Commil v Cisco: The US is in the midst of rethinking defences to 'inducement' of patent infringement

February 12, 2015

Charles T. Steenburg

(as published in Intellectual Property Magazine)

The Supreme Court of the US’ (SCOTUS) upcoming decision in Commil USA, LLC v Cisco Systems, Inc, may restrict the options of defendants charged with “inducing” patent infringement under 35 USC section 271(b). On its face, Commil presents a narrow issue: whether a defendant’s belief that a patent is invalid constitutes a defence to inducement. However, lurking below is a broader question: whether a defendant should be liable for inducing infringement if the defendant knew about the asserted patent and the patent owner’s view that the defendant was encouraging infringement, but the defendant reasonably disagreed.

Under current law, a good-faith belief can immunise a defendant’s past conduct, even if courts ultimately side with the patent owner and determine that the activities in question actually had caused others to directly infringe the patent. For instance, a defendant that instructs customers to use products in a particular way is not necessarily liable under section 271(b), even if (1) the patent owner had previously warned the defendant that the method described in the instructions was covered by a patent; and (2) courts ultimately agreed with the owner’s understanding. This “specific intent” requirement has renewed interest in formal opinions of counsel.

However, the US Patent and Trademark Office (USPTO) has suggested the alternative of holding inducers liable as a matter of course, if they were aware of a patent in question and encouraged acts later deemed to infringe (regardless of what the defendant believed about those acts). If SCOTUS takes this approach, it would lessen the value of opinions.

Commil could also have significant impacts even if the court focuses only on the letter of the question presented. While clear in theory, the distinction between noninfringement and invalidity can be fuzzy in practice.

Why inducement matters

Inducement is a type of “indirect infringement”. Unlike direct infringement, inducement does not require that the defendant make, use, sell, offer to sell, or import a patented product or method. Further, unlike contributory infringement, defendants can be liable even for selling basic staples if they encourage customers to use them in a way that constitutes infringement.

From the perspective of many patentees, inducement offers a crucial fallback when direct infringement claims are not practical. For example, inducement theories offer a way to:

  • Enforce patents in which the only direct infringers are individuals (eg, purchasers of a particular product) and/or immune from infringement claims (eg, doctors allegedly infringing “medical method” claims);
  • Target the “source” of infringing products even though the manufacturer sells the products abroad to various importers; and
  • Pursue individual executives personally in case their company is undercapitalised.

From this perspective, a state-of-mind requirement creates a loophole for bad actors.

By contrast, accused infringers tend to cast inducement as a disfavoured theory, that allows patentees to extort money from innocents and/or cover up mistakes that applicants made in the patent drafting process.

In practice, the truth lies somewhere in the middle. Inducement theories can be critical for patent owners when facing knockoff artists who seek to exploit technicalities. Yet, section 271(b) can also be abused. Indeed, one of the underlying challenges with inducement is that it spans so many different types of scenarios and offers both sides an array of talking points.

Key inducement cases prior to Commil

DSU and its progeny. In 2006, the US Court of Appeals for the Federal Circuit (Federal Circuit) resolved an earlier split and held that inducement requires more than encouraging a third party to take acts that constitute direct infringement. The DSU Medical Corp v JMS Co, (DSU) decision – en banc in relevant part – held that section 271(b) “requires evidence of culpable conduct, directed to encouraging another’s infringement” rather than mere “knowledge of the direct infringer’s activities”.1

For this reason, the Federal Circuit found sufficient evidence to support a jury verdict in favour of the accused inducer. In particular, the defendant had obtained several noninfringement opinions of counsel. Notably, however, the jury had found that the product in question actually did infringe. In other words, the jury found that the opinions of counsel were wrong.

DSU led many companies to consider – and patent lawyers to recommend – obtaining opinions of counsel in more situations than previous conventional wisdom would have dictated.

Global-Tech Appliances. The SCOTUS’ 2011 Global-Tech Appliances, Inc. v SEB SA, (Global-Tech) decision2 also concerned inducement, but with a different twist. Unlike the accused inducer in DSU, the defendant in Global-Tech did not claim to have an opinion concerning the relevant patent or otherwise believe that its products did not infringe. The defendant instead pled ignorance that the asserted patent even existed, notwithstanding that the defendant had copied the patent owner’s product – a fact it hid from the attorney who had been responsible for conducting a right-to-use study. Unaware of the patent owner itself, the attorney failed to locate the applicable patent. The defendant in turn relied on its purported lack of knowledge as a defence to inducement.

