United States: A Good-Faith Belief Of Patent Invalidity Is Not A Defense To Inducement of Infringement

Six justices of the Supreme Court agree that an accused indirect infringer's good faith belief in invalidity of a patent "will not negate the scienter required under §271(b)." Commil USA, LLC v. Cisco Sys., Inc., No. 13-896, Slip Op. at 13 (May 26, 2015) (Kennedy, J.). This ruling reverses and vacates the 2013 ruling by the Federal Circuit that evidence of an accused inducer's good-faith belief of invalidity "may" negate the requisite intent for induced infringement. 720 F.3d 1361, 1368 (Fed. Cir. 2013), reh'g denied (Oct. 25, 2013). Justice Scalia authored a dissent joined by Chief Justice Roberts. Justice Breyer took no part in the decision.

The Commil majority opinion provides several bases for rejecting the "good faith belief in invalidity" defense to inducement. First, the history and structure of the Patent Act consistently treat infringement and invalidity as separate matters. This divide is demonstrated by several provisions of title 35, including section 282(a) which sets forth a statutory presumption of validity for issued patents. The divide and the presumption itself would be "undermined" by a belief-in-invalidity defense. Slip Op. at 10-11. Second, a number of "practical considerations" counsel for rejecting such a defense, including the existence of numerous avenues for defendants to test their invalidity beliefs such as the declaratory judgment statute and provisions under the America Invents Act authorizing inter partes review at the USPTO. Jury confusion and increased litigation costs are also potential difficulties associated with a defense that injects invalidity analysis into the scienter requirement of inducement. Id. at 12. Finally, the Court notes that a party's subjective belief legality is not a defense to other torts, such as tortious interference where a "belief in validity is irrelevant" and trespass where the tort "can be committed despite the actor's mistaken belief that she has a legal right to enter the property." Id. at 12-13.

The majority's Commil opinion also provides a needed clarification of the Court's prior holding in Global-Tech Appliances, Inc. v. SEB S. A., 563 U. S. ___ (2011) as to whether a good faith belief of no infringement is a defense to inducement. The Commil Court explains that Global-Tech provided an "explicit holding that liability for induced infringement can only attach if the defendant knew of the patent andknew as well that 'the induced acts constitute patent infringement.'" Commil, slip op. at 7 (quoting Global-Tech, slip op. at 10). In other words, it is not enough that an accused party know of the patent and know that it has induced particular acts; Global-Tech requires that a defendant know of the patent and know the acts it has induced constitute infringement of that patent. Commil, slip op. at 9. Notably, Justice Thomas declined to join this portion of the majority opinion though he joined the majority in rejecting a goof faith belief in invalidity defense.

The dissent argues that because Global Tech requires knowledge that the induced acts constitute patent infringement, and "only valid patents can be infringed," anyone with a good-faith belief in a patent's invalidity "cannot have the necessary knowledge of inducement." Dissent at 1-2. The dissent further argues that the separate treatment of infringement and validity under the Patent Act is "irrelevant," as is the presumption of validity which is "not weakened" by a defense that does not actually hold the patent invalid. Id. at 2-3.

The Commil decision provides three important take-a-ways for patent litigators and clients. First, practicing entities will continue to reap benefits from acquiring well-reasoned noninfringement opinions from outside counsel in response to threat letters involving customer activities or inducement. Commil confirms the value of these letters in the section 271(b) context, even as they already provide value as evidence against willfulness alongside invalidity opinions.

Second, the Supreme Court has placed new weight on the inter partes review (IPR) proceedings at the USPTO under the America Invents Act. In referencing these proceedings as a "practical consideration" for rejecting a good faith belief in invalidity defense, the Court encourages defendants to use the powerful and inexpensive USPTO forum rather that slide into an intractable infringement suit. It will be interesting to see whether similar "practical considerations" begin to factor into the Federal Circuit's willfulness and enhanced damages jurisprudence.

Third, patent holders of method claims must take notice that Global-Tech has been clarified in a manner that makes section 271(b) that much harder to prove: assertions of wrongful intent on the part of the inducer must include evidence of both knowledge of the patent and knowledge that the induced acts constitute infringement. This higher standard of scienter conspires with the Supreme Court's recent holding on divided infringement in Limelight Networks v. Akamai Technologies (No. 12-786) (liability for inducement must be predicated on an act of direct infringement) and the Federal Circuit's current "single-entity rule" test under BMC and Muniauction (direct infringement of a method claim requires that single actor or its agents practice every limitation of the asserted claims) to make inducement under section 271(b) a very difficult claim to prevail on for patent holders. Filing suit against infringing customers to gain leverage over the inducer may, in some instances, be required with the present weakening of section 271(b). ​

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