Good Faith Belief of Invalidity May be Defense to Induced Infringement and Opinion Letters May Become Increasingly Important

05 November 2013 IP Litigation Current Blog

The Federal Circuit recently denied a request for rehearing en banc in the matter of Commil USA, LLC v. Cisco Sys., Inc., in a 6-5 vote of the participating judges. 2013 U.S. App. LEXIS 21713 (Fed. Cir. Oct. 25, 2013) (“Commil II”). The result is that evidence of a good faith belief of invalidity of a patent is relevant to rebut an allegation of induced infringement, which was the holding of a three judge panel earlier in the year. See Commil USA, LLC v. Cisco Sys., Inc., 720 F.3d 1361, 1368 (Fed. Cir. 2013) (“Commil I”). Despite the protest of five of the Federal Circuit’s judges, that decision will not be reheard and reconsidered by the entire Federal Circuit. Furthermore, because the Federal Circuit has previously held that a good faith belief of non-infringement of a patent is relevant to rebut induced infringement allegations, the combination of these holdings means that opinions of counsel may be more important than ever, at least in cases with induced infringement allegations.

To step back, the focus here is on certain types of patent claims that require more than one entity to perform different parts of a process. These are known as “joint” or “divided” infringement situations. They often occur in connection with computer-related patents. For example, the steps in a patent may include separate elements for transmitting, receiving and processing certain data, which often means that one entity performs the transmitting, and a separate entity performs the receiving and processing of the data that was transmitted.  For such a method claims, neither of the entities can be liable for direct infringement because no entity performs all the steps. Instead, one of these entities can only be liable on a theory of “induced infringement.”

Induced infringement is defined by 35 U.S.C. § 271(b), which provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Courts have determined that the statute has an intent element, and the Supreme Court has stated that inducement “requires knowledge that the induced acts constitute patent infringement.”  Global-Tech Appliances, Inc.  v. SEB, 131 S. Ct. 2060, 2068 (2011). Consequently, as mentioned above, the Federal Circuit has previously held that an accused inducer’s good-faith belief of non-infringement is relevant to prove that it lacked the intent required to be held liable for induced infringement. See, e.g., DSU Medical Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1307 (Fed. Cir. 2006).

The issue in Commil was whether a good faith belief of invalidity is also relevant to show that the inducer lacked intent. The district court excluded evidence of such a good faith belief, but the Federal Circuit reversed, reasoning that “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 I, 720 F.3d at 1368. According to the majority of the three judge Federal Circuit panel, “[i]t is axiomatic that one cannot infringe an invalid patent.” Id. Consequently, if an accused inducer is aware of a patent but has a good faith belief that the patent is not valid, “it can hardly be said that that the alleged inducer intended to induce infringement.” Id.

Judge Newman dissented in the Commil case, reasoning that while invalidity is a defense to infringement because it “eliminates an invalid patent,” a good faith belief in invalidity does not avoid liability for direct infringement and therefore should also not avoid liability for induced infringement. Id. at 1373 (J. Newman, dissenting). (Of course, the same is true of non-infringement. It is a defense to infringement, but a good faith belief of non-infringement is not a defense to direct infringement. It is only a defense to induced infringement.) Judge Newman further reasoned that a good faith belief in invalidity as a defense is contrary to principles of tort liability because a mistake of law, even if made in good faith, does not absolve a tortfeasor. Id.

In dissenting from the decision to deny en banc review of Commil, Judge Reyna wrote for the five dissenting judges and picked up on Judge Newman’s analysis. The central point of Judge Reyna’s dissent is that he disagrees with the premise that “one cannot infringe an invalid patent” and reasons that, instead, infringement “is resolved solely with reference to the limitations of a patent claim.” Commil II, 2013 U.S. App. LEXIS 21713, at *5 (J. Reyna, dissenting). In Judge Reyna’s view, while an invalid patent cannot result in liability for infringement, infringement and validity issues are entirely separate. Id. at *8. Judge Reyna also reasoned that a good faith belief in invalidity should not be treated the same as a good faith belief in non-infringement because there is a statutorily mandated presumption of validity. Id. at *9. (Although, it would seem that in assessing the question of whether an accused inducer’s belief is truly a “good faith” belief, one must assess whether the alleged inducer held this belief knowing that a patent is presumed to be valid.) Finally, Judge Reyna expressed concern about whether the issue is a question of law or fact and whether the issue of good faith belief of invalidity should be tried at the same time as the invalidity issues or perhaps earlier. Id. at *10-11. (The last point suggests that defense counsel should consider asking the trial court to decide the intent issue in a separate trial prior to trying validity issues.)

Despite the concerns of Judge Reyna and the judges who joined in his dissent, the Commil case is currently the law and will remain so unless the Supreme Court takes up the issue. As Judge Reyna predicts, it may prove to be a “powerful tool” in patent litigation.

The decision also has implications regarding whether to obtain opinion letters. For a defendant that is notified about potentially infringing a patent by induced infringement, either by a demand letter or by getting sued, it may be prudent to obtain a written opinion of counsel assessing both non-infringement and invalidity of the patent. Such an opinion will support a claim of a good faith belief of non-infringement and/or invalidity, which may be sufficient to defend against the induced infringement allegation.

Indeed, the Federal Circuit has previously held that the failure of a party to obtain a non-infringement opinion may actually be probative of intent to induce infringement. See Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 699 (Fed. Cir. 2008).[1] Consequently, the failure to obtain an opinion of counsel addressing invalidity also may be found to be probative of intent or a lack of good faith belief of invalidity. The Broadcom, Commil, and DSU cases thus collectively suggest that a party accused of induced infringement should not only consider obtaining an opinion of counsel regarding the potential non-infringement and invalidity of the patent as affirmative evidence of lack of intent, but also should consider that if it does not obtain such an opinion, the failure to obtain the opinion may be used against it if it offers a defense of good faith belief of non-infringement or invalidity.

[1] Notably, inducement is treated somewhat differently than willfulness in this respect. The Federal Circuit has held that the absence of a legal opinion is insufficient to support a finding of willfulness. See In re Seagate, 497 F.3d 1360, 1371 (Fed. Cir. 2007).

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