Commil USA, LLC v. Cisco Systems, Inc. (2015)

By Kevin E. Noonan --

The Supreme Court handed down its decision in Commil USA, LLC v. Cisco Systems, Inc. today and in doing so reprised several themes that have emerged over the past decade of the Court's activist approach to patent law.  The Court reversed the Federal Circuit (albeit technically that court's decision was vacated) and in the process chastised the Federal Circuit for misinterpreting both patent law and the Court's decision in Global-Tech Appliances, Inc. v. SEB S.A. (2014).  The Court also reiterated its belief that patent law is replete with dichotomies (here, between infringement and invalidity), consistent with its "Goldilocks" views regarding the effects of too much versus too little patent protection.  And, somewhat bizarrely the Court takes the time to venture into the policy issues surrounding abusive patent litigation seemingly unrelated to the issues before the Court.  (To be fair, the Court "sides" with the patentee in its decision, which runs contrary to the general trend but this may be considered the exception that probes the rule rather than any great epiphany by the Court.)

To recap, the technology in this case relates to Commil's patents for implementing short-range wireless networks.  "The technical details of Commil's patent are not at issue," according to the Court (which must be a relief -- there is something endearingly quaint about how the Court describes the technology:

So it suffices to say, with much oversimplification, that the patent is for a method of implementing short-range wireless networks.  Suppose an extensive business headquarters or a resort or a college campus wants a single, central wireless system (sometimes called a Wi-Fi network).  In order to cover the large space, the system needs multiple base stations so a user can move around the area and still stay connected.  Commil's patent relates to a method of providing faster and more reliable communications between devices and base stations.

And the opinion refers to the Federal Circuit opinion for a discussion of the claims.  The case comes to the Court after the Federal Circuit reversed the District Court for ruling that Cisco's evidence that it had a "good faith belief" that Commil's claims were invalid was inadmissible for rebutting liability for inducing infringement.  The  question before the Court, whether a good-faith belief in invalidity is a defense to induced infringement, was taken for consideration after five of the twelve Federal Circuit judges framed that issue in their dissent to the en banc court's decision not to consider the question itself.

The Court's opinion was written by Justice Kennedy joined by all the Justices except the Chief Justice, who joined Justice Scalia's dissent, and Justice Breyer who did not participate in the decision.  In addition, Justice Thomas joined the majority only with regard to the Court's decision on the question presented (Section II-B) and its foray into abusive patent litigation policy (Part III).  The holding is simple:  "A defendant's belief regarding patent validity is not a defense to an induced infringement claim."  But of course the more interesting aspect of the decision is the Court's reasoning in arriving at its decision.

From the outset, the Court states that this conclusion is not limited to inducing infringement under 35 U.S.C. § 271(b) but extends to literal infringement under § 271(a) (a strict liability tort) and contributory infringement under § 271(c) (like inducement, a tort that requires knowledge of the existence of the patent).  Before arriving at this question, however, the Court (in Part II-A) revisits its decision in Global Tech, motivated according to the opinion by Commil's argument, supported by the Department of Justice as amicus, that all that is required to satisfy the intent prong of the test for inducement is knowledge of the patent.  In particular, Commil and the government argued that intent does not require that the accused infringer knew she was infringing, and the Court rejects this interpretation of its Global Tech decision.  The opinion cites language in the Global Tech opinion to the effect 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.'"  The Court illustrates this with a hypothetical:  under the government's view, "even if the defendant reads the patent's claims differently from the plaintiff, and that reading is reasonable, he would still be liable because he knew the acts might infringe.  Global-Tech requires more.  It requires proof the defendant knew the acts were infringing" (emphasis added).

