Good Faith Belief in Invalidity of Patent Will Not Immunize Induced Infringer

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Bringing a lawsuit for a distinct variety of patent infringement has been made a little easier, which is good news for patent owners but probably bad news for victims of patent trolls. This outcome follows from a recent United States Supreme Court decision in Commil USA, LLC v. Cisco Systems, Inc., in which the Court ruled that a party accused of induced infringement of a patent cannot excuse his conduct based on a good faith belief that the patent is invalid.

As is widely known, a patent owner can bring three varieties of patent infringement claims, the most common one being against the party that is accused of directly violating the patent. That is, a patent owner can sue whomever “makes, uses, offers to sell, or sells any patented invention.” 35 U.S.C. § 271(a). However, the patent owner can also pursue claims for contributory and induced infringement. 35 U.S.C. § 271(b) & (c). As reflected in the statutory language of the patent laws, a contributory infringement can occur when a party produces a component of an infringing device that is distributed or sold by the direct infringer, whereas induced infringement is often an alternative claim against the direct infringer for aiding and abetting infringement by a third party (such as encouraging a customer to utilize the infringing device).

While there are differences between contributory and induced infringement, there is overlap between them. For example, the Court’s decision inCommil serves as an important reminder that both contributing and induced infringement – unlike direct infringement -- require proof of knowledge on the part of the accused infringer. Specifically, to be found liable for either induced or contributory infringement, a party must be shown to have known about the subject patent and, further, to have known his acts were infringing. These requirements are not easy for the patent owner to establish, and indeed, one common defense used by accused infringers has been that their knowledge was negated by their belief the patent itself was invalid (i.e., should never have been issued). Or, as Justice Scalia explains in his dissent, “[b]ecause only valid patents can be infringed, anyone with a good-faith belief in a patent’s invalidity necessarily believes the patent cannot be infringed.”

In Commil, the subject patent protected a method for implementing wireless networks, using equipment of a kind made by Cisco and sold by Cisco to its customers. Commil sued Cisco both for directly infringing Commil’s patent and for inducing Cisco’s customers to infringe, a separate claim that presented the possibility for far greater damages. Cisco defended by asserting that it could not be accused of inducing its customers to infringe because it had a good-faith belief that the patent was invalid.

However, the majority in Commil shot down the argument that a good-faith belief in a patent’s invalidity will preclude a finding of induced infringement. The Court reasoned that “infringement and invalidity are separate matters under patent law.” According to the Court, invalidity remains a defense to ultimate liability, but not to whether the patent has been infringed in the first place, and thus, an accused infringer can be found to have known his conduct constituted infringement even if he believed the patent to be invalid.

The majority appeared to recognize that its holding will impact the patent troll “industry,” which from the perspective of its critics involves patent owners making frivolous claims based on shaky patents in order to obtain payments based more on the expense of litigation than on a belief that the claim has merit. That is, recipients of troll letters often obtain an analysis from counsel that the patent is invalid and need not be respected. While an opinion that the patent is invalid remains a highly important defense to liability for patent infringement, under Commil it will not block a charge that the accused has induced others to infringe. The Supreme Court suggested the problem of patent trolling is better solved by courts’ sanctioning attorneys for filing frivolous claims and awarding fees to the opposing party. This was small comfort to Justice Scalia, who predicts the decision will increase “the in terrorem power of patent trolls.”