May 26, 2015

A Good-Faith Belief That A Patent Is Invalid Is Not A Defense To Induced Infringement

5 min

On May 26, 2015, the U.S. Supreme Court concluded that a defendant’s good-faith belief that a patent is invalid is not a defense to a claim of induced patent infringement, while at the same time confirming that a good-faith belief of non-infringement is a defense, and that mere knowledge of the patent is by itself not enough to prove inducement. Justice Kennedy delivered the opinion of the Court, in which Justices Ginsburg, Alito, Sotomayor, and Kagan joined. Justice Thomas joined in part only. Justice Scalia filed a dissenting opinion, in which Chief Justice Roberts joined.

In reversing the Federal Circuit, the High Court explained that a belief regarding a patent’s invalidity cannot negate § 271(b)’s scienter requirement of “actively induce[d] infringement,” i.e., the intent to “bring about the desired result” of infringement.

Background and Procedural History

Commil USA, LLC (“Commil”) brought this action against Cisco Systems, Inc. (“Cisco”), which makes and sells wireless networking equipment, for infringement of its patent for a method of implementing Wi-Fi networks. Commil alleged that Cisco had infringed Commil’s patent by making and using networking equipment. In addition, Commil alleged that Cisco had induced others to infringe the patent by selling the infringing equipment for them to use.

At the first trial, the jury concluded that Commil’s patent was valid and that Cisco had directly infringed. As to induced infringement, the jury found Cisco not liable, though Commil was granted a new trial on induced infringement and damages for an unrelated reason. Between the first and second trial, Cisco had the validity of Commil’s patent reexamined by the USPTO, which confirmed its validity. In the second trial, Cisco argued, as a defense to the claim of induced infringement, that it had a good-faith belief that Commil’s patent was invalid, and Cisco sought to introduce evidence to support that assertion. The District Court ruled this evidence inadmissible, and the jury returned a verdict for Commil on induced infringement, which Cisco appealed to the Federal Circuit.

The Federal Circuit held that the trial court erred in excluding Cisco’s evidence of its goodfaith belief that Commil’s patent was invalid. In so doing, the Federal Circuit found that the Supreme Court’s prior holding in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. ___ (2011), in which the Court determined that liability for induced infringement can only attach if the defendant knew of both the patent and that “the induced acts constitute patent infringement,” should be read as allowing an accused infringer to negate the requisite intent for inducement by pointing either to a good-faith belief of non-infringement or a good-faith belief of invalidity. The Federal Circuit expressly noted, “[w]e see 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.” The Supreme Court granted certiorari to decide whether a defendant’s good-faith belief that a patent is invalid is a defense to induced infringement.

The Court’s Opinion

Before addressing the actual question presented, the Court in Part II-A first addressed and rejected Commil’s and the Government’s argument that Global-Tech should be read as holding that only knowledge of the patent is required for induced infringement. The Court clarified that (1) the Global-Tech opinion required proof that the defendant knew the acts were infringing and (2) that Global-Tech was clear in rejecting any lesser mental state as the standard.

Turning then to the question-at-issue, the Court in Part II-B held that a defendant’s belief regarding patent validity is not a defense to a claim of induced infringement. The Court explained that the scienter element for induced infringement concerns infringement, which is different than a belief that the patent is not infringed (which is a defense to a claim of induced infringement). In so concluding, the Court reasoned that infringement and validity appear in separate parts of the Patent Act and that non-infringement and invalidity are listed as two separate defenses—thus, permitting a defense of belief in invalidity would conflate the issues of infringement and validity. The Court also concluded that allowing a defense based on a belief in patent invalidity would undermine the presumption under the Patent Act, and the case law before its passage, that a patent is “presumed valid.” The Court found that invalidity is not a defense to infringement but, instead, is a defense to liability and that, because of that fact, a belief as to invalidity cannot negate the scienter required for induced infringement.

The Court additionally found practical reasons not to create a defense based on a good-faith belief in invalidity, noting that accused inducers who believe a patent is invalid have various proper ways to obtain a ruling to that effect and that creating such a defense would have negative consequences, such as rendering litigation more burdensome for everyone involved.

In Part III the Court noted its awareness that an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees,” eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396 (2006) (Kennedy, J., concurring), and stressed that district courts have the authority and responsibility to ensure that frivolous cases are dissuaded via means such as Rule 11 sanctions and awarding attorney’s fees to prevailing parties in “exceptional cases.”

The Dissent

The dissent agreed with the rejection of Commil’s and the Government’s main argument that § 271(b) does not “requir[e] knowledge of the infringing nature of the induced acts” but disagreed that a good-faith belief in a patent’s invalidity should not be a defense to induced infringement. The dissent asserted that because only valid patents can be infringed, anyone with a good-faith belief in a patent’s invalidity necessarily believes the patent cannot be infringed (and therefore cannot induce actions that he knows will infringe it). Addressing the Court’s practical considerations, the dissent opined 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,” a consequence which “[t]he Court seemingly acknowledges . . . in Part III of its opinion.”

Justice Thomas joined the majority in Parts II-B and III only, apparently taking a position in line with Commil and the Government, that neither a good-faith belief in non-infringement or invalidity should be a defense to inducement.