Supreme Court on Induced Infringement: Good-Faith Belief of Invalidity Not a Defense and Knowledge of Infringement Required

In a 6-2 decision this week, the United States Supreme Court in Commil USA, LLC v. Cisco Systems, Inc., 575 U.S. ____ (2015) held that an accused infringer’s good-faith belief of patent invalidity is not a defense to a claim of induced infringement and stressed that induced infringement requires knowledge of infringement (as opposed to mere knowledge of a patent). Justice Kennedy wrote the majority opinion. Justice Scalia dissented, joined by Chief Justice Roberts, and Justice Breyer took no part in the decision.

Trial Court Proceedings

Commil sued Cisco in the Eastern District of Texas, alleging that Cisco’s manufacture and use of networking equipment infringed Commil’s patent directed to a method of implementing short-range wireless networks. Commil also alleged that Cisco had induced others to infringe the patent by selling the allegedly infringing equipment.

A jury found that Commil’s patent was not invalid and that Cisco had directly infringed it. The jury did not, however, find Cisco liable for induced infringement. Commil moved for a new trial, which the trial court granted.

In defending against the inducement claim in the second trial, Cisco sought to offer evidence that it had a good-faith belief that Commil’s patent was invalid. The trial court ruled, however, that Cisco’s proffered evidence of its good-faith belief of invalidity was inadmissible and the jury found Cisco liable for inducement.

Federal Circuit Appeal

Cisco appealed to the Court of Appeals for the Federal Circuit. Relevant to the Supreme Court’s decision, the Federal Circuit held that the trial court erred in excluding Cisco’s evidence of a good-faith belief that Commil’s patent was invalid. The Federal Circuit noted that it is “axiomatic that one cannot infringe an invalid patent” and held that “evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.”

Majority Opinion

Importantly, the Supreme Court began by clarifying its holding in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. ___ (2011). In particular, Commil and the government (which supported Commil in the case) both argued that Global-Tech should be read as holding that only knowledge of the patent is required for induced infringement; that a party charged with inducing infringement need not know that the acts induced would infringe. The Court rejected this argument, noting that such a reading “would contravene Global-Tech’s explicit holding that 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.’” (Quoting Global-Tech.) According to the Court, “Global-Tech requires more. It requires proof the defendant knew the acts were infringing. And the Court’s opinion was clear in rejecting any lesser mental state as the standard.”

The Court next held that an accused infringer’s belief regarding patent validity is not a defense to a claim of induced infringement.  The Court provided four primary reasons for rejecting the Federal Circuit’s previous ruling. First, the Court reasoned that the Patent Act treats infringement and invalidity as distinct issues. According to the Court, “[w]hen infringement is the issue, the validity of the patent is not the question to be confronted.” The Court explained that “the issues of infringement and validity appear in separate parts of the Patent Act” and “noninfringement and invalidity are listed as two separate defenses . . . and defendants are free to raise either or both of them.” “Were this Court to interpret §271(b) as permitting a defense of belief in invalidity, it would conflate the issues of infringement and validity.”

Second, the Court reasoned that allowing consideration of an accused infringer’s belief of invalidity would undermine the statutory presumption that a patent is valid:

That presumption takes away any need for a plaintiff to prove his patent is valid to bring a claim. But if belief in invalidity were a defense to induced infringement, the force of that presumption would be lessened to a drastic degree, for a defendant could prevail if he proved he reasonably believed the patent was invalid. That would circumvent the high bar Congress is presumed to have chosen: the clear and convincing standard.

(Citations omitted.)

Third, the Court reasoned that “invalidity is not a defense to infringement, it is a defense to liability . . . [a]nd because of that fact, a belief as to invalidity cannot negate the scienter required for induced infringement.”

Finally, the Court cited “practical reasons not to create a defense based on a good-faith belief in invalidity.” Specifically, the Court noted that accused infringers have other ways to obtain a ruling that a patent is invalid, including filing a declaratory judgment action, inter partes review, or ex parte reexamination, and pleading invalidity as an affirmative defense. The Court also cited “negative consequences” such as making litigation more burdensome and costly and more difficult for juries.

Dissent

In his dissenting opinion, which was joined by Chief Justice Roberts, Justice Scalia agreed with the majority’s rejection of Commil’s argument that induced infringement does not “require knowledge of the infringing nature of the induced acts.” He disagreed, however, that an accused infringer’s good-faith belief of invalidity was not a defense to a claim of induced infringement. He argued that, because it is impossible to infringe an invalid patent, it is impossible for anyone with a good-faith belief that a patent is invalid to induce actions the he or she knows will being infringing.

Implications of Decision

The Court’s holding regarding a good-faith belief of invalidity will likely have a modest impact on future cases, as the Federal Circuit holding that was overruled merely indicated that a good-faith belief of invalidity “may” negate a finding of inducement.

What will likely have a greater impact is the Court’s clarification of its Global-Tech decision. That clarification should make it more difficult for plaintiffs to prove inducement because plaintiffs can no longer argue that Global-Tech does not require that an accused infringer know that its induced acts constitute infringement, and that knowledge of the patent alone is sufficient.