Turning to the question before the Court, the opinion asserts that "[t]he 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."  Moreover, "because infringement and validity are separate issues under the Act, belief regarding validity cannot negate the scienter required under §271(b)."  The opinion cites Cardinal Chemical Co. v. Morton Int'l, Inc.:  "A party seeking a declaratory judgment of invalidity presents a claim independent of the patentee's charge of infringement."  508 U. S. 83, 96 (1993).  Invalidity doesn't make the acts non-infringing; it eliminates any liability for them according to the Court, and when infringement is the issue, the patent's validity is not the question to be confronted, the opinion citing Cardinal Chemical Co.  The Court perceives a dichotomy at play in these questions:  "in Deposit Guaranty Nat. Bank v. Roper, 445 U. S. 326 (1980), the Court explained that an accused infringer 'may prevail either by successfully attacking the validity of the patent or by successfully defending the charge of infringement'" and this choice (for this Court) makes questions of an accused infringer's subjective (albeit "good faith") belief in whether a patent claim is invalid irrelevant to the question of whether she intends to infringe.

The Court finds evidence of Congress's intent to raise this dichotomy in the structure of the Patent Act:

[T]he issues of infringement and validity appear in separate parts of the Patent Act.  Part III of the Act deals with "Patents and Protection of Patent Rights," including the right to be free from infringement.  §§251– 329.  Part II, entitled "Patentability of Inventions and Grants of Patents," defines what constitutes a valid patent.  §§100–212.

And in this regard, the Court also notes that non-infringement and invalidity are "two separate defenses" governed by separate sections of the statute and that they can be asserted separately as further evidence of this statutory dichotomy.

The Court then makes the strongest patent-affirming statement it has made in any case over the past decade, when the opinion voices concern with the presumption of validity, which is "a 'common core of thought and truth' reflected in this Court's precedents for a century," citing Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U. S. 1, 8 (1934).  "[I]f belief in invalidity were a defense to induced infringement," according to the opinion, "the force of that presumption would be lessened to a drastic degree, for a defendant could prevail if he proved he reasonably believed the patent was invalid."  This would be a way to "circumvent the high bar Congress is presumed to have chosen:  the clear and convincing standard," citing Microsoft Corp. v. i4i Ltd. Partnership, (2011).

In reference to Justice Scalia's arguments in dissent (without ever referencing that there is a dissent), the majority states that it does not dispute Scalia's logic that one cannot infringe an invalid patent, calling the rubric "a simple truth, both as a matter of logic and semantics."  But that isn't the issue as the majority sees it:

[T]he questions courts must address when interpreting and implementing the statutory framework require a determination of the procedures and sequences that the parties must follow to prove the act of wrongful inducement and any related issues of patent validity.

The Court then quotes Judge Newman from her dissent:  "[v]alidity and infringement are distinct issues, bearing different burdens, different presumptions, and different evidence."  720 F. 3d, at 1374 (opinion of Newman, J.).

The opinion also states that the "orderly administration of the patent system" requires that infringement and invalidity be considered separately, and thus the District Court was correct in ruling evidence of Cisco's belief that Commil's claims were invalid was inadmissible.  The jurisprudential point:  "invalidity is not a defense to infringement, it is a defense to liability" and thus "a belief as to invalidity cannot negate the scienter required for induced infringement."

The Court also considers the availability of other avenues to show invalidity -- declaratory judgment actions, citing MedImmune, Inc. v. Genentech, Inc., 549 U. S. 118, 137 (2007), inter partes review under the AIA (§ 316) or ex parte reexamination (§ 302) (which is what Cisco actually did) as alternative ways for an accused infringer to raise challenges to invalidity, the majority agreeing that claims found to be invalid cannot be infringed (versus permitting mere good faith belief to be enough).

The Court finds an analogy between tortious interference with contract and whether the contract is invalid, which is irrelevant as a defense, or perhaps more aptly, trespass on property without knowledge that the trespasser had no legal right to enter a property not being sufficient to eliminate liability for the trespass.

