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“They can’t sue me personally! Can they?”
How is it possible that you can be personally liable for patent infringement even though you have a company? We all recognize that the whole point of incorporating is to shield individuals from personal liability. Unless a plaintiff can “pierce the corporate veil” and show that an individual and the company are really “alter egos” of one another, one’s individual assets cannot be touched. At least, that’s the common perception of the protection of incorporation. Not necessarily so with patent infringement.
Under a theory of inducing infringement, a corporate officer could be personally liable for inducing a corporation to infringe a patent. Inducement to infringe is a type of indirect infringement claim [35 USC Section 271(b)] - the idea being that the direct infringement [Section 271(a)] of a corporation was aided and abetted by the corporate officer. This claim of indirect infringement does not require a plaintiff to pierce the corporate veil, which would be required in a direct infringement claim.
Inducement to Infringe
Proving inducement to infringe comes with its own challenges. As a threshold, the plaintiff must prove direct infringement by the corporation. If there’s no direct infringement, there can be no indirect infringement.
Assuming the corporation committed direct infringement, the plaintiff has the burden of showing that the accused “inducer”:
>knew of the patent, and
>possessed specific intent to encourage another’s infringement.
The intent element has been described as more than mere knowledge of a direct infringer’s activities. A defendant must have intended to cause the acts that constitute the direct infringement and must have known or should have known that its action would cause the direct infringement.”
How to Protect Yourself from Personal Liability for Patent Infringement
So, what can corporate officers do to protect themselves from personal liability?
First, avoid being a one man company. Surround yourself with other corporate officers and a competent board of directors if possible. It’s harder to prove any one person encouraged a corporation to commit direct infringement if the decision-making process involves a group or at least a few different people.
Second, get an exculpatory legal opinion. If you are aware of a patent, or perhaps more importantly, an aggressive patent owner that might present issues, invest in a well thought out non infringement and/or invalidity opinion letter. Competent legal opinions could serve as evidence that a corporate officer did not possess specific intent to encourage another’s infringement. Furthermore, though willful infringement has a different legal standard, such opinion letters also reduce the risk of a finding of willfulness, which could otherwise result in paying the other side’s attorney’s fees and/or enhanced money damages.