Yesterday the United States Supreme Court issued a decision in Commil USA, LLC v. Cisco Systems, Inc. The case dealt with the issue of induced infringement. Specifically, the issue considered by the Supreme Court was whether a good faith belief of patent invalidity is a defense to a claim of induced infringement. In a 6-2 decision written by Justice Kennedy, the Supreme Court ruled that belief of invalidity is not a defense to a claim of induced infringement. Justice Breyer took no part in the decision. Justice Scalia, who was joined by Chief Justice Roberts, dissented.
While it seems that the Supreme Court issued a reasonable decision in this case it is deeply troubling how little the Supreme Court actually knows about patent law. In addition to repeatedly discussing the validity of the Commil patent, rather than the validity of the patent claims, the Supreme Court also seemed to suggest that Cisco could have relied on a procedural challenge to the Commil patent that simply wasn’t available as an option at any relevant time during the proceedings. Thus, even when the Supreme Court issues a decision within the bounds of reasonableness they can’t help but evidence their lack of knowledge with respect to basic patent law concepts.
The history of this dispute dates back to 2007 when Commil, which makes and sells wireless networking equipment, sued Cisco in the United States District Court for the Eastern District of Texas. Commil alleged that Cisco had directly infringed Commil’s patent under 35 U.S.C. 271(a) by making and using networking equipment. Commil also alleged that Cisco had induced others to infringe the patent under 35 U.S.C. 271(b) by selling the infringing equipment for them to use.
At the conclusion of the first trial the jury concluded that Commil’s patent was valid and that Cisco had directly infringed. The jury also found that Cisco was not liable for induced infringement. The jury awarded Commil $3.7 million in damages for direct infringement. At the conclusion of the trial Commil filed a motion for a new trial on induced infringement and damages, which the District Court granted.
One month before the start of the second trial Cisco filed a petition for reexamination of the Commil patent at the United States Patent and Trademark Office (USPTO). The USPTO granted Cisco’s request but ultimately confirmed the validity of Commil’s patent claims.
When the second trial proceeded Cisco raised a good faith defense to the claim of induced infringement, arguing that it had a good faith belief that Commil’s patent was invalid. As a result, Cisco argued that it could not be liable for induced infringement. To this end, Cisco sought to introduce evidence to support their asserted good faith belief of patent invalidity. The District Court ruled that Cisco’s proffered evidence of good faith belief of invalidity was inadmissible. Ultimately, on April 8, 2011, the jury returned a verdict in favor of Commil on induced infringement and awarded $63.7 million in damages.
Cisco appealed to the United States Court of Appeals for the Federal Circuit. The Federal Circuit affirmed in part, vacated in part, and remanded for further proceedings. In an opinion by current Chief Judge Prost, the Federal Circuit concluded: “Cisco’s evidence of a good faith belief of invalidity may negate the requisite intent for induced infringement.” The Federal Circuit explained that the District Court erred by allowing the jury to find Cisco liable for induced infringement “based on mere negligence where knowledge is required.” This decision was not at issue at the Supreme Court.
The issue taken by the Supreme Court related to a separate, second holding of the Federal Circuit relating to Cisco’s contention that the trial court committed error by excluding Cisco’s evidence that it had a good faith belief that Commil’s patent was invalid. The Federal Circuit reasoned: “evidence of an accused inducer’s good faith belief of patent invalidity may negate the requisite intent for induced infringement.” Judge Newman dissented on that point. In Judge Newman’s view a good faith belief of patent invalidity is not a defense to induced infringement, which was the rule ultimately adopted by the Supreme Court.
SCOTUS Ruling on Induced Infringement
Justice Kennedy delivered the opinion of the Supreme Court, starting his substantive analysis with a discussion of direct infringement, which was joined by Justices Ginsburg, Alito, Sotomayor and Kagan. Justice Thomas, who joined in the majority with respect to Parts II-B and III, did not join the substantive background discussions. Although Justice Thomas did not file a separate opinion it seems that he did not join parts of the decision that were historical in nature (Part I) and those parts of the decision that related to substantive discussion of legal issues not being considered by the Court (Part II-A). Notwithstanding, Kennedy began by explaining that direct infringement is a strict liability offense, which means that the defendant’s state of mind is irrelevant. In contrast to direct infringement, however, liability for inducing infringement attaches only if the defendant both knew of the patent and that “the induced acts constitute patent infringement.”
Moving on to the issue at hand, regarding whether a good faith belief of patent invalidity is a defense to a claim of induced infringement, Kennedy explained: “[B]ecause infringement and validity are separate issues under the Act, belief regarding validity cannot negate the scienter required under §271(b).” Kennedy concluded: “Were this Court to interpret §271(b) as permitting a defense of belief in invalidity, it would conflate the issues of infringement and validity.”
Moving on to address the logical argument that an invalid patent cannot be infringed, Kennedy explained logic and semantics sometimes must give way to interpretation of an otherwise clear statutory framework. Kennedy wrote:
To say that an invalid patent cannot be infringed, or that someone cannot be induced to infringe an invalid patent, is in one sense a simple truth, both as a matter of logic and semantics. See M. Swift & Sons, Inc. v. W. H. Coe Mfg. Co., 102 F. 2d 391, 396 (CA1 1939). But the questions courts must address when interpreting and implementing the statutory framework require a determination of the procedures and sequences that the parties must follow to prove the act of wrongful inducement and any related issues of patent validity. “Validity and infringement are distinct issues, bearing different burdens, different presumptions, and different evidence.” 720 F. 3d, at 1374 (opinion of Newman, J.). To be sure, if at the end of the day, an act that would have been an infringement or an inducement to infringe pertains to a patent that is shown to be invalid, there is no patent to be infringed. But the allocation of the burden to persuade on these questions, and the timing for the presentations of the relevant arguments, are concerns of central relevance to the orderly administration of the patent system.
