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Supreme Court Invokes Common Law Principles in Largely Pro-Patent Decision: Good-Faith Belief of Invalidity Is Not a Defense to Induced Patent Infringement
The Supreme Court decided today in Commil USA, LLC v. Cisco Systems, Inc. that an accused infringer’s good-faith belief that a patent is invalid, standing alone, is not a defense to induced infringement. As discussed in greater detail in our earlier post, the Federal Circuit reversed the district court’s ruling that prohibited Cisco from presenting evidence of its good-faith belief that Commil’s patent was invalid, as a defense to induced infringement.
Among other things, the Court reasoned that a different result would contravene the presumption that a patent is valid. To overcome that presumption, a defendant must provide clear and convincing evidence of invalidity. But if a defendant need only show a good-faith belief that a patent is invalid to avoid inducement liability, “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.” (Emphasis added.)
Invoking common law torts of tortious interference with contract and trespass, as well as criminal law concepts of ignorance or mistake of law, the Court also observed, “In the usual case, ‘I thought it was legal’ is no defense.” In the same vein, held the Court, belief in the patent-in-suit’s invalidity should not bar liability for inducing infringement.
While it appears that the majority and the dissent agree on the pro-patent nature of this decision, the Court rejected the argument—advanced by Commil and the Solicitor General—that inducement liability requires only knowledge of the patent, and not knowledge as well that the induced acts constitute infringement. In so holding, the Court reaffirmed its holding in Global-Tech Appliances, Inc v. SEB S.A.: in an action for induced infringement, the plaintiff must show that the alleged inducer “knew of the patent in question and knew the induced acts were infringing”; proving negligence or recklessness is not sufficient (see also our prior treatment here).
In dissent, Justice Scalia argued that the majority holding “increases the in terrorem power of patent trolls.” He argued that the majority seemingly acknowledged this consequence, where the Court emphasized that “district courts have the authority and responsibility to ensure frivolous cases are dissuaded.”
Commil raises some interesting questions for treatment in future cases. One is how “knowledge” under the reaffirmed Global-Tech standard will be determined after Commil, considering validity and infringement issues often are mixed—with one another, and with claim construction issues. A related issue is what evidence of that “knowledge” will be admitted into evidence, and whether or not it should be accompanied by a limiting instruction.
Finally, nothing in Commil changed the reality that if the patent-in-suit is adjudged invalid, then there is no liability—for direct infringement or for induced infringement.
Applying the Supreme Court’s new “reasonable certainty” standard for patent definiteness in Biosig Instruments, Inc. v. Nautilus, Inc. (2015) (Nautilus III), the Federal Circuit again held that Biosig’s patent for a heart rate monitor is not indefinite. In Nautilus II (2014), the Supreme Court rejected the Federal Circuit’s “insolubly ambiguous” standard for indefiniteness, but did not determine whether Biosig’s patent was indefinite.
Biosig argued that “reasonable certainty” “is not a new standard; it is the degree of clarity in patent claiming that has governed for nearly one hundred years.” And the Federal Circuit appears to have agreed, calling “reasonable certainty” a “familiar standard”; “the core of much of the common law.” The court noted that judges “have had no problem operating under the reasonable certainty standard,” since the Supreme Court’s decision. The court quoted Judge Bryson, sitting by designation in Texas: “Indefiniteness is a legal determination; if the court concludes that a person of ordinary skill in the art, with the aid of the specification, would understand what is claimed, the claim is not indefinite.” The court concluded that Biosig’s claims inform a skilled artisan with reasonable certainty and are therefore not indefinite.
The Federal Circuit applied the Supreme Court’s new claim construction rule in Teva v. Sandoz (2015) (addressed here). The district court considered some extrinsic evidence during claim construction, which could have resulted in a “clear error” review. But because “a skilled artisan would understand the inherent parameters of the invention as provided in the intrinsic evidence” (emphasis added) the court reviewed the claim construction de novo, reversing the district court.
At least at the Federal Circuit, the Supreme Court’s Nautilus decision may not have the impact some thought it might. It remains to be seen what effect it will have on district court proceedings.
Today, the Supreme Court held in B&B Hardware v. Hargis Industries that likelihood-of-confusion decisions by the United States Patent and Trademark Office’s Trademark Trial and Appeal Board (“TTAB”) can have preclusive effect in federal court.
