U.S. Supreme Court Rejects Good-Faith Invalidity Defense to Induced Patent Infringement

technologyOn May 26, 2015, the U.S. Supreme Court issued its decision in Commil USA LLC v. Cisco Systems, Inc., 575 U. S. ____ ( 2015), rejecting the Federal Circuit Court of Appeals’ recognition of a defense to induced patent infringement claims based on the good-faith belief that a patent is invalid.  The Federal Circuit Court of Appeals decision had vacated Commil’s multi-million dollar award ($63.7 million in damages and $10.3 million in interest) against Cisco Systems, Inc. and required a third trial to consider Cisco’s good-faith defense to Commil’s induced infringement claims.  There is no doubt that the High Court’s 6-2 decision (without Justice Breyer’s participation) has Commil and some other patent holders breathing sighs of relief, as the novel good-faith invalidity defense was seen as opening the flood gates to good-faith defenses based on every possible defense to infringement liability.  The U.S. government joined Commil in urging the Supreme Court to put an abrupt end to the good-faith defense.  Arguments were heard in March and Tuesday the Supreme Court answered the question – “is a good-faith belief that a patent was invalid is enough?” – with the resounding “no” that Commil and the United States wanted.  Our last Commil post outlined key points of contention raised during arguments.  We highlight the Supreme Court’s reasoning for rejecting the good-faith invalidity defense below.

Knowledge Required.  The Supreme Court majority took Commil’s invitation to clarify the intent required for induced infringement, but it rejected the reading of Global-Tech Appliances, Inc. SEB S.A., 131 S.Ct. 2060 (2011) proffered by Commil and the government that limited the mental state necessary for induced infringement to knowledge of the patent.  Instead, the Court clarified that “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.”

Non-Infringement vs. Invalidity.  The Supreme Court did side with Commil and the government by drawing a clear distinction between defenses of noninfringement and validity under the Patent Act, finding that a defendant’s belief regarding the validity of a patent has no bearing on an induced infringement claim and is not a viable defense:

The question the Court confronts today concerns whether a defendant’s belief regarding patent validity is a defense to a claim of induced infringement. It is not. The scienter element for induced infringement concerns infringement; that is a different issue than validity. Section 271(b) requires that the defendant “actively induce[d] infringe­ment.” That language requires intent to “bring about the desired result,” which is infringement. And because infringement and validity are separate issues under the Act, belief regarding validity cannot negate the scienter required under §271(b). When infringement is the issue, the validity of the patent is not the question to be confronted.

The Federal Circuit had proceeded on the grounds that “[i]t is axiomatic that one cannot infringe an invalid patent,” yet the Supreme Court majority relied upon “the long-accepted truth—perhaps the axiom—that infringement and invalidity are separate matters under patent law.”  The Court reasoned that noninfringement and invalidity are two separate statutory defenses that defendants can raise, therefore allowing a defense to infringement based on a belief regarding invalidity “would conflate the issues of infringement and validity.”  The Supreme Court recognized the simplicity and logic behind the axiom proffered by the Federal Circuit, but retorted that the courts must determine the procedures and sequences required by the statutory framework in order to maintain the patent system as intended.  “Validity and in­fringement are distinct issues, bearing different burdens, different presumptions, and different evidence.”  The proper interplay between infringement claims and the invalidity defense according to the Supreme Court:

Invalidity is an affirmative defense that can preclude enforcement of a patent against otherwise infringing conduct. An accused infringer can, of course, attempt to prove that the patent in suit is invalid; if the patent is indeed invalid, and shown to be so under proper procedures, there is no liability. That is because 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 Supreme Court noted among additional practical reasons for rejecting the defense: “In the usual case, ‘I thought it was legal’ is no defense. That concept mirrors this Court’s holding that belief in invalidity will not negate the scienter required under §271(b).”

Presumption of Validity. In rejecting the good-faith belief in invalidity defense, the Supreme Court also pressed the importance of the presumption of validity established by the Patent Act and case law, which places a high burden on defendants.  According to the Court, the presumption that a patent is valid is “a common core of thought and truth reflected in this Court’s precedents for a century,” and the good-faith invalidity defense would significantly lower the burden on defendants.  Instead of establishing by clear and convincing evidence that a patent is invalid, they merely would have to establish a reasonable belief of invalidity, thereby negating the purpose of the presumption.

What About the Trolls? While the Supreme Court’s opinion may be read as strengthening the power of patent trolls, as the Dissent notes, the majority’s opinion does stress that district courts have the authority and responsibility to deter the filing of frivolous cases using powers granted under Federal Rule of Civil Procedure 11 and statutes/case law allowing the grant of attorneys’ fees in exceptional cases.

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