Development of new product lines
Businesses track new products and developments of their competitors. They attend trade shows, receive information from mutual clients about new products offered by others. In response, companies may attempt to introduce a competitive alternative. In doing so, they may reverse engineer (i.e., purchase and take apart) their competitors products. When they base their products on their competitors, they must be careful not to infringe on their competitor’s intellectual property rights. To this end, due diligence is undertaken in an effort to ensure that the competitive alternative does not infringe upon the rights of their competitors. One part of due diligence involves searching for and reading through multiple patent references to determine whether your competitor has protected its product with a patent.
Background of SEB v. Pentalfa
The following case illustrates how one company violated a competitor’s patent rights by copying their product. SEB v. Pentalfa, 2009-1099 (Fed. Cir. Feb. 5, 2010). SEB held a patent directed to a deep fryer. The patent claimed a way of manufacturing the exterior skirt of the deep fryer with an inexpensive ordinary grade plastic thereby reducing the cost of the deep fryer. A ring of heat insulating and heat resistive material is mounted to the top of the skirt and an inner hot pan. The skirt and hot pan is separated by an air space of sufficient width to insulate the skirt from the hot pan.
Patent search commissioned
Pentalfa copied SEB’s deep fryer. However, before manufacturing and selling the copy-cat product, Pentalfa obtained a “right-to-use study” from a patent attorney. The patent attorney conducted a search but did not find SEB’s deep fryer patent. The patent attorney provided a positive right-to-use opinion. Despite the positive right to use opinion, the jury held that Pentalfa actively induced others to infringe SEB’s patent. To be held liable for active inducement of infringement, the alleged infringer must have the specific intent to encourage another’s infringement. Pentalfa contends that they did not have the “specific intent” to encourage another’s infringement because they did not have actual knowledge of SEB’s deep fryer patent.
Failure to inform patent counsel
However, the Court held that the requisite specific intent does not require actual knowledge of the patent but may also include a deliberate indifference of a known risk that SEB held a patent. In the present dispute, Pentalfa copied SEB’s deep fryer. Pentalfa hired an attorney to conduct a right to use study but did not tell the patent attorney that it based its product on SEB’s deep fryer. The Court indicated that the failure to inform one’s counsel of copying would be highly suggestive of deliberate indifference. Also, the parties were sophisticated with respect to the patent system. Hence, the Court held that Pentalfa actively induced others to infringe SEB’s patent.
Inform patent counsel of basis for new product design
Based on this case, if you copy another company’s product then you should inform your patent attorney of this fact. Also, you should inform your patent attorney of the process by which the product was invented. The purpose is to address the issue of patent infringement early during the process so that design around options can be implemented if possible. Design arounds are alternative designs that avoid the patent yet retain the functional feature of the patented product. Typically, it is less expensive to redesign at the manufacturing stage compared to the cost to recall, litigation and a pay out of damages to the patentee.
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