Defendant’s Good-Faith Belief That a Patent Is Invalid Is Not a Defense to a Claim for Inducing Infringement

SUMMARY

Yesterday in Commil USA, LLC v. Cisco Systems, Inc.,1 the U.S. Supreme Court reversed the Federal Circuit and held that a defendant’s good-faith belief that an asserted patent is invalid is not a defense to a claim that the defendant induced infringement under 35 U.S.C. § 271(b). The Court also took the opportunity to clarify its ruling in Global-Tech Appliances, Inc. v. SEB S.A.2 that a plaintiff claiming induced infringement must prove that the defendant knew of the patent and that the acts it induced would constitute infringement.3

BACKGROUND

35 U.S.C. § 271(b) creates liability for those who actively induce infringement of a patent. In Global-Tech Appliances, Inc. v. SEB S.A.,4 the Supreme Court held that liability under that statute requires both knowledge of the patent-in-suit and knowledge that the induced acts constitute patent infringement.

Commil held a patent covering a method of providing reliable wireless connections. Cisco makes and sells wireless equipment. Commil brought suit against Cisco in 2007, alleging in part that Cisco induced others to infringe Commil’s patent. At trial, Cisco sought to introduce evidence that it had a good-faith belief that Commil’s patent was invalid. The district court refused to admit the evidence, and ultimately the jury found Cisco liable for inducing infringement.

On appeal, the Federal Circuit held that the district court had erred because “evidence of an accused inducer's good-faith belief of invalidity may negate the requisite intent for induced infringement.”5 The Federal Circuit denied petitions for rehearing en banc, and the Supreme Court granted certiorari.

THE SUPREME COURT’S DECISION

The Supreme Court, in a 6-2 decision written by Justice Kennedy (Justice Breyer did not participate), reversed the Federal Circuit and held that a good-faith belief that an asserted patent is invalid is not a defense to a claim that the defendant induced infringement.

The Court first discussed its holding in  Global-Tech, rejecting Commil’s assertion that Global-Tech requires only that the defendant knew of the patent. The Court explained that Global-Tech also requires proof that the defendant knew the induced acts were infringing.6 The Court noted, for example, that a defendant may escape liability for inducing infringement if it “reads the patent’s claims differently from the plaintiff, and that reading is reasonable.”7

In turning to whether a good-faith belief in patent invalidity can be a defense to an inducement claim, the Court emphasized the distinction between infringement and invalidity. The Court noted that validity and infringement are separate  defenses, discussed in  different sections of  the  Patent Act. The Court reasoned that allowing an accused inducer to assert belief of invalidity as a defense against induced infringement would improperly “conflate the issues of infringement and validity.”8     The Court further observed that permitting a belief-in-invalidity defense would undermine the presumption that a patent is valid and the rule that a patent can only be invalidated based on clear and convincing evidence. Allowing the defense would enable a defendant to escape liability merely by showing that its belief was reasonable and held in good faith, without demonstrating invalidity under a higher standard of proof.9

Finally, the Court noted several “practical reasons” to reject the belief-in-invalidity defense, especially given the availability  of alternative ways to have a patent declared invalid such as an action for declaratory judgment, inter partes review, and re-examination.10 The majority reasoned that allowing the defense would increase litigation costs because it would be easier to present grounds for a belief in invalidity than for a belief in non-infringement.  The Court also expressed concern that permitting the defense would risk jury confusion between the issues of validity and the defendant’s belief in invalidity.

Apparently recognizing that its rejection of the belief-in-invalidity defense could expand the rights of patent owners at the expense of accused infringers, the Court devoted the final section of its opinion to a warning to firms that “use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees,” and that “may use patents as a sword to go after defendants for money, even when their claims are frivolous.”11     The Court stressed that “district courts have the authority and responsibility to ensure frivolous cases are dissuaded,” through Rule 11 sanctions, or by the award of attorney’s fees to prevailing parties under 35 U.S.C. § 285.12

Justice Scalia, joined by Chief Justice Roberts, dissented. Justice Scalia agreed with the majority that induced infringement requires proof that the defendant knew that the induced acts would constitute infringement.  Justice Scalia disagreed with the majority, however, on whether a good-faith belief in a  patent’s invalidity is a permissible defense to a claim of induced infringement. Justice Scalia reasoned that “there can be no infringement . . . of an invalid patent,”13 and thus “anyone with a good-faith belief in a patent’s invalidity necessarily believes the patent cannot be infringed” and so should not be liable for induced infringement.14

IMPLICATIONS

The Court’s decision in Commil clarifies the law on induced infringement and disposes of a potential defense to induced infringement that was not widely recognized or asserted before the Federal Circuit’s earlier decision in the case.

The decision, however, bucks the Court’s recent trend of paring back the rights of patent holders. As the majority acknowledged, its decision may strengthen claims of patent owners, including non-practicing entities.15 As such, it may generate additional litigation based on potentially weaker patents. Apparently recognizing this possibility, the Court stressed that lower courts have both the responsibility and ability to swiftly dispose of frivolous patent suits.16  In part, the Court’s comments also may be directed to Congress, as certain members of the judiciary continue to suggest that pending legislation to address frivolous patent suits is unnecessary given the tools already available to district courts.

The decision may also increase litigation by potential defendants. Those accused of inducement, and even those merely contemplating activities that may induce infringement, likely will have to consider taking early action before the courts or agencies to prove invalidity, or fail to do so at their peril.