In Wordtech Systems, Inc. v. Integrated Network Solutions, Inc., No. 04-CV-1971 (Fed. Cir. June 16, 2010) the Federal Circuit decided the appeal of a verdict for patent infringement, as well as an award of damages individual liability of corporate officers.
Generally, the "corporate veil" shields corporate officers from individual liability for tortuous conduct occurring in the regular course of their employment. Yet as the Federal Circuit discussed in Wordtech, the general rule does not always apply. The court vacated the findings of individual liability and remanded for a new trial, but included an extensive discussion concerning how individual corporate officers may be liable for their corporation's patent infringement.
Concerning personal liability for direct infringement, the Federal Circuit stated that the corporate veil shields company officers from personal liability committed in the name of the corporation, unless the corporation is the officers "alter ego." Id. at 7-8. To determine this type of personal liability under § 271(a) the general principles relating to piercing the corporate veil must be invoked. Id. at 8. In order to find direct infringement personal liability, a plaintiff must prove that either (1) the corporation in question was not a valid corporation when the infringing acts were committed, or (2) that the corporate veil should be disregarded under state law. Id. at 10. Notably, the court abstained from discussing whether the corporate veil should be applicable to only owners of a corporation, or both owners and officers, until such a challenge is directly presented. Id. at 8, n. 2.
Regarding personal liability for indirect infringement, the court discussed both inducement and contributory infringement. In discussing inducement, the Wordtech court noted that the corporate veil will not shield officers from liability under § 271(b). Rather, "'corporate officers who actively assist with their corporation's infringement may be personally liable for inducing infringement regardless of whether the circumstances are such that a court should disregard the corporate entity and pierce the corporate veil.'" (emphasis in original). Id. at 12. Concerning contributory infringement, the court stated that an officer is individually liable under § 271(c) when "'personal wrongdoing is not supported by legitimate corporate activity, personal liability for wrongful actions" will be assigned even when the individual was acting on behalf of the corporation. Id. at 14-15. A corporation does not shield its officers from liability for personally participating in contributory infringement. Id. at 14.
The Wordtech opinion illustrates that while the corporate veil may often shield individual officers from personal liability for infringement, there are exceptions to this rule.