Highlighting the novelty of the defense, the Federal Circuit acknowledged that it had never addressed whether a good-faith belief in invalidity was a defense to a claim for induced infringement, and Commil’s petition for certiorari made it a point to stress that the Federal Circuit had essentially created a “new” defense in its decision. The majority at the Supreme Court picked up on this point, too, while the dissenters argued that courts are not in the position to create “new” defenses in any event, as patent law is a creature of statute.

Indeed, our research uncovered only one decision from before the Federal Circuit’s Commil decision discussing a good-faith belief in invalidity as a defense to induced infringement.

Unsurprisingly, after the Federal Circuit endorsed this defense, numerous defendants began asserting it. The Supreme Court then vacated the Federal Circuit’s decision and restored the essential status quo: a good-faith belief of patent invalidity is not a defense to induced infringement. What follows is a discussion of the Supreme Court’s decision and reasoning, followed by a history of the defense from before and after the Federal Circuit’s decision, and, finally, several takeaways from Commil v. Cisco for all patent infringement defendants.

Supreme Court Decision

On May 26, 2015, the Supreme Court ruled that a defendant’s good-faith belief that a patent is invalid is not a defense to a claim of induced infringement.¹ The Supreme Court vacated the 2013 ruling of a divided panel of the Federal Circuit, which reasoned that evidence of a defendant’s “good-faith belief of invalidity may negate the requisite intent for induced infringement.”²

In support of its distinction between patent infringement, on the one hand, and patent validity, on the other, the Supreme Court reasoned that the Patent Act addresses each in a separate section and that noninfringement and invalidity are listed in the Act as “two separate defenses.”³

The Court also reasoned that permitting a belief in the invalidity of a patent as a “new defense” would lessen “to a drastic degree” the presumed validity of patents.⁴ Indeed, the Court opined, the burden on the accused inducer to demonstrate the invalidity of the patent by “clear and convincing” evidence and “the procedures and sequences that the parties must follow to prove the act of wrongful inducement and any related issues of patent validity” are “of central relevance to the orderly administration of the patent system.”⁵

Further, the Court emphasized that, as a practical matter, accused inducers have various ways to invalidate a patent and avoid liability for infringement, including affirmative defenses, declaratory judgment actions, inter partes review at the Patent Trial and Appeal Board (PTAB), and ex parte reexamination at the U.S. Patent and Trademark Office (USPTO).⁶

District Court Excluded Evidence of Good-Faith Belief in Invalidity

The petitioner, Commil USA, LLC, holds a method patent for short-range wireless networks. Commil sued respondent Cisco Systems, Inc. in the Eastern District of Texas, claiming that Cisco infringed Commil’s patent by making wireless network equipment and induced others to infringe by selling that equipment. Among other defenses, Cisco raised invalidity as an affirmative defense and brought counterclaims seeking a declaration that Commil’s patent was invalid. After a jury determined that Commil’s patent was valid and that Cisco was liable for direct but not induced infringement, Commil successfully moved for a new trial on induced infringement. At Cisco’s request, the USPTO then reexamined Commil’s patent, ultimately finding it valid.⁷

At the trial on induced infringement, Cisco proffered evidence of its good-faith belief that Commil’s patent was invalid. The district court ruled that any evidence offered in support of that theory was inadmissible and instructed the jury that indirect infringement could be found if Cisco “knew or should have known” that it would induce others to infringe. The jury ultimately found Cisco liable for induced infringement.⁸

After the jury’s verdict, the Supreme Court held in Global-Tech Appliances, Inc. v. SEB S.A. that induced infringement requires knowledge of the allegedly infringed patent as well as knowledge that any induced acts actually infringe the patent.⁹ Cisco then attempted to use that holding to move for a new trial, but the district court denied its request.¹⁰

Federal Circuit Reversed, Invoking Good-Faith Belief of Invalidity as a Defense to Induced Infringement

