Supreme Court Strikes Down New Defense to Inducing Patent Infringement

Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896)

On May 26, 2015, the Supreme Court issued its decision in Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896), rejecting the accused patent infringer’s argument that a good faith belief that the patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b). In the majority opinion by Justice Kennedy,[1] the Court confirmed its previous holding in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. __ (2011) that to be liable for inducing infringement the inducer must have knowledge (1) of the patent, and (2) that the induced acts constitute infringement. Slip Op.at 6. Thus, if the alleged inducer reasonably believes that the acts it induces are not infringing, there can be no liability for inducing infringement. Slip Op. at 9. The accused inducer in this case, Cisco, argued that a good faith belief that the patent is invalid should likewise preclude a finding of inducement because an invalid patent cannot be infringed, and a belief of invalidity therefore negates any knowledge that the induced acts constitute infringement.

The majority rejected this argument for several reasons. First, the majority notes that the Patent Act treats infringement and invalidity separately. The infringement statute, Section 271, is found in Part III of the Act, entitled “Patents and the Protection of Patent Rights,” while the patentability statutes, Sections 101, 102, and 103, etc., are in Part II, entitled “Patentability of Inventions and Grants of Patents.” See Slip Op. at 10. Second, the majority further noted that non-infringement and invalidity are listed as separate defenses under Section 282, and allowing a good faith belief of invalidity to defeat an inducement claim would contradict the presumption of validity that issued patents enjoy pursuant to that section. See Slip Op. at 10. Because patents are presumed valid, they must be proved invalid by clear and convincing evidence, as opposed to the lower preponderance-of-the-evidence standard used for proving infringement. According to the majority, this difference further dictates that infringement and invalidity should not be conflated. See Slip Op. at 10. Lastly, the majority noted that allowing the defense would make litigation more burdensome and confuse juries by making them distinguish between the defendant’s belief regarding validity and the actual issue of validity. See Slip Op. at 12.

Interestingly, the majority went out of its way to note that accused infringers still have multiple ways to defend against frivolous patent infringement claims, especially claims by patent assertion entities or “trolls.” The majority stressed that Rule 11 of the Federal Rules of Civil Procedure and 35 U.S.C. § 285 allow district courts to award sanctions and attorney fees against parties who bring frivolous cases. Slip Op. at 14. According to the majority, these deterrents, combined with post-grant review proceedings at the Patent Office, warrant maintaining the separation between infringement and validity.

 

[1] Justice Scalia and Chief Justice Roberts dissented, while Justice Breyer did not take part in deciding the case.

Supreme Court Considers New Defense to Inducing Infringement

Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896)

On March 31, 2015, the Supreme Court heard oral argument in Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896), which relates to whether a defendant can be liable for inducing infringement if the defendant had a good faith belief that the asserted patent is invalid. Under 35 U.S.C. § 271(b), one is liable for inducing infringement if it knowingly induced infringement and possessed specific intent to encourage another’s infringement. Inducement differs from direct infringement under 35 U.S.C. § 271(a) in that direct infringement is a strict liability offense, whereas inducement includes an additional intent requirement. Courts have traditionally held that an alleged inducer’s good faith belief that it (or the party it is inducing) is not infringing the asserted patent is a defense to an inducement claim. Under this theory, if the inducer does not believe it is infringing, it cannot have a specific intent to encourage another party to infringe.

Commil raises the question of whether the alleged inducer’s good-faith belief that the patent is invalid also serves as a defense to inducement liability. In the court below, the Federal Circuit for the first time answered this question in the affirmative. However, infringement and invalidity have traditionally been viewed as separate issues, such that using invalidity as a defense to infringement would conflate two issues that are generally separate. In addition, the Patent Act states that all issued patents carry a presumption of validity. Allowing an accused infringer to avoid inducing infringement based on its good faith belief that the patent is invalid would seem to undercut the statutory presumption of validity.

During oral argument, Justice Scalia likened inducement to aiding and abetting, which requires wrongful intent, suggesting that a belief that the patent is invalid may negate the wrongful intent. Justice Kagan also suggested that infringement and invalidity are two sides of the same coin, such that if a good faith belief of non-infringement is sufficient to defeat inducement liability, a good faith belief of invalidity should also be sufficient. On the other hand, Justice Sotomayor questioned how the presumption of validity can be reconciled with a defense based on a good faith belief of invalidity, suggesting that there may be a split among the justices.

