Good-Faith Belief of Invalidity May Negate Induced Infringement

Good-Faith Belief of Invalidity May Negate Induced Infringement

As early as the1990 decision in Manville Sales Corp. v. Paramount Sys. Inc., 917 F.3d 544 (Fed. Cir. 1990), the Federal Circuit applied a standard that encompasses negligence in determining whether the defendant violated 35 U.S.C. § 271 (b), prohibiting active inducement of infringement. Under this standard, if the alleged infringer knew or should have known one’s action would induce actual infringement, the alleged infringer was held liable as an infringer.

However, Commil USA, LLC v. Cisco Systems, Inc., No. 12-1042 (Fed. Cir. June 25, 2013), reversed over two decades of precedents and toughened the standard to prove induced infringement.

In Commil, the jury found that the defendant had induced infringement and awarded the plaintiff $63.7 million in damages. Cisco appealed the jury verdict, contending that the court erroneously instructed the jury on the standard for induced infringement in view of new precedent.

In particular, Cisco relied on Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011), where the Supreme Court held by an eight to one majority that liability under § 271(b) requires specific intent, i.e., that the accused inducer have knowledge that the induced acts constitute patent infringement. There, the Supreme Court also held that the requirement may be met by establishing “willful blindness” by the defendant, meaning that (a) “the defendant . . . subjectively believe[s] that there is a high probability” that a patent exists and the defendant’s acts infringe the patent; and (2) “the defendant must take deliberate actions to avoid learning” about such facts.

To Cisco’s advantage, under the Global-Tech Appliances decision, mere knowledge of a substantial and unjustified risk of infringement only establishes negligence. The Federal Circuit agreed with Cisco and found erroneous the trial court’s instruction that the jury may find inducement if the defendant “knew or should have known that its actions would induce actual infringement.”

Further, the Federal Circuit held that Cisco should have been allowed to present evidence showing its good-faith belief of invalidity because such belief is relevant to the requisite intent required for liability under a § 271(b) violation. Subsequently, the Federal Circuit affirmed the district court’s grant of a new trial, vacated the jury’s verdict on induced infringement, and remanded for a new trial.

It may be fairly propounded that the Global-Tech and Commil decisions recognize that a good-faith, albeit erroneous, belief of invalidity may conceivably negate the requisite intent for induced infringement. Accordingly, in cases where induced infringement is the plaintiff’s principal theory, it would be especially beneficial for the defendant’s counsel to make timely pre-trial and trial motions in accordance with the Daubert standard.

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