Power Integrations v. Fairchild Semiconductor

By Jason Rantanen

Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. (Fed. Cir. 2016) 15-1329.Opinion.12-8-2016.1
Panel: Prost, Schall, Chen (author)

This appeal is the latest in a long-running patent saga between Power Integrations and Fairchild.  Each asserted patents against the other; each won as to liability against the other. The most interesting aspect of this opinion is its discussion of inducement, in which the court rejects a jury instruction on inducement that expressly stated that the third party’s direct infringement “need not have been actually caused by the [accused inducer’s] actions.”

Background:  The complexity of this appeal is illustrated by the opinion’s 8 bullet-point summary of its holdings.   The jury found that Power Integrations’ Patent Nos. 6,107,851 and 6,249,876 were not anticipated and were directly and indirectly infringed by Fairchild and that Fairchild’s Patent No. 7,259,972 was not obvious and was infringed by Power Integrations under the doctrine of equivalents (but was not literally infringed or indirectly infringed by Power Integrations).  The jury also found Power Integrations’ Patent No. 7,834,605 neither anticipated nor obvious.  Following trial, the district court granted judgment as a matter of law that Fairchild directly infringed this patent.  The district court granted a permanent injunction against Fairchild and declined to grant an inunction against Power Integrations.

Fairchild appealed and Power Integrations cross-appealed.

Inducement: The indirect infringement issue involved 35 U.S.C. § 271(b), a one sentence provision at the heart of several significant opinions over the last few years.  Section 271(b) reads “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”  Basic elements of an inducement claim include some type of action by the alleged inducer to encourage acts by a third party, an awareness that the third party’s acts would infringe a patent, and actual direct infringement by a third party.

The full jury instruction takes up almost a page and a half of the opinion.  The critical passage on appeal reads:

In order to establish active inducement of infringement, it is not sufficient that others directly infringe the claim. Nor is it sufficient that the party accused of infringement was aware of the acts by others that directly infringe. Rather, in order to find inducement, you must find that the party accused of infringement intended others to use its products in at least some ways that would infringe the asserted claims of the patent. However, that infringement need not have been actually caused by the party’s actions. All that is required is that the party took steps to encourage or assist that infringement, regardless of whether that encouragement succeeded, or was even received.

Slip Op. at 22 (emphasis in opinion).  The problem, in the court’s words, was that “[t]his instruction left the jury with the incorrect understanding that a party may be liable for induced infringement even where it does not successfully communicate with and induce a third-party direct infringer.”  Id. at 23.  Rather, inducement “requires successful communication between the alleged inducer and the third-party direct infringer.”  Id.  Quoting from Dynacore Holdings Corp. v. U.S. Philips Corp., 363, F.3d 1263, 1274 (Fed. Cir. 2004), the court observed “[w]e have further held that “[t]o prevail under a theory of indirect infringement, [plaintiff] must first prove that the defendants’ actions led to direct infringement of the [patent-in-suit].”  Id. at 24.  Thus, “a finding of induced infringement requires actual inducement.”  Id.  In terms of doctrine, the court situates this inquiry in the requirement of inducement itself.

Although the court does not come right out and say it, this is fundamentally a theory of causality in inducement.  In other words, it is not enough that the alleged inducer engage in acts intended to result in direct infringement by a third party and that the third party directly infringes.  At a minimum, there must be a successful communication between the two.  Attempted inducement is not enough; there must be “actual inducement.”  This interpretation  is further bolstered by the court’s rejection of the language in the jury instruction stating that “infringement need not have been actually caused by the party’s actions.”   That said, despite the invitation to address causality presented by the jury instruction, the court conspicuously avoids describing its holding in those terms.  Nowhere outside of the jury instruction and a few unrelated places does a permutation of “caus” appear.

Even as it recognized a requirement that there be some link between the acts of the alleged inducer and the directly infringing acts,  however, the Federal Circuit was not willing to go so far as to say that Fairchild did not induce infringement  as a matter of law.  After rejecting Fairchild’s argument on the lack of sufficiency of the evidence generally, the Federal Circuit dismissed its argument on nexus between Fairchild’s acts and the ultimate direct infringement.  Fairchild contended

that Power Integrations introduced evidence of only three acts of direct infringement—sales of an HP printer, Acer notebook computer, and Samsung notebook computer containing infringing Fairchild controller chips—and that Power Integrations was required to present evidence that Fairchild specifically induced HP, Acer, Samsung, or the retailers from which Power Integrations purchased the infringing products to incorporate the infringing controller chips into products bound for the United States.

