Supreme Court Will Review the Standard for Induced Infringement

The Supreme Court granted certiorari on Friday to review another patent case—Commil, USA, LLC v. Cisco Systems, Inc.—which involves the mental state required for induced infringement liability under 35 U.S.C. § 271(b). In particular, the Court will determine whether a defendant's good faith belief that the patent is invalid is a defense to induced infringement. The decision will effect almost every patent case now pending: every defendant raises invalidity defenses, and many are accused of inducement, especially in cases involving method patents, which are common in fields ranging from software to medical devices to biotechnology. It is therefore worth examining Commil in detail.

The Background Leading up to Commil

There are two broad categories of infringement: (1) direct infringement, under which one who makes, uses, sells, offers to sell, or imports a patented invention is liable, and (2) indirect infringement, under which one who induces another to infringe or contributes to another's infringement is also liable. Direct infringement is usually a strict liability offense, meaning that the defendant doesn't have to know it was infringing (or even knew about the patent at all) to be liable. Indirect infringement is different: the defendant must have some awareness that what it was doing is wrong. Why the different treatment? An indirect infringer's conduct is not itself per se unlawful and might have an innocent explanation, so the mental state requirement helps protect innocent conduct. Accomplice liability in the criminal law provides a useful analogy—bringing your friend lighter fluid and matches is innocent conduct if you think he's using it for a barbeque, but not if you know he's using it to burn down his neighbor's house. Liability attaches only in the latter case.

So what exactly must the defendant know to be liable for induced infringement? The Supreme Court answered one part of that question in Global-Tech Appliances, Inc. v. SEB SA, 131 S. Ct. 2060 (2011), when it held the defendant must at least know the patent exists (or be willfully blind to its existence). Global-Tech also confirmed the defendant must know what its conduct is inducing others to do—there, the defendant knew its customer was importing the accused product into the United States. But Global-Tech was less clear on another part of the question: does the defendant have to know that it is inducing conduct that is covered by the patent? That issue was not presented in Global-Tech because the defendant argued only that it didn't know about the patent, not that it knew of the patent but didn't think it covered the accused product. But Global-Tech seemed to answer it anyway, broadly stating that "induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement." See 131 S. Ct. at 2068. The Federal Circuit has likewise held (in cases both before and after Global-Tech) that a good faith belief in non-infringement was a defense to inducement.

The Federal Circuit's Commil Opinions

This raised yet another question, which has now come to a head in Commil. What about a defendant who says that it thought it had a good faith defense because the patent was invalid? Is that enough to preclude liability for induced infringement?

A split panel of the Federal Circuit held that a defendant's good faith belief the patent is invalid "may" be a defense to induced infringement. See Commil USA, LLC v. Cisco Sys., Inc., 720 F.3d 1361 (Fed. Cir. 2013). The majority's reasoning was that you can't infringe an invalid patent, and so, if a good faith belief in non-infringement is a defense, then a good faith belief in invalidity must be too:

Under our case law, it is clear that a good-faith belief of non-infringement is relevant evidence that tends to show that an accused inducer lacked the intent required to be held liable for induced infringement. We see 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.

It is axiomatic that one cannot infringe an invalid patent. Accordingly, one could be aware of a patent and induce another to perform the steps of the patent claim, but have a good-faith belief that the patent is not valid. Under those circumstances, it can hardly be said that the alleged inducer intended to induce infringement. Thus, a good-faith belief of invalidity is evidence that may negate the specific intent to encourage another’s infringement, which is required for induced infringement. . . .

This is, of course, not to say that such evidence precludes a finding of induced infringement. Rather, it is evidence that should be considered by the fact-finder in determining whether an accused party knew "that the induced acts constitute patent infringement." Global-Tech, 131 S.Ct. at 2068.

Commil, 720 F.3d at 1367-69 (some internal cites and footnote omitted). Although the majority disclaimed adoption of a per se rule, it did not explain how a defendant could hold a good faith belief in invalidity yet still be liable for inducement. In dissent, Judge Newman said the majority was adopting such a per se rule.

The Federal Circuit subsequently denied rehearing en banc in a close 6-5 vote. See Commil USA, LLC v. Cisco Sys., Inc., 737 F.3d 699 (Fed. Cir. 2013). The dissenters raised three primary objections to the panel's decision: (1) the term "infringement" in § 271 refers solely to whether a product or process meets all limitations of the patent; (2) "infringement" and invalidity are separate issues under the patent statute; and (3) permitting a good faith invalidity defense to negate inducement liability undermines the presumption of validity and complicates the inquiry. Id. at 701-03 (Reyna, J., dissenting). They were also concerned about the decision's far-reaching future consequences: "The new rule is a powerful tool in patent litigation in that it establishes an escape hatch from liability of infringement that is not now in the statute." Id. at 703. And, indeed, many patent practitioners, including at least one of my colleagues, began advising clients accused of inducement to obtain opinions of counsel that the patent was invalid, to shore up that good faith belief for potential use as a trial defense.

