You think your competitor’s patent is junk? Don’t tell it to the judge


06.08.15 Posted in Supreme Court Opinions by

Commentary by James P. Demers

On May 26, 2015, the U.S. Supreme Court issued a decision in a patent case, Commil USA, LLC v. Cisco Systems, Inc., in which the Court held that a good faith belief that a patent is invalid is not a defense against a charge of patent infringement.

The history of the dispute is long and torturous, involving two trials and a series of appeals dating back to 2007, but the facts of the case are simple enough:  Commil owns a patent on a method of operating a network of wireless routers, and Cisco sold equipment to its customers that used the method and therefore infringed the patent.  Commil duly brought suit, in the Eastern District of Texas, accusing Cisco of directly infringing the patent and also of inducing their customers to infringe.  It was the latter charge that led to the case at hand.

Cisco made the usual attempts, in the Patent Office and in the courts, to have Commil’s patent declared invalid, but did not succeed.  At trial on the induced infringement charge, Cisco attempted to present evidence that they had held a “good faith belief” that Commil’s patent was not valid, intending to argue that this was a valid defense.  The court refused to enter the evidence, and instructed the jury that they could find inducement if “Cisco actually intended to cause . . . direct infringement [by its customers],” and if “Cisco knew or should have known that its actions would induce actual infringement.”  The jury returned a verdict for Commil on induced infringement and awarded $63.7 million in damages.

On appeal, a 3-judge panel of the U.S. Court of Appeals for the Federal Circuit (“CAFC”) concluded it was error for the District Court to have instructed the jury that Cisco could be liable for induced infringement if it “knew or should have known” that its customers would infringe the patent.  The panel held that induced infringement requires “knowledge that the induced acts constitute patent infringement,” a standard established by the Supreme Court in a 2011 decision, Global-Tech Appliances, Inc. v. SEB S.A.  But how is “knowing that your customers will infringe” different from “knowing that the induced acts constitute infringement”?

What the CAFC judges were getting at was the legal concept of scienter – the state of mind of the accused party (in this case, Cisco).  According to the CAFC panel, in order to actually know that the acts of their customers will constitute infringement, Cisco would first have had to know that Commil’s patent was, in actual fact, valid.  The panel reasoned that Cisco, having a good-faith belief that the patent was not valid, could not have truly “known” that its customers were infringing, because an invalid patent cannot be infringed – indeed, there is no patent to infringe.  Commil appealed this decision.

The Supreme Court, in no uncertain terms, disagreed with the CAFC panel, and vacated their decision, handing the victory, finally, to Commil.  “The question the Court confronts today concerns whether a defendant’s belief regarding patent validity is a defense to a claim of induced infringement.  It is not.  The scienter element for induced infringement concerns infringement; that is a different issue than validity.”

What it means to you

At this point, you might be thinking, “OK, this might be fascinating material for patent attorneys to ponder, but what’s the message for me and my business?”  The lesson is that when you’re accused of infringing a patent, or of inducing your customers to infringe a patent, it doesn’t matter what you think about the quality of the patent.  You can be charged with “knowing” that you or your customers are infringing it, even if you’re convinced that the patent is junk.  And it will not matter a bit if you have a written opinion from the best (or most expensive) patent attorneys in the country, assuring you that it is junk.

To be sure, you may prevail if the patent is, in fact, declared invalid – but that’s an entirely separate question, decided by different rules applied to different facts.  And a competent opinion of counsel on validity, while it can’t obviate infringement, can significantly reduce the damages you might have to pay.  Patent law is full of such critical subtleties, which is why it is essential that you promptly consult with an experienced patent attorney any time you’re accused of patent infringement (or if you think you may be infringing someone else’s patent).

Contact the author by email: James_Demers@cittonechinta.com



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