Orange Book Blog

Commil USA, LLC v. Cisco Sys., Inc., No. 2012-1042 (Fed. Cir.)

    by Sandra A. Frantzen

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).