On appeal, the Federal Circuit held that the district court should not have excluded evidence that Cisco had a good-faith belief in the invalidity of Commil’s patent because that evidence “may negate the requisite intent for induced infringement,” which it believed to be a matter of first impression.¹¹ The court reasoned that there was “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.”¹² Dissenting from that holding, Judge Newman opined that “infringement in fact does not depend on the belief of the accused infringer that it might succeed in invalidating the patent.”¹³

The Federal Circuit also held that the district court’s “knew or should have known” instruction on induced infringement was incorrect, as it allowed for a finding of liability based on negligence rather than actual knowledge.¹⁴

Supreme Court Confirmed Knowledge of Patent and Its Infringement Is Required for Induced Infringement

Before the Supreme Court, Commil argued that Global-Tech required knowledge of the patent—but not necessarily infringement—to establish induced infringement.¹⁵ A unanimous Court rejected this argument out of hand as inconsistent with Global-Tech’s “explicit holding that liability for induced infringement can only attach if the defendant knew of the patent and knew as well that the induced acts constitute patent infringement.”¹⁶ In his dissent to the remainder of the opinion, even Justice Scalia agreed on this point, writing, “I agree with the Court’s rejection of the main argument advanced by Commil and the United States, that induced infringement under 35 U.S.C. § 271(b) does not ‘requir[e] knowledge of the infringing nature of the induced acts.’”¹⁷

Belief in Invalidity Is Not a Defense to Induced Infringement

On Commil’s next argument that good-faith belief of invalidity is a defense to induced infringement, the Court explained that the knowledge required for induced infringement “concerns infringement,” which “is a different issue than validity.”¹⁸ It continued that because the language of the Patent Act requires intent to infringe, “[a]nd because infringement and validity are separate issues under the Act,” a good-faith belief that a patent is invalid cannot negate actual knowledge of infringement.¹⁹

The Court first relied on precedent demonstrating that noninfringement and invalidity are “independent” or “alternative” grounds for dismissal of a claim for patent infringement.²⁰ Next, the Court turned to the structure of the Patent Act, which addresses infringement and validity in separate sections and lists noninfringement and invalidity as separate defenses. Given the statutory dichotomy, “permitting a defense of belief in invalidity . . . would conflate the issues of infringement and validity.”²¹

The Court also reasoned that permitting good-faith belief in invalidity as a defense to induced infringement would “lessen[] to a drastic degree” the presumed validity of patents by lowering the “high bar” required to prove invalidity: clear and convincing evidence.²² Indeed, the presumption of validity afforded patents, the burdens shouldered by those who would invalidate them, “and the timing for the presentations of the relevant arguments” played a central role in the Court’s analysis, as these are “concerns of central relevance to the orderly administration of the patent system.”²³

As a practical matter, the Court emphasized that “accused inducers who believe a patent is invalid have various proper ways to obtain a ruling to that effect,” including the assertion of affirmative defenses and the filing of declaratory judgment actions, as well as inter partes review and ex parte reexamination of patents before the PTAB and USPTO, respectively.²⁴

Further, the Court held that refusing to recognize a “new defense” of belief in invalidity also avoids “negative consequences,” chief among them “more burdensome” litigation, “increase[d] discovery costs,” and juror confusion.²⁵

Finally, the Court stressed that, although “[n]o issue of frivolity ha[d] been raised by the parties,” district courts have “the authority and responsibility to ensure frivolous cases are dissuaded.”²⁶ This authority includes sanctioning attorneys who bring frivolous lawsuits and awarding attorney’s fees to prevailing parties in “exceptional cases.”²⁷ The Court opined that this authority is a “safeguard” against those “companies [which] use patents as a sword to go after defendants for money, even when their claims are frivolous”—companies against whom a good-faith belief in the invalidity of their patents is not a defense.²⁸ The Court concluded, saying that “[t]hese safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity.”²⁹

