The Supreme Court has accepted certiorari in two more patent related cases regarding: invalidity as a defense to induced infringement; and payment of royalties after expiration of the patent.
Invalidity and Induced Infringement Liability
In Commil USA, LLC v. Cisco Systems, Inc., 720 F.3d 1361 (Fed. Cir. 2013), cert. granted, 135 S. Ct. 752 (Dec. 1, 2014), the Federal Circuit held that a good faith belief that a patent is invalid may constitute a defense to the intent element of induced infringement under 35 U.S.C. § 271(b).
The Supreme Court's recent decision in Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068 (2011), held that induced infringement "requires knowledge that the induced acts constitute patent infringement." The knowledge requirement may be satisfied by showing actual knowledge or willful blindness. Id. at 2072. The Federal Circuit had previously held that good faith belief a patent is not infringed is a defense to the intent element. DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc). "We 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." Commil, 720 F.3d at 1368.
The AIPLA argues in its amicus brief that an important principled distinction does exist – infringement and invalidity are entirely separate concepts. The knowledge requirement is inferred from the statutory requirement the defendant “actively induces infringement of a patent”. 35 USC § 271(b). The statute refers to infringement, not validity. Thus only actual invalidity is a defense, not a mere good faith belief in invalidity.
The AIPLA argues a defense of a good faith belief in invalidity would result in cases where the patent owner could not hold anyone liable. But that result already exists where there is a good faith belief there is no infringement. And the single actor rule can result in no liability if conduct is divided between multiple entities so there is no direct infringer. Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014) (liability for induced infringement requires direct infringement). See “Who Infringed” (June 26, 2014) http://www.fclaw.com/newsletter/newsletter.cfm?id=1209.
Recent cases have narrowed the scope of inducement liability. I humbly predict that narrowing trend will continue and the Supreme Court will affirm the Federal Circuit and uphold the good faith belief in invalidity as a defense to an induced infringement claim.
Post Term Royalties and Antitrust Liability
In Kimble v. Marvel Enterprises, Inc., 727 F.3d 856 (9th Cir. 2013), cert. granted, 135 S. Ct. 781 (Dec. 12, 2014), the Ninth Circuit held that use of a patent royalty agreement "that projects beyond the expiration date of the patent is unlawful per se." This rule has existed for 50 years. Brulotte v. Thys Co., 379 U.S. 29, 32, 85 S. Ct. 176 (1964).
The AIPLA in its amicus brief argues that this bright line per se rule avoids the uncertainty of a rule of reason analysis and is better suited to the underlying patent policy prohibiting the expansion of patent rights by contract. Because the public can freely use an invention after the patent expires, a licensing agreement cannot require the licensee to continue to pay the same royalty amount after the patent expires.
A per se rule applies if the conduct always or almost always tends to restrain competition and decrease output. The tide of history has pushed back per se antitrust rules and extended the application of the rule of reason when the practice formerly considered a per se violation can yield procompetitive effects. In Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 127 S. Ct. 2705 (2007), the Supreme Court held minimum resale prices are no longer illegal per se – overruling an almost 100 year old precedent (Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 31 S. Ct. 376 (1911)). The existence of a patent alone does not prove the owner has monopoly power. Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28, 126 S. Ct. 1281 (2006). Mere administrative convenience will not warrant a per se rule. Id.
The Ninth Circuit called the rationale for the existing per se rule “counterintuitive” and “unconvincing”. Kimble, 727 F.3d at 857. If the patent application is rejected, an existing license agreement can continue indefinitely. Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262-66, 99 S. Ct. 1096 (1979). The royalty is not necessarily based on patent power as opposed to the value of the invention. Moreover, royalty payments beyond the patent expiration date can be efficient and enable payment of the full value of the patent. Kimble, 727 F.3d at 866 n.7; accord Zila, Inc. v. Tinnell, 502 F.3d 1014, 1019 n.4 (9th Cir. 2007).
I humbly predict the Supreme Court will overrule Brulotte (abandoning the per se rule) and reverse and remand the Kimble case for analysis under the rule of reason.