[x-pubpol] Supreme Court closes the door on good-faith invalidity defence of patent infringement

[Joly MacFie]

Cisco just lost a $63.5m patent infringement SCOTUS appeal in which its
defense was (partly) that since it believed the patent was invalid, it
could not have been knowingly infringing it.

The IPKat has a lengthy analysis of which part is below
http://ipkitten.blogspot.com/2015/05/supreme-court-closes-door-on-good-faith.html

The Question

Whether a good-faith belief in invalidity is a defence to induced
infringement?

The Answer

No.  After Justice Kennedy trotted through the Court's 2011 decision in
Global-Tech (in which he was the lone dissenter), the Court explained their
opinion in four parts.  First, infringement and invalidity are separate
matters under patent law.  Indeed, issues of infringement and validity
appear in separate parts of the Patents Act.  The defences of
non-infringement and invalidity are two separate defences.  As Newman J
wrote in her dissenting opinion "validity and infringement are distinct
issues, bearing different burdens, different presumptions, and different
evidence."   The key element to the question as to whether a defendant is
liable for induced infringement is infringement - not validity.  Under
section 271(b), the statute requires that the defendant "actively induce[d]
infringement" which requires intent to "bring about the desired result",
being infringement.  Belief regarding validity has no role to play whether
there was intention to bring about infringement. Invalidity, after all, is
not a defence to infringement.  Invalidity is a defence to liability.
Therefore belief as to invalidity "cannot negate the scienter required for
induced infringement." To hold otherwise, would conflate the issues of
infringement and validity.

Second, to allow such a defense would also undermine the "common core of
thought and truth" that a patent is presumed valid. This presumption makes
it possible for a patentee to commence a claim without first having to
prove that his patent is valid.   If belief in invalidity were a defence to
induced infringement, the presumption would be undermined to such a degree
that a defendant could prevail if he proved that he reasonably believed
that the patent was invalid.  The reasonable belief standard would fly in
the face of the "clear and convincing" standard of proof established by
Congress that defendants must meet to rebut the presumption of validity
(see the AmeriKat's posts on Microsoft v i4i).

Third, such a defence would also have negative consequences in that it
could render "litigation more burdensome for everyone involved".  The
availability of such a defence could incentive every potential inducer to
advance a theory of invalidity, the veracity of which would be more
difficult for the court to assess than questions of infringement.  This
could result in accused inducers finding it "easier to prevail on a defence
regarding the belief of invalidity than non-infringement.  In addition the
need to respond to the defence will increase discovery costs and multiply
the issues the jury must resolve.  Indeed, the jury would be put to the
difficult task of separating the defendant's belief regarding validity from
the actual issue of validity."

Finally, in its reasoning, the Supreme Court also placed weight on the
practical reasons why not to create a defence based on a good-faith belief
in invalidity.  Practically, if the defendant really has a belief that the
patent is invalid then there are procedural avenues open to them.  They can
prove that the patent is invalid as an affirmative defence,  file a
declaratory judgment requesting the court to declare the patent invalid
(MedImmune v Genetech (2007)), seek inter partes review at the Patent Trial
and Appeal Board or seek ex parte rexamination at the Patent and Trademark
Office.

The Scalia Dissent

"It follows, as night the day, that only valid patents can be infringed.
To talk of infringing an invalid patent is to talk nonsense."  Although
readers could be forgiven in thinking that such colorful dicta came from
the mouth of our beloved Sir Robin Jacob, it actually came from Justice
Scalia in his dissent ["This is where the comparisons between the two
stop," Merpel hastens to add].

In what reads like an angry professor marking an incompetent, but arrogant,
student's exam paper Justice Scalia (who was joined by Chief Justice John
Roberts) picks apart each of the Court's arguments.  His own reasoning goes
like this:
1.  Induced infringement requires knowledge that the induced acts
constitute patent infringement (see Global-Tech).
2.  Only valid patents can be infringed.
3.  Anyone with a good-faith belief in a patent's invalidity, necessarily
believes the patent cannot be infringed.
4.  It is impossible for anyone who believes the patent cannot be infringed
to induce actions that he knows will infringe it.
5.  A good faith belief that a patent is invalid is therefore a defence to
induced infringement of that patent.
Justice Scalia considered that the fact that infringement and validity are
dealt with separately under the Patents Act was irrelevant.  "Saying that
infringement cannot exist without a valid patent does not “conflate the
issues of infringement and validity,” ... any more than saying that water
cannot exist without oxygen “conflates” water and oxygen. Recognizing that
infringement requires validity is entirely consistent with the
“long-accepted truth . . . that infringement and invalidity are separate
matters under patent law.”"  Further, permitting a good-faith invalidity
defence would not undermine the statutory presumption of validity.  All it
would do would be to permit an alleged inducer the possibility to avoid
liability for a third party's infringement of a valid patent.  It would not
undermine the patent's presumed validity (the AmeriKat recommends listening
to the opening questions from Chief Justice Roberts regarding the
percentage of patents that are upheld as valid here saying that 60% of
patents being found to be valid is not much of a presumption of validity).

In saying that “invalidity is not a defense to infringement, it is a
defense to liability.” the Court was merely making "an assertion, not an
argument."  Justice Scalia reiterated that infringing a patent means
invalidating the patentee’s right of exclusivity:  "An invalid patent
confers no such right. How is it possible to interfere with rights that do
not exist? The Court has no answer."

Scalia considered the Court's weakest argument to be its reliance on
"practical reasons" not to create a defence based on a good-faith belief in
invalidity.  He concluded:
"Ours is not a common-law court. Erie R. Co. v. Tompkins, 304 U. S. 64, 78
(1938). We do not, or at least should not, create defenses to statutory
liability—and that is not what this dissent purports to do. Our task is to
interpret the Patent Act, and to decide whether it makes a good-faith
belief in a patent’s invalidity a defense to induced infringement. Since,
as we said in Global-Tech, supra, the Act makes knowledge of infringement a
requirement for induced-infringement liability; and since there can be no
infringement (and hence no knowledge of infringement) of an invalid patent;
good faith belief in invalidity is a defense."

-- 
---------------------------------------------------------------
Joly MacFie  218 565 9365 Skype:punkcast
WWWhatsup NYC - http://wwwhatsup.com
 http://pinstand.com - http://punkcast.com
 VP (Admin) - ISOC-NY - http://isoc-ny.org
--------------------------------------------------------------
-
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.isoc-ny.org/pipermail/x-pubpol-isoc-ny.org/attachments/20150527/20e7884d/attachment.htm>