Justice Scalia’s Dissent

Justice Scalia and Chief Justice Roberts dissented, arguing that “[b]ecause only valid patents can be infringed, anyone with a good-faith belief in a patent’s invalidity necessarily believes the patent cannot be infringed.”³⁰ As such, Justice Scalia argued, it is “impossible for anyone who believes that a patent cannot be infringed to induce actions that he knows will infringe it,” as required to prove induced infringement under Global-Tech.³¹

The dissent went on to argue that the Patent Act’s separate treatment of infringement and invalidity was “irrelevant” because recognizing that infringement requires a valid patent is entirely consistent with that separation. Justice Scalia also argued that an alleged inducer who succeeds in demonstrating his good-faith belief in the invalidity of a patent “does not . . . call a patent’s validity into question”; rather, “[h]e merely avoids liability for a third party’s infringement of a valid patent, in no way undermining that patent’s presumed validity.”³² As for the majority’s “practical” reasons for not “creat[ing] a defense based on a good-faith belief in invalidity,” Justice Scalia countered that the Court could not create a defense to liability under the Patent Act even if it wanted to as it is not a common-law court.³³

Before Commil, Defendants Seldom Raised This Defense

Before the Federal Circuit’s decision in Commil, defendants very seldom raised a good-faith belief in invalidity as a defense to induced infringement. In its opposition to Commil’s petition for certiorari, Cisco pointed out that a good-faith belief of noninfringement is recognized as a defense to induced infringement and argued that invalidity should be treated no differently. In support, it cited several cases where a good-faith belief of noninfringement was a valid defense.³⁴ Notably, it did not cite any cases where a good-faith belief of invalidity was used as defense.

This is understandable, as we found only one other case where the defense was raised prior to the Federal Circuit decision. In Meyer Intellectual Properties Ltd. v. Bodum, Inc.,³⁵ the parties filed motions for summary judgment on multiple issues. The defendant argued that it had a good-faith belief in the invalidity of the patent, which would prevent the plaintiff from making a prima facie case of induced infringement. The court reasoned that there may be support for a defense that a good-faith belief in the invalidity of a patent precludes a finding of induced infringement, but it ultimately did not reach the merits of the defense because it found that the defendant failed to provide proper support for its assertion that it held a good-faith belief in invalidity.

After Commil, Defendants Jumped on the Defense

Understandably, after the Federal Circuit’s decision endorsing a good-faith belief in invalidity as a defense to induced infringement, defendants began asserting the defense more frequently. A search revealed nine decisions that included this defense in the short window between the Federal Circuit’s decision in June 2013 and the Supreme Court’s decision overruling the Federal Circuit in May 2015.

In Toshiba Corp. v. Imation Corp.,³⁶ a jury found for Toshiba on its claim of induced infringement against Imation. Imation moved for judgment as a matter of law, claiming that it had “meritorious defenses to Toshiba’s infringement claims that trump any finding that they had the specific intent to induce infringement at any time after the complaint was filed.”³⁷ Specifically, Imation argued that it had a good-faith belief in the invalidity of Toshiba’s patents and asked for a “judicial determination that [they] could not have formed the specific intent to infringe because they had objectively reasonable defenses to infringement.”³⁸ The court agreed that the defenses were relevant, but said that their resolution was up to the jury and should not be subject to a “post-hoc judicial assessment of the reasonableness of [the] defenses.”³⁹ The motion for judgment as a matter of law was granted on other grounds.

In Halo Electronics, Inc. v. Pulse Electronics, Inc.,⁴⁰ Pulse moved for judgment as a matter of law on Halo’s induced infringement claim after a jury found against Pulse at trial. Pulse argued that it had a good-faith belief in the invalidity of Halo’s patent. The court stated that although Commil stood for the proposition that a good-faith belief in the invalidity of a patent could negate the specific intent required to show induced infringement, it did not preclude a finding of induced infringement. The court then instructed the jury that if Pulse believed the patents were valid, the jury could find induced infringement. Because the jury found induced infringement, it presumably determined that Pulse did not have a good-faith belief in invalidity. The motion for judgment as a matter of law was denied.