Id. at 30.  The Federal Circuit rejected the argument that such specificity was required in the nexus.  “While none of [Power Integrations’  evidence can be directly linked to the particular HP printer, Acer notebook computer, or Samsung notebook computer Power Integrations
introduced at trial as representative acts of direct infringement, it was sufficient to allow the jury to find that Fairchild had induced its customers (including HP, Acer, and Samsung) to infringe as a class. This is all that we require.”  Id. at 31.  “Indeed, we have affirmed induced infringement verdicts based on circumstantial evidence of inducement (e.g., advertisements, user manuals) directed to a class of direct infringers (e.g., customers, end users) without
requiring hard proof that any individual third-party direct infringer was actually persuaded to infringe by that material.”  Id.

Thus, although some evidence of a link between inducer’s acts and the directly infringing acts is required, it need not be with the level of specificity that might need to be shown in other contexts.  Absolute precision of proof as to the machine in the courtroom is not necessary.  And yet, some proof of a link must be present.  Here, the court concluded, there was sufficient evidence for a reasonable jury to find that necessary link.

At this point you might be asking why all of this mattered, given that Fairchild did not appeal the jury verdict that it directly infringed the patents.  The reason is because the finding of inducement greatly expanded the scope of Fairchild’s liability beyond its direct infringement in the United States.  Based on its decision on inducement, the Federal Circuit vacated the district court’s grant of Power Integrations’ motion for a permanent injunction against Fairchild.  Of course, given that these issues are being remanded to the district court, it is conceivable that the outcomes of both could ultimately be the same.

Practice commentary: The opinion contains a simple articulation of the requirements of an inducement claim that rearranges the conventional elements.  Near the beginning of its discussion of the jury verdict, the court describes the elements as follows:

In other words, Power Integrations was required to prove that: (1) a third party directly infringed the asserted claims of the ’851 and ’876 patents; (2) Fairchild induced those infringing acts; and (3) Fairchild knew the acts it induced constituted infringement.

In my view, this version is much easier to understand than the usual way inducement is articulated.

Anticipation: The court’s review on anticipation of the ‘605 patent is also interesting as an example of a jury verdict of no anticipation being overturned on appeal.   Here, Fairchild bore a double-burden on Power Integrations ‘605 patent: not only did it bear the burden of proving that the presumptively-valid claims were anticipated, but it also had to convince the Federal Circuit on appeal that the jury’s finding to the contrary was unsupported by substantial evidence.  Fairchild was helped on appeal by the relative narrowness of the disputed evidentiary issue.  On that particular issue, the court concluded that Power Integrations’ own expert had testified that the critical element required by the claims was disclosed by the prior art reference.

Doctrine of equivalents: The main point here is Power Integrations’ successful claim vitiation argument.

Edit: Added the opinion itself.

29 thoughts on “Power Integrations v. Fairchild Semiconductor

  1. On an unrelated note, at the PQC we hear from the case study that 90% of 101 rejections are correct. I guess there’s no question anymore about how the USPTO management feels about TC3600.

  2. Ned makes an excellent point below that this is one of several areas of patent enforcement in which patent marking would be beneficial to patent owners. Yet it seems to be even further declining.
    I wonder how many patent attorneys even know that the marking statute, 35 USC 287 was amended by the AIA to allow marking by: “..or the abbreviation ‘pat.’ together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent,..” ? I.e., no longer requiring the patent numbers to be on the product itself or [in limited cases] its packaging.

    Has anyone seen much usage of that pro-patentee AIA provision?

    1. Would not expect too much, seeing as the AIA also eviscerated the public’s ability to make sure that markings were being carried out correctly.

      1. Anon, we have to assume that remark is baseless unless you can provide one.
        This is about the marking statute, not the FALSE marking statute. The amendment of the false marking statute encouraged more marking, not less marking. It did nothing to harm patent owners or reduce the benefits of marking.

  3. Re; ..”(1) a third party directly infringed the asserted claims of the ’851 and ’876 patents; (2) Fairchild induced those infringing acts; and (3) Fairchild knew the acts it induced constituted infringement.”
    Yes, this step (3) is a “scienter” requirement for inducement [merely selling the infringing product is not enough]. However, this must be qualified by the Sup. Ct. Global-Tech decision’s “willful blindness” [somewhat expanded] test for induced infringement, where the lack of knowledge of a patent on the product was due to the inducer not even specifically looking for patents assigned to a copied product’s owner.

      1. It is a bit amazing isn’t it.

        But the truly amazing thing is that there are those that think installing software in a machine to do that mildly amazing thing does not change the machine, that the software is not a component of the machine, that the method for doing that mildly amazing thing is not worthy of patenting and that a machine modified to do that mildly amazing thing is not worth of patenting.

        1. Not only “not worthy,” but in essence, there be no change at all between a machine that can do such and one that cannot.

          Almost as if that new capability is “magic,” or has somehow “magically” always been “already in there.”

