Commil USA, LLC v. Cisco Sys., Inc., No. 2012-1042 (Fed. Cir.)
The law regarding what proofs are necessary to establish inducement of infringement and what defenses are available to those accused of inducement has been hotly debated. In Commil v. Cisco, decided on Tuesday, a unanimous Federal Circuit panel reaffirmed the rule that proof of specific intent to induce infringement (and not just knowledge of the acts that constitute infringement) is necessary to establish inducement of infringement. Moreover, in a case of first impression, a majority of the panel held that the fact finder should consider whether an accused inducer had a good-faith belief of invalidity in determining whether the accused inducer had the requisite intent. This ruling will likely affect how inducement claims are presented and defended in a wide variety of cases, including Hatch-Waxman cases involving method-of-use patents.
In Commil, the patentee accused Cisco of inducing infringement of its patent, which claimed an improved method of handoffs of mobile devices between base stations in a network area. After two jury trials (a new trial was granted on a few issues due to prejudicial statements made by Cisco's trial counsel at the first trial), the juries ultimately found that Cisco induced infringement and the patent was not invalid. On appeal, Cisco objected to a jury instruction that instructed the jury that it could find inducement if "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 also objected to the district court's in limine ruling that precluded Cisco from presenting evidence during the second trial of its good-faith belief of invalidity to rebut the patentee's inducement allegations. In an opinion by Judge Prost (with separate opinions authored by Judges O'Malley and Newman), the Federal Circuit held in favor of Cisco on both issues.
First, the panel unanimously held that the "knew or should have known" language in the district court's jury instruction (which was a verbatim recitation of the inducement standard in Federal Circuit precedent) did not accurately recite the law of inducement in view of the Supreme Court's 2011 ruling in Global-Tech:
A finding of inducement requires both knowledge of the existence of the patent and "knowledge that the induced acts constitute patent infringement." Global Tech, 131 S. Ct. at 2068; see also DSU Med. Corp., 471 F.3d at 1306 (explaining that an "alleged infringer must be shown . . . to have knowingly induced infringement," not merely knowingly induced the acts that constitute direct infringement" (citation omitted)). . . . The jury was . . . instructed that Cisco must have actively and knowingly aided and abetted direct infringement. The jury, however, was not instructed that in order to be liable for induced infringement, Cisco must have had knowledge that the induced acts constitute patent infringement.
The Federal Circuit thus held that it was "clear that the jury instruction in this case was erroneous as a matter of law." The court vacated the induced infringement verdict and remanded for a new trial.
Next, a majority of the panel (Judges Prost and O'Malley) found that the district court erred in preventing Cisco from presenting evidence on its good-faith belief of invalidity to rebut the patentee's inducement allegations. Citing several cases as authority, the majority demonstrated how existing Federal Circuit precedent already recognized that an accused inducer may rely on its good-faith belief of non-infringement as evidence that it lacked the requisite level of intent needed for indirect infringement. But the majority noted that the issue of whether a good-faith belief of invalidity may serve as evidence of lack of intent had not yet been decided by the Court. The majority could "see no principled distinction between a good-faith belief of invalidity and a good faith belief of non-infringement for the purpose of whether a defendant possessed the specific intent to induce infringement of a patent." Thus, the majority held "that evidence of an accused inducer's good-faith belief of invalidity may negate the requisite intent for induced infringement" and such evidence should be considered in determining whether the accused inducer knew that the induced acts constitute infringement.
In a dissent that the majority characterized as "little more than construc[ing] a straw man and set[ting] him ablaze," Judge Newman contended that the majority's view of the law was contrary to principles of tort liability. Judge Newman wrote that "[a] mistake of law, even if made in good faith, does not absolve a tortfeasor" and thus "a 'good-faith belief' in invalidity does not avoid liability for infringement when the patent is valid."
While we will continue to watch how the Federal Circuit resolves the issue of indirect infringement in Hatch-Waxman cases, a few things remain clear. Litigants should continue to consider what evidence is needed to establish (or refute) that an accused indirect infringer is, in fact, an infringer and patent prosecutors should avoid writing claims that require lawsuits against indirect infringers (where possible).