IP Law Daily, TOP STORY: Supreme Court to decide whether belief of invalidity can negate intent to induce infringement, (Dec 8, 2014)

By Thomas Long, J.D.

In a dispute over whether Cisco Systems, Inc. infringed a method patent relating to mobile communications, held by Commil USA, LLC, the U.S. Supreme Court has granted Commil’s petition to review the correct standard for determining the requisite intent for a finding of induced infringement. At issue is a decision by the U.S. Court of Appeals for the Federal Circuit, holding that Cisco’s evidence of a good-faith belief of invalidity could negate the intent required to show induced infringement.

Patent-in-suit. The patent-in-suit is U.S. Patent No. 6,430,395, entitled “Wireless Private Branch Exchange (WPBX) and Communicating Between Mobile Units and Base Stations.” In a wireless system, mobile devices such as phones and laptop computers communicate with fixed “base stations” according to standardized procedures that govern the way in which data exchanged between devices is formatted, ordered, maintained, and transmitted. These procedures are referred to as “protocols.” Effective wireless communication requires that the transmitting device and the receiving device follow the same protocol. The ’395 patent relates to a method of providing faster and more reliable handoffs of mobile devices from one base station to another as a mobile device moves throughout a network area.

Infringement action. Cisco is a major supplier of WiFi access points and controllers. Commil alleged that certain Cisco access points and controllers infringed various claims of the ’395 patent. Cisco contended that the patent was invalid.

After a trial, the jury returned a verdict rejecting Cisco’s invalidity contentions, finding Cisco liable for direct infringement, and awarding Commil $3.7 million in damages. The jury also found that Cisco was not liable for induced infringement. Commil filed a motion for a new trial on the issues of induced infringement and damages, which the court granted.

A second trial was held on indirect infringement and damages. The jury returned a verdict in favor of Commil on both issues and awarded $63.7 million in damages. Cisco appealed.

Jury instruction. Key to Cisco’s appeal was an instruction given to the jury in the second trial. The court instructed the jury that it could find inducement if it determined that “Cisco actually intended to cause the acts that constitute direct infringement and that Cisco knew or should have known that its actions would induce actual infringement.” Cisco argued that this instruction allowed the jury to find inducement on the showing of mere negligence and, as such, was legally erroneous in view of the Supreme Court’s decision in Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011). In that case, the Court held that held that induced infringement “requires knowledge that the induced acts constitute patent infringement.”

The Federal Circuit agreed that the instruction was erroneous as a matter of law. The jury had been permitted to find induced infringement based on mere negligence, when knowledge was required. This erroneous instruction could have changed the trial’s result, the appellate court said. The verdict on induced infringement was vacated, along with the damages award.

Good-faith belief of invalidity. Prior to the second trial, Cisco proffered evidence to support its good-faith belief that the ’395 patent was invalid. A good-faith belief of invalidity could negate the requisite intent for induced infringement, according to the Federal Circuit. This evidence had to be considered by the jury in determining whether an accused party knew that the induced acts constituted patent infringement.

Argument in favor of granting certiorari. In its petition for certiorari, Commil pointed out that issued patents are entitled to a statutory presumption of validity, and the defense of invalidity must be proved by clear and convincing evidence. Quoting a dissent by Judge Jimmie V. Reyna from the Federal Circuit’s denial of Commil’s petition for en banc rehearing of the case, Commil argued that “The Federal Circuit’s new defense to inducement, however, ‘fundamentally changes the operating landscape’ and ‘strikes at the very heart of the presumption of validity by eroding patent rights that have been duly granted by the PTO based solely on an erroneous—albeit good faith—belief that the PTO erred in granting the patent.’”

Solicitor General’s amicus brief. The Solicitor General filed a brief for the United States as amicus curiae, arguing that the Federal Circuit erred in holding that a good-faith belief that a patent-in-suit is invalid is a defense to inducement liability.

“That holding is inconsistent with the Patent Act’s text and structure, and it may undermine Section 271(b)’s efficacy as a means of deterring and remedying infringement,” the Solicitor General argued.

Question presented. The Court granted certiorari only for Commil’s first question presented: “Whether the Federal Circuit erred in holding that a defendant’s belief that a patent is invalid is a defense to induced infringement under 35 U.S.C. §271(b).” Review was denied with respect to its second question, “Whether the Federal Circuit erred in holding that Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011) required retrial on the issue of intent under 35 U.S.C. §271(b) where the jury (1) found the defendant had actual knowledge of the patent and (2) was instructed that ‘[i]nducing third-party infringement cannot occur unintentionally.’”

The petition for certiorari in Commil USA, LLC v. Cisco Systems, Inc. (Docket No. 13-896) was granted December 5, 2014.

Grant of second trial. In a separate petition, Cisco requested review of the Federal Circuit’s holding that the district court did not violate the Seventh Amendment by granting a new trial on induced infringement and damages, but not on patent invalidity. The petition in Cisco Systems, Inc. v. Commil USA, LLC, Docket No. 13-1044, was denied December 1, 2014.

Justice Breyer took no part in the consideration or decision of either petition.

Attorneys: Mark Steven Werbner (Sayles, Werbner) for Commil USA, LLC. William F. Lee (Wilmer Cutler Pickering Hale & Dorr LLP) for Cisco Systems, Inc.

Companies: Commil USA, LLC; Cisco Systems, Inc.

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