By Jason Rantanen (note that you can now follow me on Twitter @PatentlyO_Jason). For the sake of disclosure: while I was in practice I represented Cisco in an unrelated patent infringement litigation involving wireless technology.
Commil USA, LLC v. Cisco Systems, Inc. (Fed. Cir. 2013) Download 12-1042.Opinion.6-21-2013.1
Panel: Newman (concurring-in-part, dissenting-in-part), Prost (author), O'Malley (concurring-in-part, dissenting-in-part)
Cisco appealed from a jury finding that it induced infringement of Commil's patent. The primary issues addressed by the court were a pre-Global-Tech jury instruction and the appropriateness of considering validity when determining whether the accused party posessed the requisite state of mind for inducement of infringement. All three judges on the panel agreed that the jury instruction was both erroneous and prejudicial while Judges Prost and O'Malley agreed that issues of validity may be considered in the intent inquiry.
Jury Instruction for Inducement: During the April 2011 trial, the jury was given the following instructions relating to inducement:
If you find that a third party has directly infringed Claim 1, 4, or 6 of the '395 patent,
then Commil must prove by a preponderance of the evidence that Cisco actively and knowingly aided and abetted that direct infringement.
Furthermore, Commil must show that 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. Inducing third-party infringement cannot occur unintentionally. This is different from direct infringement, which can occur unintentionally. Cisco also cannot be liable for inducing infringement if it was not aware of the existence of the patent.
If you find that a third party has directly infringed Claim 1, 4, or 6 of the '395 patent
and that Cisco knew or should have known that its actions would induce direct infringement, you may find that Cisco induced another to infringe Commil's patent if it provided instructions and directions to perform the infringing act through labels, advertising, or other sales methods.
(Emphasis added). Note that the court's opinion contains only bits and pieces of these instructions. In order to obtain them in their entirety, I pulled the April 8, 2011 trial transcript via Lex Machina.
The jury found in Commil's favor and award it $63,791,153 in damages. Approximately two months later, the Supreme Court issued its opinion in Global-Tech v. SEB, in which it held that induced infringement "requires knowledge that the induced acts constitute patent infringement," a requirement that can be satisfied either through actual knowledge or willful blindness. 131 S.Ct. 2060, 2068, 2072 (2011). Based on Global-Tech, Cisco argued that the "should have known" language in the above jury instruction erroneously permitted the jury to find that it liable based on a negligence standard.
On appeal, the Federal Circuit agreed with Cisco that the instruction was legally erroneous under Global-Tech and that the error was prejudicial to Cisco. "With respect to whether the induced acts constitute patent infringement, it is clear that the jury was permitted to find induced infringement based on mere negligence where knowledge is required. This erroneous instruction certainly could have changed the result. Facts sufficient to support a negligence finding are not necessarily sufficient to support a finding of knowledge." Slip Op. at 8.
Issues of Validity May Negate Intent: Cisco also argued, and the majority agreed, that it should have been allowed to present evidence relating to its good-faith belief that the asserted claims were invalid. Just as a good-faith belief of non-infringement is relevant to the intent inquiry for inducement, so too is a good-faith belief about the invalidity of the claims relevant:
It is axiomatic that one cannot infringe an invalid patent. [] Accordingly, one could be aware of a patent and induce another to perform the steps of the patent claim, but have a good-faith belief that the patent is not valid. Under those circumstances, it can hardly be said that the alleged inducer intended to induce infringement. Thus, a good-faith belief of invalidity is evidence that may negate the specific intent to encourage another’s infringement, which is required for induced infringement. Several district courts have considered this question and come to the same conclusion.[]
We now hold that evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.1 This is, of course, not to say that such evidence precludes a finding of induced infringement. Rather, it is evidence that should be considered by the fact-finder in determining whether an accused party knew “that the induced acts constitute patent infringement.” Global-Tech, 131 S. Ct. at 2068.
Slip Op. at 10-11 (internal citations omitted).