Kennedy also took the opportunity to explain the other avenues that Cisco could have taken if they had a good faith belief that the patent claims of the Commil patent were invalid. Citing the opportunity to file a declaratory judgment action, seek inter partes review at the USPTO, or filing a request for reexamination as Commil did, Kennedy wrote:
There are also practical reasons not to create a defense based on a good-faith belief in invalidity. First and foremost, accused inducers who believe a patent is invalid have various proper ways to obtain a ruling to that effect. They can file a declaratory judgment action asking a federal court to declare the patent invalid. See MedImmune, Inc. v. Genentech, Inc., 549 U. S. 118, 137 (2007). They can seek inter partes review at the Patent Trial and Appeal Board and receive a decision as to validity within 12 to 18 months. See §316. Or they can, as Cisco did here, seek ex parte reexamination of the patent by the Patent and Trademark Office. §302. And, of course, any accused infringer who believes the patent in suit is invalid may raise the affirmative defense of invalidity.
A portion of this explanation by Justice Kennedy seems a bit disingenuous, at least in this case. The ability to seek inter partes review (IPR) before the PTAB at the USPTO did not become an option until September 16, 2012, on the first anniversary of the signing of the America Invents Act (AIA). The second trial concluded with a jury verdict on April 8, 2011, which was more than five months before an IPR could have been filed. While it is true that an IPR can be filed to challenge any patent, there was no realistic opportunity for Cisco to file an IPR challenging the Commil patent claims.
The Patent Troll Not in the Room
Once again the Supreme Court was mindful of patent licensing practices and abusive litigation tactics employed by so-called patent trolls. In the final section of the Supreme Court’s opinion Justice Kennedy wrote that the Court is mindful of abusive licensing practices, but that in this case the parties raised no issue of frivolity.
Notwithstanding, Justice Kennedy wrote that it is “necessary and proper to stress that district courts have the authority and responsibility” to stop the filing of frivolous patent infringement lawsuits. Citing to Federal Rule of Civil Procedure 11, Kennedy explained that if frivolous cases are filed “it is within the power of the court to sanction attorneys for bringing such suits.” Kennedy also went on to reiterate that district courts now have broad discretion to award attorney’s fees to prevailing parties in exceptional cases, thanks to the Court’s 2014 ruling in Octane Fitness. Kennedy explained that the ability to rely on Rule 11 sanctions and discretion to award attorneys fees “militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity.”
SCOTUS and the Invalid Patent
Time and time again throughout this decision Justice Kennedy addresses the validity of the Commil patent, which is why this article discusses the issue in those terms. Of course, a patent cannot be invalid. Still, discussion of whether the patent was properly believed to be invalid raises important questions. First, is the Supreme Court simply not being nuanced and merely using sloppy shorthand language? Second, is the Supreme Court envisioning some new defense whereby invalidity is not examined on a claim-by-claim basis, but rather on a patent-by-patent basis? Third, does the Supreme Court know enough about patent law to even be making any decision at all?
It is axiomatic that invalidity is an issue to be considered on a claim-by-claim basis. Indeed, if Cisco had prevailed during reexamination the patent would not have been declared invalid even if all claims had been invalidated. A patent without claims, which is admittedly useless, would have emerged from reexamination.
There is little evidence in this opinion that the Supreme Court is adopting a new view on invalidity whereby a patent could be invalidated in whole. It is, however, correct to observe that in recent patent eligibility decisions the Supreme Court has instructed courts to look past the claims and determine what the invention really is before ruling on patent eligibility. Ignoring the patent claims is a concerning trend in Supreme Court cases, which is why the failure to properly characterize invalidity as relating to patent claims and not to the entire patent is so troubling.
Taking issue with the Supreme Court discussing the invalidity of a patent rather than discussing the invalidity of patent claims may seem a minor point to some, but this is an important piece to a much larger narrative. The Supreme Court does not understand basic patent law and routinely makes numerous silly mistakes. If a law student taking a basic Patent Law 101 course were to discuss “validity of a patent” in a final exam they would be marked down for missing a nuance that is critical to substantive patent law. The Supreme Court, however, can make sloppy misstatements of law without any consequences. Unfortunately, the Supreme Court can make up patent law as they go along, which they increasingly do.
Discussing the validity of a patent rather than the validity of patent claims would perhaps be a minor matter not even worthy of mention, but Justice Kennedy and five other Supreme Court Justices suggest the filing of an inter partes review as a way to challenge patents (or patent claims) thought to be invalid. Was the Supreme Court really suggesting that Cisco should have filed an IPR after two jury trials on the issue of inducement had already concluded and while the case was pending on appeal to the Federal Circuit? Or did the Supreme Court simply not know that IPR wasn’t an option to challenge patent claims until September 16, 2012? Perhaps the Supreme Court was merely saying there is no reason to conflate validity with infringement given the myriad ways to now challenge a patent, but it is not clear that Cisco had standing to bring a declaratory judgment action, and they certainly could not have brought an IPR.
Regardless of whether the Supreme Court decided this case properly, it is abundantly clear that the Supreme Court is wholly unqualified to address even basic issues of patent law with the nuance necessary. Careless misstatements evidence a total lack of understanding, which creates uncertainty and confusion. Either the Supreme Court needs a remedial tutorial on patent law or they need to stop taking cases in an area where they seem to lack competence.