With these damning facts, the jury found the defendant liable under section 271(b). The Federal Circuit affirmed, holding that a defendant can be liable for inducement if it “should have known” about the asserted patent and the alleged infringement. In particular, the Federal Circuit stressed that the defendant had “deliberately disregarded a known risk” that the developer of the original product (which the defendant had copied) had a relevant patent.

SCOTUS affirmed the result, albeit on a slightly different basis. First, the court emphasised that it is not enough for the accused inducer to “lead another to engage in conduct that happens to amount to infringement”. Inducement instead “requires knowledge that the induced acts constitute patent infringement”. However, the court held that “willful blindness” can be a basis for finding such knowledge. In essence, that requires a defendant to bury its head in the sand.

The Commil case

In Commil v Cisco, SCOTUS faces a scenario closer to DSU than Commil. Instead of focusing on infringement, however, Cisco proffered evidence to support its purportedly good-faith belief that Commil’s patent is invalid. The trial court judge refused to allow Cisco to present such evidence to the jury. However, the Federal Circuit reversed and ruled that Cisco’s evidence was admissible. Citing DSU, the decision found “no principled distinction between a good-faith belief of invalidity and a good-faith belief of non-infringement” for purposes of inducement.3

Commil asked SCOTUS to reverse the Federal Circuit’s decision and hold that beliefs concerning invalidity are immaterial to inducement. The court later invited the government to file a brief expressing the views of the US. The Solicitor General and the USPTO recommended that the court grant review and hold that a defendant’s belief as to the invalidity of a patent is not a defence, if the defendant is charged with inducing infringement.

SCOTUS subsequently accepted the case for review. As of this writing, the parties have not filed their merits briefs. Oral argument will likely occur in March or April, with a decision by June.

Potential outcomes and action items

There are three basic ways in which SCOTUS could resolve Commil v Cisco on the merits.

Confirm the Federal Circuit’s decision. First, the court may confirm the Federal Circuit’s holding that a defendant’s beliefs concerning invalidity can be relevant to inducement. Although this is a possibility, SCOTUS typically does not review Federal Circuit decisions with an eye toward affirming them. In GlobalTech, however, the court affirmed the result while stressing that “willful blindness” is the only alternative to actual knowledge, thereby making it somewhat harder to prove inducement than it would have been under the Federal Circuit’s standard.

If SCOTUS affirms the Federal Circuit, it will confirm the ability to emphasise one’s best defences in opinion letters, even if those positions concern validity or other defences aside from non-infringement.

Reject the Federal Circuit’s decision. Alternatively, SCOTUS may reject the Federal Circuit’s holding and draw a rigid line between infringement and validity, yet confirm the comment in Global-Tech that section 271(b) “requires knowledge that the induced acts constitute patent infringement”.

If so, patent attorneys would start considering whether particular “invalidity” opinions could be converted into “noninfringement” opinions. This may be easier than it sounds. In particular, opinions could invoke the cannon of construction that claims normally should not be construed in a way that renders them invalid.4 This maxim has fallen out of favour with the Federal Circuit, but has never been officially repudiated.

On the other hand, a rigid distinction could make it harder for alleged inducers to rely on exculpatory testimony from employees or agents aside from trained attorneys. Laypeople often lump validity and infringement considerations together. In one recent case, for example, an executive had testified that he had not viewed the asserted patents as presenting a “barrier”, because he thought that the relevant products simply practised the prior art. The jury found no inducement. The Federal Circuit affirmed, finding that the testimony was relevant under DSU despite the general rule that “practising the prior art” is no defense to infringement.5

Change direction. The final scenario is that SCOTUS could revisit Global-Tech and in particular the “hold[ing] that induced infringement under section 271(b) requires knowledge that the induced acts constitute patent infringement.” Global-Tech itself did not squarely present the issue. In asserting that it never even knew the patent existed, the accused inducer effectively conceded that it would be liable for inducement if the courts found otherwise.

The USPTO’s brief in support of Commil’s petition suggests that it would welcome such a change at some point, but not necessarily now, given the case’s procedural posture.

If SCOTUS does revisit Global-Tech, it could effectively overturn DSU and make it significantly easier for patent owners to prove inducement.

1. 471 F3d 1293 (Fed Cir 2006) (en banc in relevant part).

2. 131 S Ct 2060 (2011).

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

4. Eg, Harris Corp v IXYS Corp, 114 F 3d 1149 (Fed Cir 1997)

5. Kinetic Concepts, Inc v Blue Sky Med Group, 554 F 3d 1010 (Fed Cir 2009).