Whom Do I Sue and When Do I Pierce the Corporate Veil? When Corporate Officers Can Also Be Personally Liable for Patent Infringement

So you want to enforce your IP, but whom do you sue? This is one of the most important, and often overlooked, inquiries plaintiffs face whom to properly name as a defendant? The selection of defendants can have implications on the viability of the asserted causes of action and the availability of damages and other remedies down the road.

How do I Pick Defendants?

The selection of defendants depends on the facts of each particular case. The patent infringement statute, 35 U.S.C.  271, gives an idea of who would be liable. Section (a) of the statute states, "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention" is liable for direct infringement. Thus, potential defendants include the seller of an infringing item, its manufacturer, and/or its importer, among other players along the distribution chain.

Section (b) of the patent infringement statute states that "whoever actively induces infringement of a patent shall be liable as an infringer." Although patent plaintiffs often assert infringement under both section (a) and (b) against the same parties identified above, through the inducement section, patent plaintiffs can attach liability to the named party for the infringing activities by third parties.

Importantly, corporate officers or individuals can be liable for patent infringement under both Sections (a) and (b) of the patent infringement statute as direct infringers and as inducers of infringement.

When can Corporate Officers or Individuals be Direct Infringers?

Remember, to be a direct infringer under 35 U.S.C.  271(a), a defendant must make, use, offer to sell, sell, or import the patented item. Since the most obvious potential defendant is a corporation or business organization (such as a limited liability company), plaintiffs often overlook the opportunity to rope in individuals in their personal capacity.

Generally, to hold corporate officers or individuals liable for infringement under Section 271(a), plaintiffs must first demonstrate alter ego liability. This is also known as "piercing the corporate veil" and requires a review of the applicable state law governing alter ego liability. The dominant test for alter ego liability is a non-exclusive multi-factor inquiry that examines an individual's control or domination over a corporation and how that control was used as it relates to the infringing acts. Thus, plaintiffs need to first plead alter ego liability before alleging direct infringement against a corporate officer or individual.

What About Inducement of Infringement allegations against Corporate Officers or individuals?

Alleging inducement against a corporate officer or individual under Section 271(b) is more straightforward. The important difference from alleging direct infringement is that alter ego liability does not need to be alleged in order to demonstrate liability for inducement. Plaintiffs need only put forward evidence that the corporate officer or individual actively assisted in their corporation's infringement. Personal liability for inducing infringement can then be found regardless of whether the circumstances are such that a court should disregard the corporate entity and pierce the corporate veil.

More questions? Contact the authors or visit Fish’s Intellectual Property Law Essentials.