Supreme Court opinion re. induced patent infringement

The opinion in Commil USA, LLC v. Cisco Systems, Inc. came out today.  The issue was whether or not a good faith belief as to the invalidity of a patent may serve as a defense to an induced infringement claim under 35 U.S.C. 271(b).  The Supreme Court said “no,” because, in part, that would undercut the presumption of validity that comes with an issued patent.  Other reasons were provided as well.

However, the more interesting issue in my view is the final section of the opinion, which seems to be a shot across the bow at “patent trolls” (or “non-practicing entities” (“NPEs”), depending on your sympathies).

The Court stated:

The Court is well aware that an “industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees.” eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 396 (2006) (KENNEDY, J., concurring). Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous. This tactic is often pursued through demand letters, which “may be sent very broadly and without prior investigation, may assert vague claims of infringement, and may be designed to obtain payments that are based more on the costs of defending litigation than on the merit of the patent claims.” L. Greisman, Prepared Statement of the Federal Trade Commission on Discussion Draft of Patent Demand Letter Legislation before the Subcommittee on Commerce, Manufacturing, and Trade of the House Committee on Energy and Commerce 2 (2014). This behavior can impose a “harmful tax on innovation.” Ibid.

 

No issue of frivolity has been raised by the parties in this case, nor does it arise on the facts presented to this Court. Nonetheless, it is still necessary and proper to stress that district courts have the authority and responsibility to ensure frivolous cases are dissuaded. If frivolous cases are filed in federal court, it is within the power of the court to sanction attorneys for bringing such suits. Fed. Rule Civ. Proc. 11. It is also within the district court’s discretion to award attorney’s fees to prevailing parties in “exceptional cases.” 35 U. S. C. §285; see also Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U. S. ___, ___–___ (2014) (slip op., at 7–8). These safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity. This dichotomy means that belief in invalidity is no defense to a claim of induced infringement. The judgment of the United States Court of Appeals for the Federal Circuit is vacated, and the case is remanded for further proceedings consistent with this opinion. It is so ordered.

 

The Court is seemingly reminding litigants, attorneys, and lower courts that the recent Octane Fitness case made it less burdensome to find that a patent case is “exceptional” for purposes of collecting attorney’s fees under 35 U.S.C. 285.  Lower courts now have lots of discretion to determine exceptionality, without the need to meet a specific standard of proof other than that the case “stands out” from others, and, under the “totality of the circumstances,” is an “exceptional” case.

Is the Supreme court suggesting that patent troll/NPE cases might be good candidates for “exceptional” cases in the future?

More commentary here:

http://patentlyo.com/patent/2015/05/invalidity-defense-inducement.html

http://www.scotusblog.com/case-files/cases/commil-usa-llc-v-cisco-systems-inc/

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