Admissions to the opposing party during pre-litigation negotiations may haunt you during litigation. In Info-Hold. v. Muzak (Fed. Cir. 2015), the defendant (Muzak) admitted that his systems probably incorporated a key limitations of Info-Hold’s patent claims. The Federal Circuit remanded the case back to the district court to explore whether Muzak was willfully blind as to his infringement of Info-Hold’s patent which could open Muzak up to liability for inducement of patent infringement and possibly three times normal damages.
The patent technology involved in Info-Hold v. Muzak was related to playing music and messages (e.g., advertisements) through telephones when the caller is placed on hold. After sending an initial cease and desist letter, the patent owner’s counsel telephoned Muzak’s counsel six months later. During that conversation, Muzak’s counsel expressed surprise when he learned that the ‘374 owned by Info-Hold covered the playback of music as opposed to only messages. Muzak’s counsel responded by saying “We’re talking about the music, how they control their music … Well … yeah, we have a system where there probably is some control of the music.” Muzak’s counsel informed Info-Hold’s counsel that he would take another look at the ‘374 patent in relationship to Muzak’s products.
During litigation, Info-Hold asserted inducement of patent infringement against Muzak. To prove inducement of infringement, the patentee must show that the accused inducer took an affirmative act to encourage infringement with the knowledge that the induced acts constitute patent infringement. The knowledge requirement may be satisfied by showing either actual knowledge or willful blindness. Willful blindness is present if the inducer (1) subjectively believed that there was a high probability that a fact exists and (2) took deliberate actions to avoid learning that fact.
Here, the Federal Circuit held that there are issues of material fact as to whether Muzak had the requisite knowledge in terms of willful blindness. Info-Hold had repeatedly contacted Muzak to place Muzak on notice of its patent and patent infringement. During pre-litigation negotiations, Muzak’s counsel also admitted that Muzak’s systems probably had a feature which may have been encompassed within Info-Hold’s patent claims. Based on this evidence, the Federal Circuit held that issues of material fact existed as to whether Muzak may have subjectively believed there was a high probability it infringed the ‘374 patent and took deliberate actions to avoid learning whether it actually did. The Federal Circuit vacated the district court’s grant of summary judgement of no induced infringement and remanded for further consideration as to willful blindness.