Good-Faith Belief in Patent Invalidity as a Defense in Induced Patent Infringement Cases?

October 29, 2013

Tuesday, October 29. 2013, by Rory Fleming
It has been long established that the direct infringement of a patent does not require knowledge of that patent or intent to infringe.  It is up to the developers of new products to check the U.S. Patent and Trademark Office’s patent database before releasing their products out into the world.  However, the Supreme Court held in Global-Tech Appliances Inc. v. SEB S.A. that induced infringement “requires knowledge that the induced acts constitute patent infringement.”  The knowledge requirement for induced infringement “can be satisfied either through actual knowledge or willful blindness.”

This outcome may have significant deleterious effects in the patent world because it may give companies incentives to play the ostrich when it is financially beneficial.

However, in denying the petition for a rehearing en banc of Commil USA, LLC v. Cisco Systems, Inc., the U.S. Court of Appeals for the Federal Circuit may set precedent for how induced infringement cases are handled in the future.  Commil USA, LLC, is an Israel-based company that “owns a patent . . . on a method of improving the handoff between mobile base stations when the user of a mobile device moves throughout a network area.”  Commil sued Cisco Systems, Inc., a U.S. company which produces WiFi access points and switches, for allegedly infringing on Commil’s patented improvements.  On appeal from the U.S. District Court for the Eastern District of Texas, the Federal Circuit held in Cisco’s favor that the trial court’s jury instructions were “erroneous” under the Supreme Court’s interpretation of 35 U.S.C. § 271(b)—induced infringement—in Global Tech v. SEB.  Specifically, the instruction that Cisco was liable if it “knew or should have known” that it would induce direct infringement permitted the jury to find liability on a negligence standard, which is “not necessarily sufficient to support a finding of knowledge.”  Judge Pauline Newman wrote in a partial dissent that “[a] good-faith belief of patent invalidity may be raised as a defense to willfulness of the infringement, but it is not a defense to the fact of infringement.”
Commil sought rehearing en banc using a theory based on Judge Newman’s dissent.  The Federal Circuit’s decision vacated a $74 million jury verdict from the District Court, primarily because of the Supreme Court’s Global-Tech decision.  Global-Tech raised the threshold beyond negligence for a knowledge finding, and Commil wrestled with the invalidity claim as a determinant of the existence of intent.  Ultimately, the Federal Circuit held that a “good-faith belief of invalidity” is “relevant evidence” that may show a lack of intent to infringe.  The denial of the rehearing request displays the Federal Circuit’s confidence in its decision, which solidifies a tougher standard to proving induced infringement.
This outcome may have significant deleterious effects in the patent world because it may give companies incentives to play the ostrich when it is financially beneficial.  Judge Newman’s position that the good faith belief in invalidity “does not negate infringement of a valid and enforceable patent” would reward inventors who go through the correct USPTO processes of establishing and challenging patents.  In the meantime, Commil suffered a $74 million hit with no right to recourse.  The decision on appeal added injury to insult from the District Court proceedings, during which Cisco’s counsel allegedly behaved in an ethnically and religiously insensitive way.