Hargis applied to register the mark SEALTITE and B&B opposed, based on its registration for SEALTIGHT. The TTAB sustained B&B’s opposition, even though the marks would be used for different goods in different markets. In a contemporaneous federal suit, the district court gave no deference to the TTAB decision and held that SEALTITE was not likely to cause confusion with SEALTIGHT. Affirming, the Eighth Circuit reasoned that TTAB decisions are not entitled to preclusive effect because the TTAB applied different factors to determine likelihood of confusion, the TTAB placed too much emphasis on the appearance and sound of the marks, and different parties bore the burden of persuasion in the opposition proceeding and infringement suit.
Reversing, the Supreme Court held that “issue preclusion applies where ‘the issues in the two cases are indeed identical and the other rules of collateral estoppel are carefully observed.’” The same likelihood-of-confusion standard applies in the TTAB and federal courts, as the operative language of the relevant statutes is essentially identical, even though the TTAB does not consider the same list of “factors” as courts in some circuits. Further, any inquiry regarding procedural differences should focus not on the differences themselves, but on the quality of the procedures available in the different tribunals. Rejecting Hargis’s argument that procedural differences in the TTAB weigh against giving preclusive effect to its decisions, the Court found that, at least in general, the TTAB’s procedures are equivalent to those in federal courts.
Not all TTAB decisions will have preclusive effect, because not all will meet the ordinary elements of issue preclusion. For instance, “if the TTAB does not consider the market-place usage of the parties’ marks, the TTAB’s decision should ‘have no later preclusive effect in a suit where actual usage in the marketplace is the paramount issue.’” Even with its limits, B&B Hardware makes TTAB proceedings more important for those who enforce trademarks and those who defend against infringement.
On January 20, 2015, in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., the Supreme Court reallocated power between federal district courts and the Federal Circuit in the patent claim construction process. For many years, the Federal Circuit has reviewed all district court claim constructions de novo, without deference to the district court. Today, the Court held that the Federal Circuit must find clear error before overturning a district court’s resolution of an underlying factual dispute during claim construction.
After the Court’s decision in Markman v. Westview Instruments (1996), the Federal Circuit’s Cybor Corp. v. FAS Technologies, Inc. (1998) decision announced the de novo standard of review. Under this standard, the Federal Circuit has often reversed district court claim construction orders.
Dissolving this longstanding precedent, the Court held that Rule 52(a)(6), Federal Rules of Civil Procedure, requires that claim construction decisions involving “evidentiary underpinnings,” “subsidiary factual findings,” or “underlying factual disputes,” not be set aside unless clearly erroneous. The Federal Circuit still reviews “the ultimate construction of the claim de novo.” And claim constructions that only analyze the intrinsic evidence—the patent, its specification, and the prosecution history—still will be reviewed de novo. “But, to overturn the judge’s resolution of an underlying factual dispute, the [Federal Circuit] must find that the judge, in respect to those factual findings, has made a clear error.”
Recognizing the “need for uniformity in claim construction,” and recalling that Markman aimed to alleviate “damaging…unpredictability” in claim construction, by making it an issue for the court, Justice Thomas’s dissent raises the concern that Teva will “inject uncertainty into the world of invention and innovation.” “At best,” Justice Thomas wrote, Teva will increase “collateral litigation over the line between law and fact.” The majority, in contrast, viewed “subsidiary factfinding [as] unlikely to loom large in the universe of litigated claim construction.” With such a significant change in claim construction, it’s at least certain that it will take some time to see who is right.
On December 5, 2014, the Supreme Court granted certiorari in Commil USA, LLC, v. Cisco Systems, Inc., to decide whether a defendant’s good-faith belief that a patent is invalid is a defense to induced infringement.
Previously, a divided panel of the Federal Circuit held that a Texas district court should have allowed evidence that Cisco believed in good faith Commil’s patent was invalid. At trial, Cisco was not permitted to present such evidence to rebut Commil’s claims of induced infringement. The district court relied on Federal Circuit precedent, DSU Medical Corp. v JMS Co., which addressed a good-faith belief of non-infringement, not a good-faith belief of invalidity, as a defense.
Reversing the district court, the Federal Circuit reasoned that, because one necessarily cannot infringe an invalid patent, no principled distinction exists between a good-faith belief of non-infringement and a good-faith belief of invalidity. Accordingly, the court held that evidence of a good-faith belief of invalidity is evidence that “should be considered by the fact-finder in determining whether an accused party knew that the induced acts constitute patent infringement.” In dissent, Judge Newman argued that a good-faith belief of invalidity cannot be a defense to induced infringement of a patent that is actually valid and infringed.
For now, the Federal Circuit’s decision provides accused infringers with two means of defending against induced infringement claims: good-faith belief of non-infringement and good-faith belief of invalidity. Considering the recent patent cases the Supreme Court has reviewed, it is uncertain whether both defenses will persist.