In Clouding IP, LLC v. Rackspace Hosting, Inc.,⁴¹ on Rackspace’s motion to dismiss Clouding’s second amended complaint, Rackspace argued that it had a “good faith basis” for believing Clouding’s patents were invalid. The basis apparently arose after Clouding filed its first amended complaint. The court held that while Commil’s defense of good-faith belief in invalidity applied to Clouding’s induced infringement claim, it did not apply at the pleading stage and was an issue for trial, and denied the motion to dismiss.

In Global Traffic Technologies, LLC v. Emtrac Systems, Inc.,⁴² GTT moved for confirmation of enhancement of damages on its patent infringement claim. The district court found that because Emtrac had “good-faith invalidity defenses once litigation began” that factor did not weigh in favor of enhancing damages;⁴³ however, the court enhanced damages anyway. The Federal Circuit reversed, finding that a good-faith belief of invalidity was objectively reasonable and enhanced damages should not have been awarded.

In BRK Brands, Inc. v. Nest Labs, Inc.,⁴⁴ Nest moved for dismissal of BRK’s induced infringement claim, arguing that it had a good-faith belief that BRK’s patent was invalid. The court stated, “Of course if the patent is invalid there can be no infringement, induced or otherwise. But if the patent is valid and therefore infringed, it seems odd that the erroneous belief of the inducer that it was invalid should be a defense.”⁴⁵ Questioning Commil, the court stated, “[W]hat is required for induced infringement is knowledge of the patent and that it was infringed, not knowledge or belief that it was a valid patent.”⁴⁶ However, because the issue was not ripe for decision at the pleading stage, the motion to dismiss was denied.

In Ultratec, Inc. v. Sorenson Communications, Inc.,⁴⁷ Sorenson moved for summary judgment on Ultratec’s claim of induced infringement. Sorenson claimed that it reasonably believed that Ultratec’s patents were invalid and therefore could not have induced infringement. The court stated, “Defendants rely on the Federal Circuit’s recent decision in Commil . . . , in which the court held for the first time that a good faith belief of invalidity ‘may negate the requisite intent for induced infringement.’”⁴⁸ The court continued, saying, “the language in Commil makes clear, for inducement purposes the question is not whether an invalidity defense was objectively reasonable, but whether it was actually held in good faith.”⁴⁹ The court determined that it was up to the jury to decide if Sorenson’s beliefs were held in good faith, and the motion for summary judgment was denied.

In OPTi, Inc. v. VIA Technologies, Inc.,⁵⁰ VIA filed a motion for judgment as a matter of law after the jury found against it on the issue of induced infringement. VIA argued that the evidence was insufficient to support a finding of specific intent to induce infringement. Denying VIA’s motion, the court stated that VIA knew of OPTi’s patent during the infringement period and the jury was instructed to consider whether VIA had a good-faith belief in the invalidity of that patent. And because the jury concluded that VIA induced infringement, it must have found that VIA did not have a good-faith belief in invalidity.

In Visteon Global Technologies, Inc. v. Garmin International, Inc.,⁵¹ the court recognized a good-faith belief of invalidity as a defense to induced infringement, but held that the merits of the defense could not be determined on a motion for summary judgment.

In Nalco Co. v. Turner Designs, Inc.,⁵² Turner moved for summary judgment on Nalco’s claims of induced infringement. The court denied the motion, finding that a reasonable jury could find that Turner induced infringement of Nalco’s water treatment device patent. The court cited Commil for the proposition that a good-faith belief in invalidity is a viable defense against a claim of induced infringement. However, the court noted that Commil involved a post-trial motion and not a pretrial motion on an issue that must go to the jury for determination.

