On May 26, 2015 the Supreme Court vacated and remanded the Federal Circuit's decision in Commil USA, LLC v. Cisco Systems, Inc., 720 F.3d 1361 (Fed. Cir. 2013). In an interesting 6-2 decision (Justice Breyer did not participate), patent owners and alleged infringers both benefit from the Court's decision. While the decision eliminated the defense of a good-faith belief of invalidity for induced infringement, it also rejected an attempt to eliminate a good-faith belief in non-infringement as a defense for induced infringement. The Commil decision, therefore, provides alleged infringers with a more clearly marked path for defending against induced infringement.
Commil USA, LLC ("Commil") initially filed suit against Cisco Systems, Inc. ("Cisco") in the United States District Court for the Eastern District of Texas alleging direct and induced infringement. The technology at issue in the patent involved a method of implementing short-range wireless networks and the ability to move easily between devices and base stations within a wireless network.
The jury found Commil's patent valid and Cisco liable for direct infringement. The jury, however, did not find Cisco liable for induced infringement. Commil requested, and the court granted, a new trial to determine whether Cisco induced others to infringe the patent by selling the technology. Cisco sought to introduce evidence of its good-faith belief that Commil's patent was invalid as a defense to induced infringement, but the Court ruled this evidence was inadmissible. The jury returned a verdict for Commil on induced infringement and awarded Commil US $63.7 million in damages.
Cisco appealed the judgment to the United States Court of Appeals for the Federal Circuit. The Federal Circuit held that induced infringement requires knowledge that the induced acts constitute patent infringement and that the trial court erred when it excluded Cisco's evidence regarding its good-faith belief that the patent was invalid. The Federal Circuit then denied motions for a hearing en banc filed by both parties. The Supreme Court granted certiorari.
Belief in Invalidity Not a Defense to Infringement
Prior to addressing the question of whether a good-faith belief of invalidity is a defense for induced infringement, the majority first reaffirmed their holding in Global-Tech Appliances, Inc. v. SEB S. A., 563 U.S. __ (2011). Commil, with support of the Government as amicus curae, attempted to eliminate a good-faith belief in non-infringement as a defense for induced infringement by arguing that Global-Tech should be read as holding that only knowledge of the patent is required for induced infringement. The majority rejected the argument, and stated "liability for induced infringement can only attach if the defendant knew of the patent and knew as well that the induced acts constitute patent infringement." Slip op., at 6 (internal quotes omitted). The majority concluded that Global-Tech "requires proof the defendant knew the acts were infringing." Id., at 9.
Moving on to the question at issue, the 6-2 majority addressed whether a good-faith belief of invalidity is a defense for induced infringement. The majority decision, authored by Justice Kennedy, answered this question in the negative. Id. The majority explained that "infringement and validity are separate issues under the [Patent] Act" and, therefore, "belief regarding validity cannot negate the scienter required" for induced infringement. Id. Allowing a defense of belief in a patent's invalidity would "conflate the issues of infringement and invalidity." Id., at 10. The majority further explained that "invalidity is not a defense to infringement" but is "a defense to liability." Id., at 11.
In the dissent, Justice Scalia, joined by Chief Justice Roberts, agreed with the majority that "knowledge of the infringing nature of the induced acts" is a requirement for induced infringement under Global-Tech. Slip. op. dissent at 1. But they dissented on the good-faith belief issue. The dissent reasoned that "[b]ecause only valid patents can be infringed, anyone with a good-faith belief in a patent's invalidity necessarily believes the patent cannot be infringed." Id., at 1-2. Justice Scalia also criticized the majority's decision for "increas[ing] the in terrorem power of patent trolls." Id., at 3.
The Commil decision provides two important take away points for practitioners and their clients. First, invalidity opinions can no longer establish a defense of good-faith belief in invalidity in the context of induced infringement (but still have value with respect to the issue of willfulness). While the decision did not address direct infringement, the Court's statement that "the validity of the patent is not the question to be confronted" when addressing infringement suggests that the holding would extend to all infringement claims. Slip op., at 9. However, not all is lost for alleged infringers. Commil reinforces the value of non-infringement opinions in the context of induced infringement, and raises the bar for patent holders to prove induced infringement. Assertions under section 271(b) must include both knowledge of the patent and knowledge that the induced acts constitute infringement.