Commil at the Cert. Stage

Before granting certiorari, the Supreme Court asked for the U.S. Government's view about whether it should take the case. The Solicitor General's brief urged the Court to take the case and reverse. The Solicitor's analysis may shed light on why the Court is interested in the case and what it might do.

Notably, the Solicitor first questioned whether Global-Tech actually held that a patentee must prove the defendant knew the acts it was inducing constitute infringement:

Global-Tech clearly establishes that a defendant may be held liable under Section 271(b) only if it knew about the patent at issue. Global-Tech does not clearly resolve, however, whether the defendant must additionally possess actual knowledge that the induced conduct constitutes infringement. On the one hand, certain passages in Global-Tech suggest that Section 271(b) requires only knowledge of (or willful blindness to) the patent's existence. On the other hand, prominent passages in Global-Tech suggest that Section 271(b) additionally requires proof that the defendant knew the induced conduct to be infringing. The factual circumstances of Global-Tech did not require the Court to choose between those two potential understandings of Section 271(b)'s scienter requirement.

S.G. Brief at 9-10 (internal cites omitted). The Solicitor acknowledged, however, that the Federal Circuit has found a good faith belief in non-infringement as a defense and assumed it was true because the parties hadn't challenged it.

Even on that assumption, the Solicitor still argued the Commil panel's rule was unjustified. The Solicitor refined the panel's axiomatic statement that one cannot infringe an invalid patent, asserting the "more accurate statement of the law" is that "a finding of invalidity does not negate the fact of infringement, but instead precludes liability for infringement." S.G. Brief at 12. Applying that formulation, the Solicitor then argued there is a principled distinction between a good faith belief in non-infringement and invalidity:

If Section 271(b) requires knowledge that the induced conduct actually infringes a patent, then the accused infringer's good-faith belief that it was inducing activities outside the patent's coverage would negate that required knowledge. By contrast, an inducer who knows that the induced conduct practices a patent, but who believes that the patent is invalid, nevertheless knows that it is inducing "infringement" as that term is properly understood.

S.G. Brief at 13-14 (internal cites omitted).

The Solicitor also took aim at the Commil panel's assertion that a good faith belief in invalidity "may" be a defense to inducement but might not always preclude liability:

The Federal Circuit asserted that, although a good-faith belief in invalidity will sometimes preclude liability, it will not necessarily have that effect. But if a good-faith belief in invalidity establishes that the defendant "can hardly be said" to have intended to induce infringement, [Commil, 720 F.3d at 1368], it is unclear how there could ever be circumstances in which the defendant believed the patent was invalid but still intended to induce infringement.

S.G. Brief at 11-12 n.2.

The Solicitor closed by stressing the high stakes involved and the need to strike the proper balance between patent rights and not ensnaring innocent defendants. After predicting that "accused infringers are likely to raise the new defense in most, if not all, cases," id. at 14, the Solicitor expressed concern for the potential damage to patent rights. It stressed that "inducement liability provides an important means of enforcing patent rights," noting Judge Rich's statement that, at the time of the 1952 Patent Act, about 20-30% of patents could not practically be enforced against direct infringers. That number may be even higher today. For example, many patents on computer chips and other small electronics components must be primarily enforced through indirect infringement because the components are manufactured abroad and imported only after being incorporated into large devices by third parties. Likewise, many software patents cover methods executed by customers, and, without indirect infringement, the patent holder could only pursue thousands or millions of individual customers.

What Will the Supreme Court Do?

It is, of course, hard to predict what will happen next—all we know for sure is that Supreme Court is interested in resolving the issue, not what they will do. But, if recent history is a guide, then reversal is likely. That is what the Supreme Court has done in most patent cases from the last few years, and there would have been little reason for them to take the case to affirm.

The trickier task is to identify the alternative standard the Supreme Court will adopt. The Court could take the Solicitor's narrow approach, assume a good faith belief in non-infringement precludes liability, but hold that a good faith belief in invalidity is not. The Court did something similar in Akamai last year, assuming the Federal Circuit's "single-actor" rule for joint infringement was correct but reversing its construction of another aspect of inducement liability. Or the Court could use the case to make a broader pronouncement, perhaps clarifying Global-Tech to tell us whether or not a good faith belief in non-infringement is a defense. (If it were not, then the Federal Circuit's ruling would necessarily fall.) Or maybe the Supreme Court has something altogether different in mind. Maybe it wants to say a good faith belief in invalidity is always a defense to inducement and eliminate the Federal Circuit's equivocation on that issue.

Whatever the answer, we will have it by the end of the Court's term in June. In the meantime, interested parties may want to consider filing amicus briefs to try to help shape the final decision. And everyone with currently pending cases (especially those about to go to trial) will have to think about how this impacts their case, and to preserve all possible positions on the question in case the Supreme Court changes the law.