In Bose Corp. v. SDI Technologies, Inc.,⁵³ Bose appealed from a district court order granting summary judgment for the defendants on claims for indirect infringement. In its motion for summary judgment, SDI argued that it had a good-faith belief that Bose’s patent was invalid, which negated the intent prong of indirect infringement. The alleged belief was based on advice from counsel, but the Federal Circuit held that summary judgment on the issue of post-verdict liability was inappropriate because SDI could not credibly maintain its good-faith belief of invalidity defense after a verdict to the contrary. Reversing the grant of summary judgment, the Federal Circuit found that the district court improperly relied on incomplete evidence of SDI’s good-faith belief in invalidity.

Takeaways for Defendants Facing a Claim of Induced Patent Infringement

Aside from returning to the status quo by rejecting the “new” defense of good-faith belief in invalidity for induced infringement, there are a few takeaways from the Supreme Court’s decision for defendants facing a claim of induced patent infringement.

First, put your money where your mouth is. The Court’s Commil decision seems to encourage parties to patrol patents by requiring that accused infringers be proactive in seeking to invalidate patents. The decision promotes going on the offensive, encouraging defendants to bring declaratory judgment actions or petitions for inter partes review or ex parte reexamination, as well as going on the defensive, encouraging defendants to turn the basis of their belief into a winning affirmative defense or declaratory judgment counterclaim. In other words, the Court tells potential defendants: if you think a patent you may infringe is invalid, put your subjective good-faith belief to the objective test.

Second, do not write off an opinion letter that finds invalidity. Although good-faith belief of invalidity is not a defense to induced infringement, there may still be value in an opinion letter that finds likely invalidity, as opposed to noninfringement. That value is relevant to charges of willful infringement and to evaluating whether to assert a defense, file a declaratory judgment action, or seek inter partes review or ex parte reexamination.

Third, in an induced infringement case, if you need to choose between invalidity or noninfringement, choose noninfringement. Often, depending on your position on claim construction, a choice must be made between noninfringement or invalidity, and this will be even more important to consider given that a good-faith belief in noninfringement is still a defense to induced infringement, while a good-faith belief in invalidity is not.

In sum, we are back to the status quo. Even though Commil “takes away” a “new” defense to claims of induced infringement, a good-faith belief in invalidity remains useful in other aspects of a case (willfulness and damages), and actually proving invalidity remains the most solid defense.

Endnotes

1. Commil USA, LLC v. Cisco Sys., Inc., 135 S. Ct. 1920, 1928 (2015) (Kennedy, J., writing for a majority that included Justices Thomas, Ginsburg, Alito, Sotomayor, and Kagan). “Although the precise issue to be addressed concern[ed] a claim of improper inducement to infringe,” the Court made it clear that its discussion “refer[red] as well to direct infringement and contributory infringement.” Id. at 1926.

2. Commil USA, LLC v. Cisco Sys., Inc., 720 F.3d 1361, 1368 (Fed. Cir. 2013).

3. Commil, 135 S. Ct. at 1928.

4. Id. at 1928–29.

5. Id. at 1929.

6. Id. (stating that “invalidity is not a defense to infringement, it is a defense to liability”).

7. Id. at 1924.

8. Id. at 1924–25.

9. 131 S. Ct. 2060 (2011).

10. Commil, 135 S. Ct. at 1925.

11. Commil USA, LLC v. Cisco Sys., Inc., 720 F.3d 1361, 1367–68 (Fed. Cir. 2013) (“[W]e appear to have not previously determined whether a good-faith belief of invalidity may negate the requisite intent for induced infringement.”).

12. Id. at 1368.

13. Id. at 1374 (Newman, J., concurring in part and dissenting in part).

14. Id. at 1366 (majority opinion).

15. Commil, 135 S. Ct. at 1926.

16. Id. (internal quotation marks omitted); see also id. at 1928 (“Global-Tech . . . requires proof the defendant knew the acts were infringing.”).

17. Id. at 1931 (Scalia, J., dissenting).

18. Id. at 1928 (majority opinion).

19. Id. The Court analogized its conclusion—that subjective belief in invalidity is irrelevant to the issue of infringement—to bedrock principles of tort and criminal law, stating that “[i]n the usual case, ‘I thought it was legal’ is no defense.” Id. at 1930.

