Commil USA V. Cisco Systems: “I thought it was legal” is no defense to induced infringement under 35 U.S.C. § 271(b)
The United States Supreme Court’s recent decision in Commil v. Cisco1 held that a good-faith belief of a patent’s invalidity, standing alone, is insufficient to provide a defense to a claim of inducing another’s infringement of a United States Patent. Viewed through the historical overlap and common reasoning underpinning the analysis of intent to induce infringement under 35 U.S.C. §271(b) and willful infringement under 35 U.S.C. §284, this new jurisprudence will spawn uncertainty and require new litigation strategies under both doctrines. Given this uncertainty, accused infringers may find advantage in going on the offense and leveraging a strong invalidity argument to drive to an early judicial determination of invalidity.
35 U.S.C. §271(b) provides that: “Whoever actively induces infringement of a patent shall be liable as an infringer.” The threshold to a claim of induced infringement requires the active inducement of an act of direct infringement by another. While the plain language of the statute does not speak to “intent,” the meaning of “active inducement” evolved through decades of precedent to require proof that the defendant: (1) had actual knowledge of the patent; (2) knew that “the induced acts constitute patent infringement;” and thus (3) had an intent to induce.2 Prior to Cisco, a good faith belief that a patent was invalid provided a basis on which to defeat the intent element of the inducement inquiry. The reasoning, and based in an axiom of U.S. Patent law, was simple: “one cannot infringe an invalid patent.”3 But in Cisco, the United States Supreme Court turned this axiom on its head, holding that a defendant’s good-faith belief of a patent’s invalidity is not a defense to a claim of induced infringement.
The Decision
Commil filed suit against Cisco in the United States District Court for the Eastern District of Texas, a hotbed of patent ligation in the United States, asserting (among other claims) that Cisco induced infringement of a patented method of implementing short-range wireless networks. In support of its defense to the alleged inducement, Cisco sought to introduce evidence of its good-faith belief that Commil’s patent was invalid, and therefore argue that it could not have knowingly and intentionally induced infringement. The district court, however, excluded this evidence. On appeal, the Federal Circuit reversed, reasoning that “evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.” The Federal Circuit “saw 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.” The Supreme Court granted certiorari on the question of “whether a defendant’s belief regarding patent validity is a defense to a claim of induced infringement.” The Supreme Court’s holding was straight-forward: “It is not.” The Court’s reasoning, however, was substantially more complex.
While the Supreme Court reaffirmed that a plaintiff must show that “the defendant knew of the patent and knew as well that the induced acts constitute patent infringement,”4 the Court reasoned that “invalidity is not a defense to infringement, it is a defense to liability,” and that “permitting a defense of belief in invalidity … would conflate the issues of infringement and invalidity.”
Notwithstanding Justice Scalia’s vehement dissent, the Court’s reasoning behind this fine line distinction hinged on the “long held” presumption of validity under 35 U.S.C. §282(a). Under this presumption, an accused infringer must prove invalidity by clear and convincing evidence to establish its invalidity defense. And, as the Court chided, to allow a good-faith belief in a patent’s invalidity to serve as a defense to inducement would “circumvent the high bar Congress is presumed to have chosen: the clear and convincing standard.” The Court thus held that “invalidity is not a defense to infringement, it is a defense to liability. And because of that fact, a belief as to invalidity cannot negate the scienter required for induced infringement.”
The Court further explained various “practical reasons not to create a defense based on a good-faith belief in invalidity,” stating that accused inducers have several alternate avenues by which to assert or test their belief that a patent is invalid, such as filing a declaratory judgement action, seeking inter partes review, or proving an invalidity defense at trial. In sum, the Court applied a “deeply rooted” general principle of law in the United States: “‘I thought it was legal’ is no defense.”
Cicso’s Impact
Even before we see how the Federal Circuit applies Cisco, this decision will have an immediate effect on opinion practice and pre-litigation strategy. It is common practice for accused inducers (as well as accused direct infringers) to seek an opinion of counsel both to buttress a defense to an allegation of inducement, but also to serve as a defense to willful infringement. To the extent an accused inducer elects to seek an opinion of counsel, if at all possible, that opinion should focus on noninfringement in addition to invalidity. This remains the case no matter how confident an accused inducer is in its invalidity position, even where invalidity is palpable; for example, following a sea change in the law such as Alice Corp. v. CLS Bank International.5 But in the wake of Cisco, such an opinion may be of limited utility if the grounds of invalidity on which it is founded do not ultimately result in an actual judgment of invalidity – a risk borne entirely by the accused infringer. In such a case, accused inducers may find distinct advantage in leveraging a strong invalidity argument early, either through a declaratory judgment action or post grant review before the U.S. Patent and Trademark Office. This undercuts the patentee’s own leverage, which increases as time passes and alleged damages accrue, even if an accused inducer is likely to succeed through more prolonged negotiations and litigation in the end.
It is more challenging to assess the impact of Cisco outside the inducement context and how it may apply – if at all – to opinion practice as a defense to a claim of willful infringement. Pursuant to 35 U.S.C. §284, infringement is willful when the defendant was “objectively reckless … act[ing] despite an objectively high likelihood that its actions constituted infringement of a valid patent.”6 However, it has also been an axiom that “a competent opinion of counsel concluding either that [an accused infringer] did not infringe the [patent] or that it was invalid would provide a sufficient basis for [the accused infringer] to proceed without engaging in objectively reckless behavior….”7 The reasoning of Cisco, however, will be used to challenge the viability of this axiom in the willfulness context. Thus, similar to an accused inducer, an accused direct infringer may strategically benefit from leveraging a strong invalidity defense offensively, and early. Ultimately, the Federal Circuit will likely decline to extend Cisco to willfulness, likely prompting yet another review by the Supreme Court, which is more active in the patent sphere today than at any other time in recent history. In the meantime, the best defense is a good offense.
1 Commil USA, LLC v. Cisco Sys., 135 S.Ct. 1920 (2015) (“Cisco”).
2 Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2068 (2011) (collecting cases).
3 Commil USA, LLC v. Cisco Sys., 720 F.3d 1361, 1368 (Fed. Cir. 2013), rev’d, 135 S.Ct. 1920 (2015); see also Viskase Corp. v. Am. Nat'l Can Co., 261 F.3d 1316, 1323 (Fed. Cir. 2001); Specialty Rental Tools & Supply v. Boyd's Bit Serv., 84 Fed. Appx. 90, 96 (Fed. Cir. 2003).
4 Cisco, 135 S.Ct. at 1926.
5 Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014) (holding that patent claims are invalid if directed to “abstract ideas” and if the ordered combination of those abstract ideas does not amount to an “inventive concept” or is not “meaningfully limited” in scope to prevent sweeping preemption of the field of invention.).
6 In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007).
7 Finisar Corp. v. DirecTV Group, Inc., 523 F.3d 1323, 1339 (Fed. Cir. 2008) (emphasis added).
Authors
Adam P. Samansky
Member
