On March 31, the Supreme Court heard oral argument in Commil USA LLC v. Cisco Systems Inc.  The Supreme Court considered the Federal Circuit’s holding that a belief in a patent’s invalidity is a defense to inducing infringement under 35 U.S.C. § 271(b).  The Justices posed tough questions to both sides.

The Federal Circuit’s decision has been of concern to the health care industry where inducing infringement of method of treatment patents offers important protection to innovators.  Indeed, both the Biotechnology Industry Organization (BIO) and PhRMA filed amicus briefs urging reversal of the Federal Circuit’s decision.  Although a decision upholding the Federal Circuit will impact many lawsuits where the drug product at issue is already on the market, it should not impact litigation under the BPCIA (or the Hatch-Waxman Act) since the validity of the asserted patents is typically determined prior to launch of the drug product.  The determination of validity prior to launch makes it impossible for an infringer to rely on a good faith belief in a patent’s invalidity as a defense to inducing infringement.

At the outset, Justice Kagan challenged Commil’s position that a belief in a patent’s invalidity would not negate inducement given the Court’s prior decision in Global-Tech Appliances, Inc. v. SEB S.A. (decided May 31, 2011).  In Global-Tech, the Supreme Court held that liability for inducement “requires knowledge that the induced acts constitute patent infringement.”  Justice Kagan said she did not understand why a good faith belief in a patent’s invalidity would not be considered in determining inducement when a good faith belief in non-infringement would: “the two defenses are so intertwined and [] two sides of the same coin that they should be treated in the same way.”

Justice Scalia challenged Commil’s position by analogizing to holding an aider and abettor liable in the context of criminal law without wrongful intent.  He also opined that inducement is a relatively minor infringement issue since the patent owner could always sue the direct infringer:

The patentee has a cause of action against the person who…violates the patent, right?  You’re just talking about supplemental liability for somebody who induced that…violation.  And generally, for that kind of liability, we have required mens rea.  We have required knowledge that you’re doing something wrong.”

The Justices also pushed hard against Cisco, noting that Chief Judge Rich of the Federal Circuit, who had significant influence on U.S. patent law, described the “assertion that invalid claims can’t be infringed [a]s a nonsense statement” and that “courts constantly hold claims infringed, but invalid.”  Chief Justice Roberts questioned Cisco on why the accused infringer “shouldn’t bear th[e] risk” of a mistaken belief in invalidity and why the patent holder should “lose the value of his patent until you get around to deciding the validity?”  Justice Kagan also told Cisco “your problem is that [a] presumption of validity exists and that this question of validity functions in a patent suit only as an affirmative defense.”

The Justices were also troubled by relying on “ignorance of the law as an excuse” (John Roberts) for infringement.   Judge Kagan analogized to contract cases where breaking a contract because one “thought that the contract was invalid….[is] not a good defense….[I]f it turns out that the contract was invalid, you win.  But if the contract was valid, you lose even though you thought the contract was invalid.  And so, too, here it would seem to me.”  Similarly, Justice Scalia questioned using an incorrect belief in the availability of an affirmative defense to shield infringement: “is there any other area of the law where the defendant gets to say, I thought an affirmative defense would be available?  It turned out I was wrong, but I thought an affirmative defense would be available.”

Regardless of how the Supreme Court decides Commil, the outcome should have little impact on litigation under the BPCIA.  The BPCIA encourages early resolution of patent disputes during the 12-year period of marketing exclusivity for innovator biologics.  It provides a carefully orchestrated set of procedures to adjudicate the validity and infringement of patents prior to the launch of the proposed biosimilar product.  As such, in the typical case, the biosimilar maker would not have the option to rely upon a good faith belief in a patent’s invalidity as a defense to inducing infringement since the patent will have been either found valid prior to launch or is invalid and therefore not enforceable in the first place.  Thus, whether the Supreme Court reverses or upholds the Federal Circuit’s decision in Commil, inducing infringement will be alive and well in litigation under the BPCIA where patents to method of treatment and manufacture offer important protection to biologics.  (The same is true of cases brought under the Hatch-Waxman Act.)