20. Id. at 1928 (citing Cardinal Chem. Co. v. Morton Int’l, Inc., 508 U.S. 83, 96 (1993) (“A party seeking a declaratory judgment of invalidity presents a claim independent of the patentee’s charge of infringement.”); and Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 334 (1980) (explaining that an accused infringer “may prevail either by successfully attacking the validity of the patent or by successfully defending the charge of infringement”)).

21. Id.; see 35 U.S.C. §§ 100–212, 251–329, 282(b).

22. Id. at 1928–29.

23. Id. at 1929; see also Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238 (2011).

24. Commil, 135 S. Ct. at 1929.

25. Id. at 1929–30 (“Indeed, the jury would be put to the difficult task of separating the defendant’s belief regarding validity from the actual issue of validity.”).

26. Id. at 1930–31.

27. Id. (citing Fed. R. Civ. P. 11; 35 U.S.C. § 285; and Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749 (2014)).

28. Id. at 1930. This appears to be a response to Justice Scalia’s charge in dissent that the majority’s decision “increases the in terrorem power of patent trolls.” Id. at 1932 (Scalia, J., dissenting).

29. Id. at 1931 (majority opinion).

30. Id. (Scalia, J., dissenting); see also id. at 1932 (“How is it possible to interfere with rights that do not exist?”).

31. Id. at 1931.

32. Id. at 1932.

33. Id.

34. Brief in Opposition at 11, Commil USA, LLC v. Cicso Sys., Inc., 135 S. Ct. 1920 (Mar. 31, 2014) (No. 13-896) (citing Ecolab, Inc. v. FMC Corp., 569 F.3d 1335, 1351, amended on reh’g in part, 366 F. App’x 154 (Fed. Cir. 2009); Kinetic Concepts, Inc. v. Blue Sky Med. Grp., Inc., 554 F.3d 1010, 1024–25 (Fed. Cir. 2009) (affirming jury verdict of no induced infringement where “[t]he jury heard [the defendant’s] founders explain why they did not believe they were infringing”); Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317, 1329 (Fed. Cir. 2009) (“The original product instructions do not evidence a specific intent to encourage infringement, since they teach a stirring action which [the defendant] could have reasonably believed was non-infringing.”)).

35. 597 F. Supp. 2d 790 (N.D. Ill. 2009), rev’d on other grounds, 690 F.3d 1354 (Fed. Cir. 2012).

36. 990 F. Supp. 2d 882 (W.D. Wis. 2013).

37. Id. at 910.

38. Id. at 911.

39. Id.

40. No. 2:07-cv-00331-PMP-PAL, 2013 U.S. Dist. LEXIS 117190 (D. Nev. Aug. 16, 2013).

41. No. 12-675-LPS, 2014 U.S. Dist. LEXIS 14790 (D. Del. Feb. 6, 2014).

42. No. 10-4110 ADM/JJG, 2014 U.S. Dist. LEXIS 57840 (D. Minn. Apr. 25, 2014), aff’d in part sub nom., Global Traffic Techs. LLC v. Morgan, Nos. 2014-1537, – 1566, 2015 U.S. App. LEXIS 9281 (Fed. Cir. June 4, 2015).

43. Id. at *41.

44. 28 F. Supp. 3d 765 (N.D. Ill. 2014).

45. Id. at 769.

46. Id.

47. 45 F. Supp. 3d 881 (W.D. Wis. 2014).

48. Id. at 926.

49. Id.

50. 65 F. Supp. 3d 465 (E.D. Tex. 2014).

51. No. 2:10-cv-10578-PDB-MAR, 2014 U.S. Dist. LEXIS 182932 (E.D. Mich. Sept. 25, 2014).

52. 73 F. Supp. 3d 1096 (N.D. Cal. 2014).

53. 558 F. App’x 1012 (Fed. Cir. 2014).