing indemnification or contribution only applies to supplementary claims. The lack of an “intentionality” or “knowledge” requirement for a direct claim means that there is no policy against allowing “innocent” direct infringers from pursuing those infringers who are perhaps more culpable (i.e. those who knowingly or intentionally infringed a patent). Thus, it follows that this policy limitation for finding an implied right of contribution of indemnification should only bar inducing or contributory infringers from suing others. As Hricik points out, the purpose of the Patent Act might be better served by allowing “innocent” direct infringers to sue contributing or inducing infringers who knew of the infringement. 1056-57.

Of course, allowing this type of exception would require direct infringers to prove not only the claim for contribution or indemnification but also that the direct infringer had no knowledge and did not intend to infringe. Just because a direct infringement claim does not require proof of knowledge or intentional infringement does not mean the direct infringer did not know or intend to infringe. Thus, to maintain consistent with the underlying policy upon which this exception would be based would require forcing direct infringers to prove that they did not know or intend to infringe.

Although this exception is in keeping with the overall policy goals, courts have remained reluctant to find any cause of action for co-infringers because of the lack of express or implied statutory causes of action in the Patent Act itself. Therefore, it remains unlikely that even armed with this potential argument for recognizing an exception that courts will be willing to create a right to indemnification or contribution from co-infringers regardless of known or intentional infringement.

*Luke MacDowall is a third-year law student at Wake Forest University School of Law.  He holds a Bachelor of Arts in Philosophy and History from Trinity University in San Antonio, Texas.  While at Wake Law, Mr. MacDowall led the National Trial Team as team-captain and participated on the National Moot Court team.  In addition, Mr. MacDowall worked in the intellectual property litigation department at Womble Carlyle Sandridge & Rice, PLLC.  Upon graduation in May 2011, Mr. MacDowall intends to practice general business litigation with special emphasis on employment and labor law.

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