Belief Regarding Patent Invalidity Not a Defense to Inducement Claims; Inducement Requires Knowledge That Defendant Knows Actions Induced Constitute Patent Infringement

Valley Forge, PA | May 2015 – Today, the Supreme Court issued a split, and long-awaited, decision in Commil USA, LLC v. Cisco Systems, Inc. regarding whether a defendant’s good-faith belief in the invalidity of a patent is a defense to a charge of induced infringement. 575 U.S. ___ (2015). The Supreme Court’s concise answer to that question? “It is not.”

Briefly, a jury found that Cisco induced infringement of Commil’s patent, which related to a method of implemented short-range wireless networks. Cisco appealed that judgment, alleging as error the district court’s exclusion of Cisco’s evidence that it held a good-faith belief of invalidity of the asserted patent. The majority of the Federal Circuit agreed:

It is axiomatic that one cannot infringe an invalid patent. … Accordingly, one could be aware of a patent and induce another to perform the steps of the patent claim, but have a good-faith belief that the patent is not valid. Under those circumstances, it can hardly be said that the alleged inducer intended to induce infringement. Thus, a good-faith belief of invalidity is evidence that may negate the specific intent to encourage another’s infringement, which is required for induced infringement.

Commil appealed.

The Supreme Court began its analysis noting that infringement and validity are separate, and appear in separate sections, under the Patent Act. The Court also found that allowing such a defense would undermine a “common core of thought and truth” – the presumption of validity. While acknowledging the axiom that “an invalid patent cannot be infringed” as “a simple truth …[,]” the Court reiterated that “validity and infringement are distinct issues” with different burdens, presumptions, and evidence. The Court emphasized that invalidity is not a defense to infringement, but to liability for infringement. As such, “a belief as to invalidity cannot negate the scienter required” for induced infringement.

The Court identified several “practical reasons” in favor of its holding. First, a defendant can always access the available administrative review mechanisms—including inter partes review and ex parte reexamination—if it truly believes a patent is invalid. Second, an invalidity belief defense would raise the cost of litigation and make it “easier” for accused infringers to prevail on inducement claims. Finally, as a matter of fundamental jurisprudence, the Court noted that a “I thought it was legal” mentality provides no defense to liability.

The Court also rejected any notion that an invalidity belief defense is warranted to combat frivolous claims. Rather, the Court acknowledged that multiple other measures exist to offset this concern, including attorney fee motions under 35 U.S.C. § 285 or motions for sanctions under Fed. R. Civ. P. 11.

While acknowledging that such was “not in question here,” the majority also proceeded to answer a subsidiary question regarding the scope of the defendant’s knowledge required to demonstrate inducement. The Court rejected Commil’s argument that only knowledge of the patent is required for inducement. Rather, the Court expressed its agreement with the Federal Circuit that inducement requires both: 1) knowledge of the asserted patent; and 2) knowledge that the defendant “knew the acts were infringing.”

Justice Scalia, in his dissent, attacked the Court’s “practical reasons” relied upon by the majority. Justice Scalia observed that it is not the Court’s job to “create defenses to statutory liability,” but to “interpret the Patent Act” and whether the Act makes a good-faith belief in invalidity a defense to inducement. According to Justice Scalia, the majority’s holding “increases the in terrorem power of patent trolls ….” Slip op., dissent, at p. 3.

The decision is a win for patent holders, but it will likely also spur even further interest in the already hot AIA post-grant provisions – most notably inter partes review. If a market entrant is looking at possible strategies in the face of potential inducement claims, it will be important to take a proactive role as opposed to just documenting a basis of invalidity or getting an opinion of counsel. Your good faith belief of invalidity isn’t what counts. It’s your ability to actually establish invalidity—whether through administrative review or as a defense during litigation—that matters. The Supreme Court has made it abundantly clear that although your good faith belief of invalidity may indeed be well placed, it alone is not enough. You will need to continue to put your money where your mouth is when faced with patent claims of dubious validity.

RatnerPrestia’s practice is devoted exclusively to Intellectual Property law. With extensive and diverse legal, technical and corporate expertise, its professionals provide practical, cost-effective, business-oriented counseling to a wide range of international and domestic businesses. It represents clients in court proceedings and before the U.S. Patent and Trademark Office. Through its extensive network of foreign associates, it also represents clients before courts and administrative bodies around the world. RatnerPrestia is a full-service IP firm with a 30 year proven track record of success. For additional information, visit www.RatnerPrestia.com