CVSG Filed in Commil: Is This Yet Another “Fundamental Misunderstanding” of Patent Law by the Federal Circuit?

On June 2nd, the Supreme Court unanimously reversed the Federal Circuit’s decision in Limelight Networks, Inc. v. Akamai Technologies, Inc. The Court found a defendant could not be held liable for induced infringement of a patent under 35 U.S.C. §271(b) where there has been no infringement under §271(a). In the opinion, the Court had some harsh words for the Federal Circuit. The Court was uncertain why, despite the “simple truth” that liability for inducement must be predicated on direct infringement (to which all parties and the Federal Circuit agreed), the Federal Circuit nonetheless continued its analysis. Ultimately, the Court felt that “the Federal Circuit’s analysis fundamentally misunderstands” method patent infringement.  The amicus brief filed by the Government on October 16th in Cisco Systems, Inc. v. Commil USA, LLC suggests that if and when the Court considers the case, it might reject the Federal Circuit’s decision with comparable vigor.

Commil alleged that Cisco both directly infringed and induced infringement of its method patent for hand-offs of mobile devices between base stations in a wireless network system. During the district court trial (the second, the first being reversed after an attempt to unfairly prejudice the jury by counsel for Cisco), the jury found for Commil on both issues and awarded $63.7 million in damages (with an additional $10.3 million awarded by the court for prejudgment interest and costs). On appeal, Cisco argued that the jury instruction on the claim of induced infringement used the language of negligence as opposed to instructing the jury on the higher scienter requirement the Court has adopted for induced infringement cases. Of greater importance, the Federal Circuit held that Cisco should have been able to admit evidence of its good-faith belief that the patent was invalid which bears upon the “willful knowledge” scienter requirement. As it is “axiomatic that one cannot infringe an invalid patent,” the court reasoned that a “good-faith belief of invalidity” could negate the requisite “specific” intent for induced infringement.

The Federal Circuit’s support for this new defense was hardly unanimous. Judge Newman, in dissent, argued that the majority’s holding was “contrary to the principles of tort liability, codified in [§271(b)].” A subsequent petition to grant rehearing en banc was denied by a 6-5 vote in the face of two additional dissents. All five dissenting judges, led by Judge Reyna, argued that the defense is “without foundation in law and precedent.” The Government’s brief in support of granting certiorari on the issue of the good-faith defense asserted a similar position.

As with the dissenting judges, the Government took issue with the good-faith defense as being “inconsistent with the text, structure, and the purposes of the relevant Patent Act provisions.” Firstly, the Government argued that patent invalidity and non-infringement of the patent are separate defenses under the Patent Act. “The validity of the patent is not an element of direct infringement” so they argued that any belief that the patent is invalid is “irrelevant” to direct infringement. Direct infringement is a strict-liability tort, so the only defense is simply that no direct infringement occurred (i.e. non-infringement).

The brief was particularly concerned with the “axiomatic” proposition that one cannot infringe an invalid patent: it noted that one of the authors of the original Patent Act described the very assertion as a “nonsense statement.” An actual finding of invalidity would preclude liability for infringement, direct or induced, and not “negate the fact of infringement.” Furthermore, infringement is understood as practicing the actions which the granted patent allegedly protects, whether or not that grant should have been made by the PTO. Even if the inducer subjectively believes that the patent is invalid, inducing the conduct amounts to inducing infringement.

Finally, the Government affirmed the belief held by the Federal Circuit dissenting judges that this defense would “fundamentally change” inducement suits, and not necessarily in a manner favorable to patent holders attempting to enforce their rights. Recognizing that some amount of direct patent infringement (perhaps 20 or 30 percent) cannot be enforced in a practical manner, Congress made the policy decision to allow for an induced infringement cause of action in order to provide some recourse in these situations. Recognizing that all defendants may now “quickly obtain an ‘opinion of counsel’ to support a claim of good-faith belief in invalidity,” the Government sees the potential that this defense may “substantially undermine” a primary purpose of §271(b).

Amidst a clear opposition by almost half of the Federal Circuit and the US government, on top of the existing and explicit lack of trust the Supreme Court has in the Federal Circuit’s understanding of method patents (the type allegedly infringed in Commil), it would be surprising if the Court denied cert. on this issue. If the misunderstanding here is as fundamental as in Limelight (as those in opposition present it to be), the Court may soon be forcefully overruling another Federal Circuit inducement decision.

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