Judge Newman's Dissent: Judge Newman dissented as to the validity component of the court's ruling. In her view, the only intent issue involved in inducement the question of infringement; an infringer's belief as to the validity of the patent plays no rule in the determination of inducement:
A defendant’s ultimate liability for induced infringement, as for direct infringement, is subject to various defenses including patent invalidity and unenforceability. However, whether there is infringement in fact does not depend on the belief of the accused infringer that it might succeed in invalidating the patent. Such a belief, even if held in good faith, does not negate infringement of a valid and enforceable patent. This rule applies, whether the infringement is direct or indirect. My colleagues err in holding that “evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.” Maj. op. at 11.
Slip Op. at 22. One difficulty with Judge Newman's position is that she bases it on the principle that "A mistake of law, even if made in good faith, does not absolve a tortfeasor." Slip Op. at 21. This principle, however, would seem to apply as much to mistakes about infringement – which Judge Newman agrees are relevant to the question of inducement – as it would to mistakes about validity. Both can involve mistakes about fundamentally legal questions or the application of law to fact. (I've also argued in the past that this tort principle does not translate well to patent law [p. 1617-1620]).
The New Trial Issue and Judge O'Malley's Dissent: During the initial trial, according to the district court, "Cisco's trial counsel attempted to play upon religious prejudices and other ethnic stereotypes." Slip Op. at 12. After Commil lost on indirect infringement, the district court granted it a partial new trial on the issues of infringement and damages (that's the trial discussed above). All three judges agreed that the district court did not abuse its discretion in granting Commil a new trial. However, the district court also declined to include issues of validity in the new trial, a decision affirmed by Judge Prost joined by Judge Newman.
Writing in dissent, Judge O'Malley disagreed that the district court's decision to grant Commil a new trial on the issue of infringement while not allowing Cisco a new trial on the issue of validity survived Seventh Amendment scrutiny. Judge O'Malley also would have addressed "Cisco's potentially dispositive arguments regarding whether Commil did or ever could prove the third party direct infringement which is a necessary predicate to Commil’s induced infringement claim." Slip Op. at 26.
anon, in a sense you are right. But between the supplier whose causes the infringement and the end user who may otherwise be innocent, the law ought to be like it is with every other co-tortfeasors:
joint and several liability, and apportionment according to fault.
How we got into this bizarre world of 271(b) and (c) is one more example of how good intentions coupled with bad statute drafting can lead to very unfortunate results
See my response at 07:24 below.
To borrow a phrase, if one wants to talk of morality (in terms of equity), one should come to the table with clean hands.
Ned, your hands are not clean. You have redefined just who the victim is.
The victim is the patent owner.
You have painted a transgressors against that actual victim to be the victim.
That’s not cricket.
Guest, the cases still require that the inducer “know” of the patent in order to be liable.
So please address, if you could, my question of what you would do if you were a judge deciding a case presented to you where it is proved that the telephone companies directly infringed by performing all the steps of the method, but they did so only because the hardware and software provided to them by Cisco was configured to infringe.
Both Cisco and telephone companies are defendants. With respect to the defendants all I have to do is prove that they infringe. With respect to Cisco I further have to prove that they intended to cause the infringement which means I have to prove that they “knew” of the patent. But I suppose that I cannot prove it Cisco knew of the patent prior to the filing the lawsuit.
As you know, liability for direct infringement of a method patent extends back six years from the date of filing of a lawsuit regardless of actual notice. Thus the telephone companies may be liable for up to six years damages.
Given these facts, the direct infringer may be liable for up to six years of damages to the patent owner. Cisco may not be liable for any infringement until the date suit was filed given that the “knowledge” requirement.
Is this a correct result?
From an ethical the point of view, clearly it is immoral to hold the victim liable, and here the telephone company clearly is a victim of Cisco’s infringement.
Turn italics tag off.
I take it Guest, that you do not find Newman’s views to hold water then?
Let’s take the idea of ‘trespass’ for a moment.
