Just Because You Think It’s Invalid Doesn’t Mean You Don’t Infringe!

A U.S. patent is “presumed” valid. That means a patent owner does not need to prove the patent is valid in a suit for infringement. And, as the U.S. Supreme Court just explained in Commil United States, LLC v. Cisco Systems, Inc., 2015 U.S. LEXIS 3406 (May 26, 2015), a defendant’s belief that the patent is invalid is not a defense to infringement.

Commil owned a patent that covered a method for increasing the speed of wireless networks. Commil sued Cisco for patent infringement, alleging that Cisco directly infringed the patent by making and using certain network equipment. Commil also alleged that Cisco indirectly infringed the patent by inducing infringement, that is, by selling the equipment to others and instructing them how to use the equipment, causing them to thereby infringe the patent.

At trial, the jury found that Cisco had directly infringed the patent. With respect to the claim of indirect infringement, Cisco contended that it did not have the required specific intent to induce infringement because it believed in good faith that the patent was invalid. The district court for the Eastern District of Texas ruled that Cisco’s evidence of its good faith belief was not admissible as a defense to infringement. The jury found Cisco liable to Commil and awarded Commil $63.7 million in damages.

Cisco appealed to the Federal Circuit Court of Appeals, arguing that the district court’s ruling was erroneous. The appellate court reversed the district court, holding that a good faith belief that a patent is invalid is sufficient to negate the required specific intent to induce infringement.

The Supreme Court reversed the Federal Circuit. The court explained that infringement and validity are two different issues. To prove that a defendant induced infringement, a plaintiff must show that the defendant knew that the induced acts constituted patent infringement.

The Court held that infringement and invalidity are independent of each other. A defendant may successfully defend against a claim of patent infringement by defending against the infringement allegation or by proving that the patent is invalid. A defendant may assert either noninfringement or invalidity or it may assert both.

The Court further explained its rationale in stating that allowing a good faith belief in invalidity to be a defense to infringement would undermine the statutory presumption that a patent is valid. Because of the presumption, a plaintiff does not have to prove its patent is valid. The defendant must prove invalidity by clear and convincing evidence. If the defendant could defend against infringement simply by showing a belief in invalidity, then that would weaken the presumption of validity by lowering the burden of proof needed to overcome it.

The Court noted that accused infringers can assert invalidity as an affirmative defense or as a counterclaim. They can also challenge a patent’s validity in a declaratory judgment action in federal court or in an inter parties review proceeding before the Patent Trial and Appeal Board.

Another rationale raised by the Court was the procedural difficulty and burden of litigating a defense of a belief in invalidity. Defendants would be incentivized to allege a belief in invalidity, which would be easier to prove than noninfringement. Moreover, patent infringement cases would become much more complex as juries might have to decide the defense of the defendant’s good faith belief in invalidity and the defense of actual invalidity.

In concluding, the Court took a shot at patent trolls (now referred to as non-practicing entities) and prodded the district courts to more aggressively stop them, stating:

“The Court is well aware that an ‘industry has developed in which firms use patents not as a basis for producing and selling goods, but, instead, primarily for obtaining licensing fees.’ . . . Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous. . . .

[I]t 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. . . . It is also within the district court’s discretion to award attorney’s fees to prevailing parties in ‘exceptional cases.’”

The Court’s decision is not new ground – it just restates existing law: you cannot avoid liability for inducing infringement on the grounds that you thought the patent was invalid.