In a split decision earlier today, the U.S. Supreme Court in Commil USA, LLC v. Cisco Systems, Inc. reversed the Federal Circuit's holding that evidence of an accused inducer's good-faith belief of invalidity may negate the requisite intent for induced infringement.

Background of the Case

Commil USA sued Cisco Systems in the Eastern District of Texas for direct and induced infringement of a patent claiming a method of implementing short-range wireless networks. At a first trial, a jury found that Commil's patent was valid and that Cisco had directly infringed, awarding $3.7 million in damages, but that Cisco had not induced infringement. The district court, however, granted Commil's motion for a new trial on induced infringement and damages.

In the meantime, Cisco filed a request for ex parte reexamination of Commil's patent. Although the USPTO granted Cisco's request, it ultimately found Commil's patent valid.

During the second trial, the district court ruled that Cisco's proffered evidence of good-faith belief of the patent's invalidity was inadmissible, and instructed the jury that it could find inducement if "Cisco actually intended to cause the acts that constitute … direct infringement and that Cisco knew or should have known that its actions would induce actual infringement." The second jury found that Cisco had induced infringement and awarded $63.7 million in damages.

Between the time of the second trial and the Federal Circuit appeal, the Supreme Court issued its decision in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. ___ (2011). In Global-Tech, the Supreme Court held that, in an action for induced infringement, it is necessary for a plaintiff to show that an alleged inducer (1) knew of the patent in question and (2) knew the induced acts were infringing. Relying on Global-Tech, Cisco again urged the district court to find that the jury instruction was incorrect because it did not state knowledge as the governing standard for inducement liability. The district court denied Cisco's motion.

On appeal, the Federal Circuit reversed, holding in relevant part that "evidence of an accused inducer's good-faith belief of invalidity may negate the requisite intent for induced infringement," reasoning that there was "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 Federal Circuit denied en banc review, and the Supreme Court granted Commil's petition for certiorari, reversing today.

The Supreme Court's Analysis

The Supreme Court focused on four reasons why a good-faith belief of invalidity is not a valid defense.

First, the Court reasoned that "infringement and invalidity are separate matters under patent law," such that "when infringement is the issue, the validity of the patent is not the question to be confronted." To support this conclusion, the Court pointed to the Patent Act's separation of infringement and validity: "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 permitting a good-faith belief defense would undermine the presumption that patents are valid. "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."

Third, the Court reasoned 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."

Fourth, the Court outlined a variety of practical reasons for not creating a good-faith defense, citing an accused infringer's ability to challenge validity through a declaratory judgment action or a Patent Office proceeding and saying that creating a defense of invalidity would make litigation more burdensome by increasing discovery costs and complicating the issues for the jury. The Court further reasoned that a good-faith belief is disallowed as a defense in other fields of law, such as with tortious interference with a contract, trespass, and criminal law.

The Court further stressed that although this particular case did not present an issue of frivolity, district courts have the power to curb frivolous cases by sanctioning attorneys under Federal Rule of Civil Procedure 11 and by awarding attorneys' fees in exceptional cases under 35 U.S.C. § 285. "These safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity."

In a dissenting opinion, Justice Scalia, joined by Chief Justice Roberts, wrote:  "It follows, as night the day, that only valid patents can be infringed. To talk of infringing an invalid patent is to talk nonsense."