        2. Les,

          Today, at the Post Office, I saw a neat new system for entering address on, at least, Priority Mail envelopes. The line behind my was too long for me to investigate much, but this allows me to segue into productivity which is simplistically, real GDP per hour worked. To increase the overall standard of living, productivity must increase. Currently, economists are talking about secular (i.e., not business cycle related) stagnation. One cause suggested is that the low hanging fruit from advances in computing power and the Internet has been picked and there is nothing new on the horizon. Our own Prof. Crouch discussed that concept at the URL below (will the magic still work?):

          link to patentlyo.com

          Since much of the economy is related to information processing, it is indeed sad that some people think that there is nothing inventive about software.

          1. Troubled, don’t you feel just a bit sad that we can no longer build chemical plants, refineries, manufacturing plants or anything else like that in United States because it is impossible to get the requisite permits and approvals from so many different federal agencies and further because the cost to comply with the various regulations has become astronomical. There is little doubt that most manufacturing has fled the United States simply because of government.

            There are exceptions to this general rule of course, particularly where the value of the capital so great that it simply cannot be sent to places without the complete control of the company and with zero risk of loss. I think that is why Intel and a few others like it still manufacturer in the United States.

            But it does not have to be this way. I can only hope that the new regime does something to save America and reverses the trends of the last decades, particular since the EPA was first established by Nixon.

            1. Ned,

              I keep hearing that regulations are keeping us down, but very little in the way of concrete examples that bear up under scrutiny. You mention refineries. It is true that the number of refineries is going down, but refining capacity is going up. It’s probably an efficiency thing. See EIA data:

              link to eia.gov

              30? years ago, electric utilities took out an ad in the Washington Post saying that the requirement to install stack scrubbers was unreasonable because the amount of materiel (sulfur?) they would have to remove would cover Washington, DC ten feet thick. (Seemed like a dumb ad.) I sure hope the EPA doesn’t go away because I am down wind of coal country.

              If there are regulations that have negative cost benefit, by all means remove them. But keep in mind that medical care is about 17% of GDP. The country can’t afford more and be at all competitive.

              1. Troubled, check this story about a Dow plant in California. link to books.google.com

                According to the article, Dow got only few of the 60+ permits required despite millions spent. The article suggested that Clean Air Act, just passed, would have forced Dow to build outside the US.

                1. The answer (for all the “green” people out there is to force the rest of the world to have the same built in costs that the desired regulations here would force.

                  That way you remove the option of the transnationals to offshore anything (and the environment still wins out).

                2. Ned,

                  Your story appeared in a 1991 land use journal. Maybe relevant, but a bit dated. In closing, Nixon’s setting up the EPA was probably motivated by growing up south of LA. In 1970, LA smog was a major problem. Things have greatly improved, but I daresay, with a nod to anon below, that without the EPA, LA would resemble today’s Beijing.

              2. Troubled, I cited the case because it was a cause célèbre when I first moved to California. I was solicited by an environmental group that bragged about stopping the Dow plant as if that were a good thing. But it was not going to be built in an area like LA, so there was no real harm to the air except on a global level.

                Smog was really bad in the ’60s and we needed to do something. California, Chicago, and a lot of other big cities had it really bad. link to archives.chicagotribune.com

                China is now that way. They are going to have to do something.

                But, that being said, there is a difference between requiring pollution controls and not promptly approving or disapproving permits. And, we all have to realize that if we do not allow plants to be built in the US, they will be built outside the US. We need to keep in mind that some pollution, like air pollution, either is extremely localized, as in the LA Basin, or global.

                1. China is now that way. They are going to have to do something.

                  Except for the fact that the liberal view is that China needs to be allowed to continue to be the worst polluter because they should be allowed to “catch up” economically.

  4. Anon, all this in the end requires either notice or marking. The patentee must actively police his patent.

  5. Interesting. The district court adopted the criminal-law standard of causation for aiding-and-abetting liability, which focuses on moral blame and doesn’t
    really require proof of the but-for link, but the Federal Circuit changed it to the tort-style actual cause standard.

    Except that the “knowledge of the patent + intent to infringe” under Global-Tech” approach is pretty much a rigorous criminal-law-like standard. So the patentee is getting the worst of both worlds – the criminal mens rea standard (which hurts the patentee) and the civil causation standard (which also hurts the patenteee).

    1. Agreed. CAFC has been reading scienter into inducement for many years. IMHO, it is classic jury issue based on circumstantial evidence. But CAFC says you need a smoking guy, ‘buy this widget to infringe’ in contrast to ‘buy this widget’ with scienter that the sale of widget has no substantial non-infringing use. Very very high bar, that in practice is shielded by AT and AP so far as discovery is concerned. And, therefore, gutting inducement.

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