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Supreme Court Hears Oral Argument on Belief of Patent Invalidity as Defense to Induced Infringement

The Supreme Court on March 31, 2015, heard oral argument on whether a defendant’s good faith belief that the plaintiff’s patent is invalid is evidence that the defendant lacked the required intent for induced infringement liability under 35 U.S.C. 271(b). Commil USA v. Cisco Systems, Inc., U.S., No. 13-896, oral argument 3/31/2015.

Some Justices suggested that there is little principled difference between considering a defendant’s belief that a patent is invalid and considering its belief that a patent is not infringed, which was established as a proper consideration in Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060 (2011). The Petitioner argued that allowing a defendant to avoid liability based on its belief that a patent is invalid would undermine the statutory presumption of validity. However, some justices questioned that presumption, noting statistics which suggest that patent validity determinations could be made by simply flipping a coin.

Petitioner’s Argument

Mark Werbner, appearing for Petitioner Commil, contended that it would be wrong to allow an infringer with actual knowledge of the patent to escape inducement liability where it acted on the mistaken belief that the patent is invalid, especially given the presumption of patent validity.

Justice Roberts asked why the presumption should be a consideration where studies show patents are found invalid 40% of the time. The presumption of validity, Werbner replied, has long been in existence and is now codified in the statute. To allow the defendant’s belief about validity to control liability, he observed, would give the defendant who can’t prove invalidity a second chance to avoid liability on the same issue. It would essentially eviscerate all protections against infringement inducers, he added.

Justice Sotomayor asked for a response to the Federal Circuit’s observation that there is no basis for distinguishing a belief of invalidity from a belief of noninfringement, which Global Tech says can negate the intent element for inducement. Werbner insisted there is a substantial difference between validity and infringement in analyzing an inducement liability, pointing out that Section 271(b) contains no reference to validity.

Justice Scalia noted that induced infringement is simply a type of aiding and abetting, which under common law requires wrongful intent. Werbner replied that, under Aro II, once an indirect infringement defendant receives actual notice of the patent and of the infringing conduct, he cannot deny the intent element for the offense. This rule was not changed by Global Tech, he added, which was about imputing knowledge based on willful blindness rather than actual knowledge. If a defendant has questions about validity, Werbner stated, there are many options available for adjudicating those questions.

But inducement is a “supplemental cause of action” since the direct infringer is still available as a strict liability target. While intent is part of an inducement showing and not part of a direct infringement showing, that difference should not create a “yawning gap” between the two, according to Werbner. The Restatement of Torts has several provisions on aiding and abetting, and the one that uses the word “induce” requires a much lower level of scienter and intent.

Justice Kagan recited a hypothetical in which a narrow claim construction would result in noninfringement and a broad claim construction would result in invalidity. Doesn’t that mean the noninfringement and invalidity defenses are two sides of the same coin, she asked. They are not, Werbner replied, explaining that patent validity is subject to a presumption that must be adjudicated. It’s well established that one accused of violating a statute has no defense in arguing that he thought the statute invalid or unconstitutional.

Justice Kagan acknowledged that statutes and contracts are presumed valid, but that’s because they really are. But patent validity is in a different universe where you could flip a coin to decide whether a patent is valid or invalid and be right as often as wrong. Werbner pointed out that the presumption of patent validity is required by Congress and recognized by this Court in i4i. Is the increase in invalid patents an historical development, Justice Roberts asked. Werbner had not direct answer, although he pointed to recent legislation as providing procedures to address any issues to that effect. However, he added, those questions are not relevant here because this patent was both known to Cisco and its validity challenge failed.

Justice Kennedy raised a question about the kind of notice that is needed, observing that prospective defendants may receive little more than form letters from patent owners. Werbner answered that form letters would not be enough for notice of the patent and infringing conduct, but he stressed that this is not a case about knowledge of infringement but rather about a belief about patent validity, which is nowhere considered in Global Tech.

Government Argument

Assistant to the Solicitor General Ginger Anders, representing the government, advanced two alternative arguments: (1) liability for induced infringement cannot be avoided by a good faith belief as to either noninfringement or invalidity; and (2) even if a good faith belief as to noninfringement avoids liability, a good faith belief as to invalidity does not.