Just when an opinion by this Court gives the impression that the Court has decided to cabin its role in patent law within its Constitutional boundaries of interpreting the Patent Act and deciding whether Congress has exceeded the limitations on its exercise of the patent power under Article I, along comes Part III of the opinion to shatter the illusion.  Here, the Court takes on the issue of "patent trolls," citing Justice Kennedy's concurring opinion in eBay Inc. v. MercExchange, L.L.C., 547 U. S. 388, 396 (2006) (which if memory serves was not the question the Court addressed in eBay).  Broaching this issue in this case shows the political nature of the Court's patenting opinions and its penchant for espousing policy. Here, this takes the guise of the castigating practice of pursuing "frivolous" lawsuits that "may assert vague claims of infringement, and may be designed to obtain payments that are based more on the costs of defending litigation than on the merit of the patent claims," citing testimony before Congress by the Federal Trade Commission.  These questions have nothing to do with the question before the Court, which the Court admits:

No issue of frivolity has been raised by the parties in this case, nor does it arise on the facts presented to this Court.  Nonetheless, it is still necessary and proper to stress that district courts have the authority and responsibility to ensure frivolous cases are dissuaded.  If frivolous cases are filed in federal court, it is within the power of the court to sanction attorneys for bringing such suits.  Fed. Rule Civ. Proc. 11.

And:

It is also within the district court's discretion to award attorney's fees to prevailing parties in "exceptional cases."  35 U. S. C. §285; see also Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___, ___–___ (2014) (slip op., at 7–8).

The justification is that:

These 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.

Which seems a thin reed to support this frolic and detour from the question before the Court.

Justice Scalia dissents, in an opinion joined by Chief Justice Roberts (both of whom dissented in FTC v. Actavis on the question of the presumption of validity), making a very simple point:  "[o]nly valid patents confer [a] right to exclusivity -- invalid patents do not," citing FTC v. Actavis, Inc. (2013).  Accordingly:

Because only valid patents can be infringed, anyone with a good-faith belief in a patent's invalidity necessarily believes the patent cannot be infringed.  And it is impossible for anyone who believes that a patent cannot be infringed to induce actions that he knows will infringe it.  A good-faith belief that a patent is invalid is therefore a defense to induced infringement of that patent.

Commil USA, LLC v. Cisco Systems, Inc. (2015)
Opinion of the Court by Justice Kennedy, joined by Justice Ginsburg, Alito, Sotomayor, and Kagan, and joined as to Parts II-B and III by Justice Thomas; dissenting opinion by Justice Scalia, joined by Chief Justice Roberts; Justice Breyer took no part in consideration or decision of the case.

Comments

[Hoary Head]

Two thoughts. First, Scalia is off. It makes sense to say that good-faith belief that a patent is invalid can rebut a charge of *willful* infringement (or willful inducement to infringe), but it makes no sense to say that that same good faith belief should be a defense to infringement (or inducement to infringe per se). In fact, Scalia's hypothetical is only relevant in the case where the inducer subjectively believed the patent to invalid but the court found it was valid and infringed. (If the court agreed it was invalid, there would be nothing to discuss.) But to echo the majority, since when does one's subjective belief of another's non-possession of a right absolve one for liability of infringement of that right?

Second, the majority recognized that giving a pass to inducers who are armed with an invalidity opinion from counsel would largely destroy the statute's protections against induced infringement. But its ultimate conclusion - mentioned in its summary of its holding in Global-Tech - was that being armed with a reasonable non-infringement opinion can serve as a defense to a charge of inducement to infringe. At the end of the day, this is a similar result to that of the vacated CAFC opinion, although not quite as sweeping, since it's often easier to give an invalidity opinion about an overly broad claim than it is to opine that there's no infringement. (But if the claim really was too broad, why wasn't it invalidated at trial?)

[EG]

Hey Kevin,

Kennedy's majority opinion is absolutely correct, if nothing more, based upon the rationale that infringement and validity are separate issues. But as you astutely point out, why does Kennedy have to bring up the overblown "patent troll" issue in Part III? Kennedy's concurring opinion in eBay has always rubbed me the wrong way.