Argument analysis: Justices debate intent to induce patent infringement (again)
on Apr 1, 2015 at 3:23 pm
The Court started this Term’s patent day on Tuesday with Commil USA v. Cisco Systems. It is hard to believe it already has been four years since the Court tried in Global-Tech Appliances v. SEB to clarify what it takes to prove “intent” to induce patent infringement. But alas – once more into the breach.
The specific question is whether a business can “actively induce” patent infringement if it holds a good-faith (albeit mistaken) belief that a patent is invalid; if the business believes the patent invalid, how can its actions intend anything about inducement? Because the statute itself says nothing about the required state of mind, the intent requirement is entirely a matter of judicial construction. Not surprisingly, the courts have had difficulty specifying the requisite state of mind.
This case involves a patent held by Commil, which covers a method for implementing a short-range wireless network – just the kind of thing that might cover some item in the boundless catalog of routers, switches, and servers that Cisco sells and manages. Cisco apparently did not infringe the patent itself; rather, the argument is that it induces its customers to infringe. Cisco argues that it cannot be held liable for inducing infringement because it had a good-faith belief (wrong, as it turns out in hindsight) that the patent in fact was invalid. The Federal Circuit accepted that argument and the Court granted review.
Mark Werbner, arguing for Commil, stood his ground against persistently critical questioning. The basic problem with his position is that it is all but impossible to reconcile with the Court’s opinion in Global-Tech. In that case, the Court described the question before it (quite close to the question here) as “whether a party who ‘actively induces’ infringement of a patent . . . must know that the induced acts constitute patent infringement.” The answer, several pages later: “[W]e now hold that induced infringement . . . requires knowledge that the induced acts constitute patent infringement.” Werbner’s approach to the problem is to argue that the inducer must believe that the acts would infringe the patent, but he need not believe that the patent is valid; in his view the presumption of patent validity should mean that an inducer acts at its own peril if it assumes that a patent is invalid.
Justices challenged him on three distinct fronts. Chief Justice John Roberts introduced the first topic just moments after Werbner began. His tack was to explore the empirical plausibility of a belief in a patent’s invalidity. After Werbner conceded that about forty percent of litigated patents were held invalid, the Chief Justice pointedly remarked that “[t]hat’s not much of a presumption of validity.”
For his part, Justice Antonin Scalia pressed Werbner on the common-law source of the provision. In Justice Scalia’s view, it made sense for a direct infringer to be strictly liable (with no defense for a belief that the patent was invalid), but common-law precedents suggested a much higher standard of intent for secondary liability like inducement: “What good does it do to say, well, you know, you’re really not a bad actor, you’re half a bad actor. It seems to me that if you don’t know that your infringing is no worse than your not knowing that the patent is valid.”
The harshest questioning came from Justice Elena Kagan, who could see no plausible basis for distinguishing between non-infringement (the subject of Global-Tech) and invalidity (the dispute at issue here): “Global-Tech says that I have a good-faith defense as to non-infringement, but you’re suggesting I don’t have that good-faith defense as to invalidity. And I guess I don’t understand quite why that would make sense. . . . It would seem that the two defenses are so intertwined and so ‘two sides of the same coin’ that they should be treated in the same way.”
Representing the Patent and Trademark Office, Assistant to the Solicitor General Ginger Anders faced a much harsher reception. Implicitly recognizing the difficulty of distinguishing between a good-faith belief of non-infringement and a good-faith belief of invalidity, the government argued for an even broader range of inducement liability than Commil. Under the government’s reading, neither defense would be available.
As the discussion above should make clear, that argument is even harder to reconcile with Global-Tech. With an air of disbelief, Kagan challenged Anders head on: “[W]hatever the factual circumstances of that case were, we could not have been more clear about the breadth of the holding. I mean, we . . . said: ‘We now hold that induced infringement under 271(b) requires knowledge that the induced acts constitute patent infringement.’ [Y]our brief essentially puts a ‘not’ in that sentence.” In the same vein, the Chief Justice interjected that her comments “sound[ed] like an argument that Global-Tech was wrong.”
Anders did “acknowledge that the Court may understand Global Tech differently than we do” – a mild understatement – and then tried to defend her secondary position that a good-faith belief in invalidity should not be a defense even if a good-faith belief in noninfringement is a defense. Signaling how unlikely it is that the Court will accept her principal view, Justice Ginsburg immediately commented: “I hope you’ll concentrate on that because that’s the crux of this case. … If you think there is a principled difference, tell us what it is.” The problem she faced there – as she tried to defend the distinction between views about invalidity and views about infringement – is the tension between her primary view and her fallback position that the defenses should be treated differently. Justice Scalia promptly cut her off: “Of course, that’s not your position, is it? I mean, the United States would treat both the same, right? The United States says you don’t have to know either one. . . . The differences are not enough to persuade you, but you think they should be enough to persuade us. Is that it?”
The tone of questioning in the first part of the argument suggested that Seth Waxman (arguing for Cisco) would have an easy time defending the Federal Circuit’s judgment. But that quickly turned out not to be the case.
Two strains of criticism dominated. Justice Sonia Sotomayor posited a distinction between inducement liability and aiding and abetting. Conceding Waxman’s contention that aiding-and-abetting liability required scienter, she doubted its relevance to a dispute about inducement: “[Y]ou’re not aiding and abetting; you’re inducing. … Actually, it’s like you’re appointing a surrogate and you’re saying, you do it for me, but you do it.”
More broadly, the Chief Justice and Justice Kagan (despite their harsh criticism of contrary arguments earlier in the argument) expressed deep skepticism about the idea that a sophisticated defendant should be able (in the words of the Chief Justice) to treat “ignorance of the law as excuse.” For her part, Justice Kagan suggested that she found his position remarkable: “I mean, is there any other area of law where the defendant gets to say, I thought an affirmative defense would be available? It turned out I was wrong, but I thought an affirmative defense would be available.”
It is not at all obvious how the Justices will come out here. Of the three persistent questioners, only Justice Scalia seemed to have a firmly settled view. Moreover, Justice Samuel Alito (the author of the Global-Tech opinion) said not a word. It is reasonable to expect that his understanding of his own opinion (joined by seven colleagues still on the Court) will carry some weight in the deliberations. My guess, in the end, is that the Justices will stick with the route suggested in Global-Tech, that inducement liability requires knowledge of both infringement and validity. But the comments from the Chief Justice and Justice Kagan to Cisco’s counsel certainly presage a spirited debate among the Justices before they settle on a final opinion.