With respect to the first argument, Justice Kagen said Global Tech could not have been more clear in saying “we now hold that induced infringement under 271(b) requires knowledge that the induced acts constitute patent infringement.” Anders replied that the last two sentences of the opinion suggests that the Court equated knowledge of the patent with knowledge of infringement, which is supported by the discussion of this question in Aro II. She added that the potential hardship for a defendant will arise if it mistakenly believes the patent is invalid, as here. Under those circumstances, according to Anders, the inducer should bear the risk of the mistake as the party that knows about the patent, has considered it, and decided not to use the statutory mechanisms to challenge the validity of the patent.

Justice Scalia noted that relief against an inducer, which includes a mens rea element at common law, is supplemental in any event since relief is available against the direct infringer on a strict liability basis. Anders first replied that at common law criminal liability for an aider and abetter does not require knowledge that the underlying conduct is illegal. In her example (which Justice Scalia questioned), liability for aiding a felon to possess a gun does not require aider to know that it is illegal for a felon to possess a gun. Anders added that Congress recognized that Section 271(b) importantly addresses circumstances where it is impracticable to sue direct infringers, pointing as an example to the immunity enjoyed by medical practitioners under Section 287(c). Congress understood Section 271(b) as an independent means of imposing liability, she stated.

On the distinction between infringement and validity, Anders pointed out that the latter issue will be harder and more complex to determine. Justice Scalia interjected that the government position is not that they’re different but that they’re the same in that neither needs to be known by the defendant for proof of liability. Anders called that a “frontline” position, but should the Court reads Global Tech as requiring knowledge of infringement, she said that is still far from permitting a belief of invalidity to negate the intent required for “active infringement” under the statute.

But we have many cases that say you cannot infringe an invalid patent, Justice Scalia pointed out. Congress has made clear, Anders replied, that invalidity prevents liability from infringement, but it does not prevent the infringement itself from occurring.

Cisco’s Argument

Seth Waxman, appearing for Respondent Cisco, stated that there can be no inducement liability unless the defendant knew that the induced acts violate the rights of the patentee, and that an invalid patent violates no such rights. What happens to the presumption of validity under your argument, Justice Sotomayor asked. It remains unchanged as part of the high burden for rendering a patent unenforceable for invalidity against all others, Waxman replied, but he maintained that is not the issue in this case.  This case is about what the defendant can say in response to the patentee's presentation on the scienter element of inducement, he explained. 

Congress enacted the induced and contributory infringement provisions of the Patent Act to reflect common law principles of aiding and abetting liability, which have always required knowledge of wrongdoing, Waxman stated. In evaluating that knowledge element, he continued, a court or jury must evaluate the reasonableness and good faith of a defendant's denial of such knowledge, which means taking into account the presumption of patent validity and the requirement of clear and convincing evidence to prove invalidity in court.

If patents are regarded as "the law" that is binding on all, it sounds like Cisco's position is that ignorance of the law is an excuse, Chief Justice Roberts observed.  We are not arguing for a freestanding "mistake of law" defense, Waxman protested.  We do not dispute that practicing all of the steps of a patented invention is unlawful and that it is no defense to claim a belief that it is not unlawful, he explained.  Rather, we contend that invalidity defenses are "utterly factual" and that claiming a reasonable good faith belief that a patent is void is addressing the force of the issued document, not its legality.

Turning to the statistical claims on the number of patents found invalid, Justice Kagen suggested that might be a good reason for Congress to revisit the presumption of validity, but she said it nonetheless exists to limit the validity issue as an affirmative defense.  The presumption of validity in this case, Waxman replied, simply raises the bar of proving to a jury that the defendant had a reasonable good faith belief that the patent would be invalidated.

Justice Sotomayor noted that an inducer must know the induced acts are infringing, and that the next question is liability which has to do with validity.  Why must the patent owner suffer the loss of royalties to the defendant's gamble that the patent is void after having shown knowledge that the acts were infringing, she asked. Waxman's answer was that there can be no infringement of a void patent.  Justice Ginsburg pointed to the assertion by Judge Rich that it was nonsense to state that invalid claims cannot be infringed.  She said she understood the comment to refer to the way the issues create discrete inquiries in litigation: the patent is invalid; and if it is valid, it is not infringed.

To read the transcript of the oral argument in this case, click here.