If you intend to do the act of going into a particular house, is there any room at all (even as merely a matter of relevance versus being a matter with dispositive effect) that changes the intent to go into THAT particular house if you believed that the house was actually some other house?
I intend to visit a long lost friend in a cookie-cutter neighborhood. The friend is ecstatic since we have not seen each other in many years. So even though he is still away on travel, he invites me to stay at his house. He gives me the address, but I am slightly dyslexic and instead of the correct address of 2112 Arglebargle Lane, I write down 1221 Arglebargle Road. Argle bargle being a popular term, the cookie cutter neighborhood has that name for different streets with designations of Lane, Road, Street, Way, Crossroads, Boulevard,… (well, you get the picture).
I arrive late at night at 1221 Arglebargle Road, find a key under the doormat and let myself in. After making myself at home by raiding the refrigerator and plunking myself into what appears to be a guest bedroom, I fall fast asleep.
I am awoken by an officer behind whom a small elderly woman is standing, quite shaken.
Does my belief that I intended to enter THIS house (1221) have relevancy to a charge of trespass?
While I did not intend for the act to be illegal, did I intend to do the act itself?
Do you see the level difference?
You are completely misreading the opinion. It is relevant evidence, not dispositive evidence. The Supreme Court said that in order to have intent, you must know that the acts you are inducing constitute infringement (or be willfully blind to it? Not clear on this point). A good-faith belief that the acts are not infringing (either due to non-infringement or invalidity) is relevant to showing a lack of intent to cause infringement. It is not dispositive, by any means. In fact, it is quite weak, self-serving evidence that I expect judges will have to decide whether or not to exclude under Rule 403… and it is highly likely that if a patent is infringed and valid, such evidence will be accorded little weight under the circumstances. Given the overlap between willfulness and intent to induce, it only makes sense that the same things that tend to disprove willfulness also tend to disprove intent to induce.
Just because evidence is relevant does not mean that it is dispositive. It is quite likely that judges will require opinions from counsel and waiver of attorney-client privilege to put any evidence of this forward, which parties will try to avoid because it could turn out worse for them. It is certainly risky to try and disprove intent to induce on this theory because of that.
In other words, this is (yet again) a YOU problem and you are doing that accuse-others-bit.
Understood.
MM, Come on. Outside counsel kept it up despite being warned. Most companies have executives or litigation managers at trial.
Cisco knew and apparently did nothing. This is the same thing as approving in my book.
“I’d be interested in hearing them.”
LOL – answer below, given some four hours before your 3:40 PM post.
I think the answer is that if the court finds, as a matter of fact, that you had a good faith belief in the invalidity of the patent, then the question of “intent” is answered in the negative. You didn’t have the intent. So no induced infringement.
I don’t see how you get around that result given the facts in my hypothetical, but if anyone has any thoughts, I’d be interested in hearing them.
Otis W. Carroll … another great patent attorney from Texas. He has evidently apologized for his comments. Were they made without Cisco’s prior approval, I wonder?
Chad Everingham
Well there’s a surprise. Who was the judge?
For the record, counsel for Cisco who played upon religious prejudices and other ethnic stereotypes was Otis W. Carroll.
LOL Ned, Myriad at least is logically consistent. We both know that the craziness I refer to is much more evident in other Supreme Court decisions.
You know the ones.
anon, I certainly agree in the case of Myriad.
Okay, what would you do if you were to judge in a case where both Cisco and a customer were being sued. The customer directly infringes by performing all the steps of the process, but they do so because they buy machines from Cisco.
There is no excuse for the direct infringer that he did not know that what he did was an infringement. He is liable. Why is it then that the person who causes him to infringe is let off the hook if he does not know of the patent or if he has a good faith belief that the patent is valid?
I think there’s something very wrong in this entire jurisprudence that would even comprehend letting the person responsible for the infringement off the hook.
If necessary, we need an amendment to the patent statutes to overturn the Supreme Court cases that required some “intention to cause infringement” to impose liability on the circumstances such as this.
