United States: Supreme Court Holds Good Faith Belief Of Invalidity Not A Defense To Induced Infringement Claim

The U.S. Supreme Court held yesterday in Commil USA, LLC v. Cisco Sys., Inc. (No. 13-896) that a defendant's belief regarding patent invalidity is not a defense to a claim of induced infringement. Justice Kennedy authored the majority opinion, while Justice Scalia (joined by Chief Justice Roberts) dissented. Justice Breyer took no part in the decision.

Commil sued Cisco for both direct and induced infringement of a patent relating to implementing short-range wireless networks. At trial, the jury concluded Cisco directly infringed, Cisco did not induce infringement, and the patent was valid. Commil then moved for a new trial, which the district court granted. During the second trial, in defending against Commil's claim of induced infringement, Cisco argued that it had a good-faith belief that Commil's patent was invalid and sought to introduce evidence supporting that position. The district court ruled that such evidence was inadmissible.

Cisco appealed to the U.S. Court of Appeals for the Federal Circuit, which held in part in a split decision that "evidence of an accused inducer's good-faith belief of invalidity may negate the requisite intent for induced infringement" and saw "no principled distinction between a good-faith belief of invalidity and a good-faith belief of non-infringement for the purpose of whether a defendant possessed the specific intent to induce infringement of a patent." Commil USA, LLC v. Cisco Sys., Inc., 720 F.3d 1361, 1368 (Fed. Cir. 2013). Discussion of that decision can be found here. Both parties filed petitions for rehearing en banc, which were denied. Commil USA, LLC v. Cisco Sys., Inc., 737 F.3d 699, 700 (Fed. Cir. 2013). Commil then sought certiorari with the U.S. Supreme Court, which was granted.

Supreme Court Majority Opinion

Before turning to the actual question presented, the Supreme Court reaffirmed its holding in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. ___ (2011) that induced infringement requires that the defendant both knew of the patent and knew that "the induced acts constitute patent infringement." Id. at ___ (slip op. at 10). Both Commil and the government had argued to the Supreme Court that Global-Tech only required knowledge of the patent for purposes of the "knowledge" requirement for induced infringement.

The Supreme Court next turned to the question presented, i.e., whether a defendant's good-faith belief in invalidity can serve as a defense to induced infringement. In answering that question in the negative, the majority opinion relied on four arguments: (1) infringement and validity are distinct issues; (2) permitting such a defense would undermine the statutory presumption of patent validity; (3) invalidity is not a defense to infringement, it is instead a defense to liability for infringement; and (4) practical reasons support not creating this particular defense.

For the first point, the Supreme Court relied on both the fact that infringement and validity issues are found in separate sections of the Patent Act as well as language from the Supreme Court's prior decisions that illustrate "infringement and invalidity are separate matters under patent law." Slip Op. at 10. The Supreme Court then explained that "[w]ere this Court to interpret §271(b) as permitting a defense of belief in invalidity, it would conflate the issues of infringement and validity." Id.

For the second point, while recognizing that an invalid patent cannot be infringed is "in one sense a simple truth, both a matter of logic and semantics," the Supreme Court determined that adopting a defense of a good faith belief in invalidity would lessen the presumption that patents are valid "to a drastic degree." Id. at 10-11. Further, the Supreme Court found that its conclusion assisted in addressing issues relating to "the procedures and sequences that [] parties must follow to prove the act of wrongful inducement" as well as "concerns of central relevance to the orderly administration of the patent system." Id. at 11.

For the third point, the Supreme Court explained that since "invalidity is not a defense to infringement, it is defense to liability ... a belief as to invalidity cannot negate the scienter required for induced infringement." Id.

For the fourth point, the Supreme Court noted that defendants who believe a patent is invalid have different ways to obtain a ruling to that effect, including filing a declaratory judgment action or seeking inter partes review. Id. at 12. Allowing a defense of good-faith belief in invalidity could "render litigation more burdensome for everyone involved," would provide every accused infringer with "an incentive to put forth a theory of invalidity," and would put juries "to the difficult task of separating the defendant's belief regarding validity from the actual issue of validity." Id.

The Supreme Court ended its opinion by stating that it is "well aware" that "[s]ome companies may use patents as a sword to go after defendants for money, even when their claims are frivolous" and that this behavior can impose a "harmful tax on innovation." Id. at 13-14. The Court went on to explain, citing Federal Rule of Civil Procedure 11 and 35 U.S.C. § 285, that "district courts have the authority and responsibility to ensure that frivolous cases are dissuaded." Id. at 14.

The Dissent

Justice Scalia, writing in dissent, concluded that a good-faith belief in invalidity is a defense to induced infringement as "it is impossible for anyone who believes that a patent cannot be infringed [because it is invalid] to induce actions that he knows will infringe it." Dissent, at 2. Justice Scalia found that whether infringement and validity are distinct issues is irrelevant to the majority's conclusion. Id. Justice Scalia also disagreed with the majority that permitting the defense would undermine the statutory presumption of validity. He then described the majority's stated distinction between invalidity being a defense to liability rather than being a defense to infringement as "an assertion, not an argument." Id. Justice Scalia concluded by disagreeing with the majority's "practical reasons" for not adopting this defense, stating that "if the desirability of the rule we adopt were a proper consideration, it is by no means clear that the Court's holding, which increases the in terrorem power of patent trolls, is preferable." Id. at 3.

Implications

The practical impact of the Supreme Court's decision may be limited. As noted by one author, while at the time of Federal Circuit's Commil decision in June 2013 "there were a number of articles touting the 'new' defense and opining that it would have a large impact on patent cases," the author found less than 10 court decisions between the June 2013 and November 2014 referencing the defense. Further, a good faith belief of non-infringement remains relevant to rebut allegations of induced infringement. Thus, evidence regarding the defendant's beliefs remain relevant to defending induced infringement claims, though the scope of such evidence is now more limited.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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