Has the Supreme Court signaled the end of invalidity opinion letters?

by Thompson Coburn LLP
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On May 26, 2015, in the case of Commil USA, LLC v. CISCO Systems, Inc., the U.S. Supreme Court answered the question of whether a good-faith belief that a patent is invalid shields a party from committing induced infringement. Finding the determinations of infringement separate and apart from determinations of invalidity, the Supreme Court held that induced infringement could not be avoided simply by believing the patent in question invalid — a seemingly simple answer to a simple question.

But in reaching that determination, did the Supreme Court signal a desire to do more? In its Commil decision, the justices seemed to suggest that a belief as to the invalidity of a patent — no matter how well reasoned or firmly grounded — may also not prevent a finding that direct infringement was willful. While patent law has long recognized that a potential infringer who obtains an opinion of counsel addressed to either noninfringement or invalidity may prevent a finding of willfulness, arguments in the Commil decision may call in to question the efficacy of opinions relying on only invalidity arguments. If so, such a holding would mark a dramatic shift in patent jurisprudence and practice and may leave many clients holding invalidity opinion letters that unknowingly expose them to liability.

The Commil decision
The patent holder plaintiff in Commil, Commil USA, LLC, sued defendant CISCO Systems, Inc. for infringing patents Commil held directed to wireless networks. Commil argued that CISCO both directly infringed its patents by selling the wireless technology at issue and induced infringement by selling others the equipment at issue for them to use to infringe the patent.

At trial, CISCO argued it could not have induced infringement of Commil’s patent as CISCO had a good-faith belief that Commil’s patent was invalid. CISCO tried to introduce evidence on the invalidity of Commil’s patent, but the trial court excluded the evidence as inadmissible — presumably because it was irrelevant. CISCO was found liable for both direct and indirect infringement and damages of $63.7 million.

CISCO appealed to the Court of Appeals of the Federal Circuit, which concluded it was error for the trial court to have excluded its evidence that it had a good-faith belief that Commil’s patent was invalid. According to the Federal Circuit, because it is “axiomatic that one cannot infringe an invalid patent,” it also followed that “evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.” The Federal Circuit, in reaching its decision, found “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.”

This time Commil appealed and the Supreme Court disagreed with the Federal Circuit. In reaching its decision, the Supreme Court emphasized that “the scienter element for induced infringement concerns infringement” — an issue wholly separate from invalidity. According to the Supreme Court, because infringement and validity are separate issues, “belief regarding validity cannot negate the scienter required under §271(b).” Put succinctly, the defense of invalidity is a defense to liability, “not a defense to infringement.”

The Supreme Court then went on to devote much of the remainder of the opinion to showing how infringement and validity are two very separate issues. The Court described how declaratory judgment claims of invalidity exist separate and apart from claims of infringement (and can survive a finding that there is no infringement). It pointed to the topics of infringement and invalidity being parts of separate sections of the Patent Act and to the fact that each are listed as two separate defenses and that defendants may raise either or both of them.

But perhaps most importantly to the court, was the presumption of validity and its impact on this analysis. Because patents are presumed valid, the patent holder had no need to prove that its patent was valid in order to bring a claim for infringement. According to the Supreme Court, allowing a defendant to rely on a good-faith belief that a patent was invalid to avoid induced infringement required plaintiffs to prove the validity of their patents — in contravention of the presumption of validity.

Willfulness and Commil
In In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007), the Federal Circuit established a two-prong test for determining whether there has been willful infringement. Prior to Seagate, written opinions of counsel arguing that there was no infringement or that the patent in question was invalid were seen as the only way for a party to avoid a finding of willful infringement. Seagate, however, removed this need for a formal written opinion and replaced it with a more flexible test looking to the intent of the accused infringer.

Under the first prong of that test, the patent owner was required to prove by clear and convincing evidence that the alleged infringer acted despite “an objectively high likelihood that its action constituted infringement of a valid patent.” The next prong then required the patent owner to show this objectively high risk was “either known or so obvious that it should have been known” to the alleged infringer. Thus, under Seagate’s first prong, accused infringers could avoid a finding of willful infringement two ways: (1) by showing defenses to infringement, or (2) arguments of invalidity.

While there was no need to make such a showing in a formal written opinion of counsel, nothing so memorialized the possession of such invalidity arguments at the time of infringement like an opinion of counsel addressing the topic. And so, the practice for those fearing claims of infringement and hoping to avoid a finding of willful infringement has been to seek formal written opinions of counsel that they either do not infringe or that the patent in question is invalid, or both.

But, the rationale of the Commil decision appears to call the first Seagate prong into question with respect to written opinions directed solely to invalidity arguments. One could argue that, under Seagate and Commil, to show willful infringement, the patent holder must show that the alleged infringer acted despite an objectively high likelihood that its actions constituted infringement and nothing more. Since every patent is presumed valid, the portion of the analysis directed to infringement of a valid patent can be assumed. Accordingly, one reading of Commil is that the only relevant inquiry with respect to a determination of willfulness is with respect to the alleged infringer’s infringement activities. Continuing under that reading, any inquiry into the validity of the patent, including whether the alleged infringer believed the patent to be invalid, could be seen as irrelevant, because infringement and validity are entirely separate determinations with no bearing on one another.

If this were the intended result of the Commil decision, the effects would be monumental in the patent world. Parties who paid for and relied upon opinions of counsel to avoid findings of willful infringement would find that they are exposed despite their efforts. Firms that had issued invalidity opinions of counsel would be forced to revisit those opinions to add arguments directed to non-infringement. And, for the parties, until such opinions could be rendered, there would have no protection for claims of willful infringement.

To be clear, neither the Supreme Court nor the Federal Circuit have held that believing a patent invalid is irrelevant to determining whether an infringer of that patent acted willfully. Nor has a court equated the scienter requirement of showing induced infringement with the knowing infringement of willful infringement. And at no point does the Supreme Court directly point to either requirement in its analysis. But the beginnings of an argument can be pulled from the Commil analysis. Given the potentially earth-shattering nature of the Supreme Court intending such a result, patent law practitioners could have much to do to protect their clients. But ultimately only further decisions will provide true clarity.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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