…because validity and infringement are different and separate calculations.
The ‘intent’ is to the action, not the belief of the action.
Do you intend to go into that house? (whether or not you believe that house is yours is quite beside the point).
Read Newman’s dissent. Belief in the lawfulness of an action matters not to the intent to engage in that action.
It may not have much weight to negate all of the other evidence of intent, but showing a good-faith belief of non-infringement or invalidity certainly can be used to contradict such evidence. It’s certainly weak, self-serving evidence that would be difficult to accept and could possibly be excluded in a jury trial under Rule 403, but its relevance to proving or disproving intent to induce is hard to deny.
Returning to my first comment at the very top of the thread, in the case where a good faith belief in the invalidity of the patent is found as a matter of fact, in what circumstances is that belief NOT dispositive of the issue of intent? How can one have a good faith belief in invalidity (and have tht fact be acknowledged by a court) yet still “intend” to induce infringement? This is the part that confuses me.
I’m not saying it gets them off the hook. I’m saying it’s relevant to the intent element. In order to induce, you must have specific intent to cause acts which you know constitute infringement. It may not have much weight to negate all of the other evidence of intent, but showing a good-faith belief of non-infringement or invalidity certainly can be used to contradict such evidence. It’s certainly weak, self-serving evidence that would be difficult to accept and could possibly be excluded in a jury trial under Rule 403, but its relevance to proving or disproving intent to induce is hard to deny. The issue here was that the judge struck the evidence as irrelevant when it clearly has some probative value. Had the judge struck it under Rule 403 because the probative value was outweighed by massive prejudice to the patentee, the court likely would have affirmed and found no abuse of discretion.
“Can’t the Federal Circuit judges read Supreme Court opinions”
101, Ned – now that is some craziness BECAUSE of reading the Supreme Court opinions.
Go ask Alice.
I am frankly amazed at the craziness that is going on in patent law in the last few years. Divided infringement is just one of them. Can’t the Federal Circuit judges read Supreme Court opinions. Or is it that they simply disagree with them and arrogate themselves to the superior position?
Really?
Imagine a case where Cisco and its customers the telephone companies are both defendants. Cisco is solely responsible for the apparatus it sells to the telephone companies and which cause them to directly infringe. As direct infringers, they cannot get off the hook based upon some flimsy excuse concerning knowledge of the patent or any idea that the patent may be invalid. And yet, you would award all damages against these innocent parties and not one dime against Cisco, the party solely responsible for the infringement?
Majority got it right. Good faith belief on both non-infringement and invalidity is “relevant” but not dispositive (and likely will not be given significant weight but certainly is worth considering).
Interesting to see J. O’Malley hitting the 7th Amendment issue again. She hit it in Bosch v. Pylon with the bifurcated trial, and is hitting it now with the new trial. Seems to be something she is quite concerned about (likely as a former district judge).
Still no discussion of Rader’s most recent revolutionary pamphlet?
Should be “What is going on here”
Again, Newman is right.
Think about this. Cisco sells an apparatus to a telephone company that causes that telephone company to directly infringe the patent. The telephone company cannot avoid liability based upon any belief or non belief that the patent is invalid. But the party responsible for the infringement, Cisco, potentially could be left completely off the hook if they have a private belief that the patent is invalid.
The result is absurd.
While he going on here is one more nail in the coffin of patent owners trying to assert patents against the likes of Cisco.
And by the way, I like to record to make clear that Cisco hired and supported litigation counsel who are racist and bigoted beyond any measure. Cisco has to be condemned.
Jason (or anyone else): with respect to a party who is found to have had a good faith belief that a patent is invalid, what other steps might that party take to avoid a finding of specific intent (given that the mere finding of a good faith belief in invalidity appears to be non-dispositive of the “specific intent” issue)? Or is the majority suggesting that a good faith belief in invalidity will be dispositive of the intent issue if there is no other evidence of intent to induce …?
Comments are closed.