This case is potentially very important for defendants facing claims of inducing infringement. If the Federal Circuit decision is upheld, defendants would have a strong new weapon for avoiding liability for inducement. When defendants receive notice accusing them of inducing infringement of another’s patent, in addition to conducting a non-infringement analysis, they may also want to consider seeking an invalidity opinion of counsel to undercut a potential inducement claim.

Supreme Court Changes Standard Of Review For Patent Claim Construction Rulings

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. – No. 13-854 – January 20, 2015

In Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., the Supreme Court revised the standard of review used by the Federal Circuit for nearly twenty years in reviewing claim construction rulings, replacing a de novo standard with a “clearly erroneous” standard. Teva sued Sandoz for infringing its patent covering a method of manufacturing Copaxone, a drug used to treat multiple sclerosis. The relevant claim recited that the active ingredient has a particular “molecular weight.” Sandoz argued that the claim was indefinite under 35 U.S.C. §112 ¶2 because the term “molecular weight” could refer to any of three different methods of calculating molecular weight.

After hearing expert testimony, the District Court found that the patent was sufficiently definite because a skilled artisan would understand the term “molecular weight” referred specifically to one of the three allegedly possible interpretations. The District Court’s decision was based on the testimony of Teva’s expert regarding how one skilled in the art at the time of the invention would have understood the term. On appeal, the Federal Circuit reviewed the District Court’s decision, including the evaluation of expert testimony, under the de novo standard and found that the claims were indefinite. The Supreme Court reversed the Federal Circuit’s decision, finding that the Federal Circuit applied the incorrect standard of review.

Writing for the majority, Justice Breyer noted that Federal Rule of Civil Procedure 52(a)(6) prevents appellate courts from setting aside a district court’s findings of fact unless they are clearly erroneous. Justice Breyer further noted that although the ultimate question of claim construction is a question of law, underlying questions of fact that inform the claim construction determination are still subject to the “clearly erroneous” standard of Rule 52(a). For example, district courts often hear expert testimony regarding how a particular term is understood by those in the industry–a factual question that the trial court is better positioned to resolve than an appellate court. The majority distinguished between a district court’s consideration of solely intrinsic evidence (e.g., patent specification, drawings, claims, and prosecution history), and a consideration that includes evidence that is extrinsic to the patent (e.g., background science, meaning of a term of art during a particular time period, etc.). In the former, the appellate court’s review is de novo, while the latter constitutes a factual finding that is subject to review for clear error. However, even when a district court must decide a subsidiary factual dispute–e.g., resolving a dispute between competing experts about the meaning of a term at the time of invention–the court must still make a legal determination whether one skilled in the art would ascribe the same meaning to the term in the context of the specific patent at issue. That legal determination is reviewed de novo, but to overturn the district court’s construction on the basis of the underlying factual finding, the appellate court must find clear error.

In weighing the testimony of each side’s expert in this case, the District Court credited Teva’s expert’s testimony regarding how a skilled artisan would understand the term “molecular weight.” The Federal Circuit did not accept Teva’s expert’s explanation, but did not find that the District Court clearly erred in crediting the testimony of Teva’s expert. And for that reason, the Supreme Court remanded the case for the Federal Circuit to apply the correct standard of review.

Prior to the Teva decision, the Federal Circuit routinely overturned claim construction rulings under de novo review, which often led to increased uncertainty and litigation costs, as well as provided hope to parties dissatisfied with a claim construction ruling that it would be overturned on appeal. The Teva decision may reduce uncertainty and costs by ostensibly requiring greater deference to the trial court, but the ultimate effect may depend on how parties litigate claim construction and how district court judges craft their claim construction rulings. Litigants and judges may be inclined to rely more heavily on expert testimony during claim construction in order to insulate claim construction rulings from appellate review. The Federal Circuit’s deference to the lower court’s factual findings in connection with claim construction places a greater emphasis on the court’s already-critical function of construing claims. In view of this deference, litigants should carefully consider the use of experts during claim construction and whether the resultant limited appellate review helps or hurts their case.