The Road to Hell Was Paved With a Good Faith Belief: Why the Supreme Court Correctly Rejected the Good Faith Belief in the Invalidity of a Patent Defense for Dangerously Narrowing Induced Infringement Liability

• Publication year: 2015

The Road to Hell was Paved with A Good Faith Belief: Why the Supreme Court Correctly Rejected the Good Faith Belief in the Invalidity of a Patent Defense for Dangerously Narrowing Induced Infringement Liability

Sidney C. Eberhart

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NOTES

THE ROAD TO HELL WAS PAVED WITH A GOOD FAITH BELIEF: WHY THE SUPREME COURT CORRECTLY REJECTED THE GOOD FAITH BELIEF IN THE INVALIDITY OF A PATENT DEFENSE FOR DANGEROUSLY NARROWING INDUCED INFRINGEMENT LIABILITY

Sidney C. Eberhart^*

Table of Contents

I. Introduction..........................................................................................115

II. Background.............................................................................................118

A. THE PURPOSE OF PATENT LAW.........................................................118

1. Induced Infringement: 35 U.S.C. § 271(b).......................................119
2. The Previous Dispute About Inducement Claims..............................120
3. The Presumption of Validity: 35 U.S.C. § 282(a)...........................122

B. PROCEDURAL POSTURE AND AN OVERVIEW OF COMMIL USA V. CISCO SYS..................................................................................122

1. A Second Trial.................................................................................123
2. On Appeal to the Federal Circuit.....................................................123
3. Judge Newman's Concurrence and Dissent........................................125
4. Judge O'Malley's Concurrence and Dissent........................................126
5. The Supreme Court's Decision..........................................................127
6. Justice Scalia's Dissent......................................................................129

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III. Analysis......................................................................................................130

A. THE AIMS OF PATENT LAW AND THE PRESUMPTION OF VALIDITY...............................................................................................130
B. A COMPARATIVE ANALYSIS OF THE GOOD FAITH BELIEF DEFENSE...............................................................................................131

1. In the Context of Tort Law..............................................................132
2. In the Context of the Social Contract Theory and Traditional Contract Law...................................................................................134
3. Tortious Interference with Contract....................................................136
4. In the Context of Criminal Law.......................................................138

C. IMPLICATIONS OF THE FEDERAL CIRCUIT'S HOLDING AND SOLUTION HAD THE SUPREME COURT DENIED CERT OR RECOGNIZED THE DEFENSE.............................................................140

IV. Conclusion...............................................................................................142

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I. Introduction

The evil that is in this world almost always comes of ignorance, and good intentions may do as much harm as malevolence if they lack understanding.

Albert Camus¹

A common theory about the law is that it should seek to only criminalize behavior that is motivated by malicious intent.² This theory is fettered to the core belief that inherently good people have good intentions, and therefore they should not be held accountable for mere mistakes.³ While this might seem like an innocent and idealistic notion, it is exploited by those who seek to circumvent the law and rationalize their illegal behavior.⁴

Multiple areas of law that require a specific knowledge standard have grappled with the notion of "good faith." The reoccurring question asked is whether good intentions negate the knowledge requirement of causes of action that require a showing of specific intent.⁵ Patent infringement in the civil forum is no exception, and the Supreme Court has put to rest the same issue in the context of induced infringement claims.⁶

In an induced infringement claim, a patent owner asserts that the opposing party has facilitated or otherwise indirectly encouraged third parties to infringe upon the patent owner's rights.⁷ Indirect infringement commonly occurs when a manufacturer or advertiser sells a product and includes information about how to assemble that product in a way that would directly infringe a patent held by someone else.⁸ Induced infringement claims against the manufacturer or advertiser are critical causes of action for patent owners because it would be impractical and inequitable for the patent holder to locate every purchaser of the patented product.⁹ In this way, induced infringement claims provide a

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means for patent holders to assert their rights and collect damages when they otherwise could not.¹⁰ Recently, the Supreme Court rejected a new affirmative defense against induced infringement claims based on the defendant's good faith belief in the patent's invalidity. The Court held that this good faith belief defense could potentially narrow the scope of liability, and allow inducers to escape liability altogether.¹¹

On June 25, 2013, the United States Court of Appeals for the Federal Circuit affirmed the grant of a partial new trial and remanded a judgment of the U.S. District Court for the Eastern District of Texas to allow the District Court to reconsider the issue of indirect infringement in Commil USA, LLC v. Cisco Systems.¹² Cisco, the alleged infringer of U.S. Patent No. 6, 430, 395, appealed the decision of the U.S. District Court for the Eastern District of Texas primarily on the basis of an erroneous jury instruction.¹³ That instruction suggested that the jury could find Cisco liable for inducing infringement if "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."¹⁴

The Federal Circuit panel justified vacating the judgment of the trial court for incorrectly instructing the jury to find Cisco liable for inducement based on a "mere negligence" standard rather than the correct standard, which requires actual knowledge.¹⁵ While the issue with the jury instruction was the central basis for appeal, Cisco also alleged that the District Court improperly excluded evidence, which would have shown that Cisco had a good faith belief in the patent's invalidity.¹⁶

Cisco reasoned, and the Federal Circuit ultimately held, that evidence of a good faith belief in the invalidity of a patent is relevant for determining whether a plaintiff has met the specific intent prong of an induced infringement claim.¹⁷ Therefore, the jury was entitled to consider any evidence showing a good faith belief, with the understanding that the evidence would not "preclude a finding

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of induced infringement."¹⁸ The Court implicitly held that inducers could raise a new affirmative defense: a good faith belief in the invalidity of a patent.¹⁹

This Note argues that the Supreme Court correctly rejected the Federal a Circuit's holding and denied the creation of a new affirmative defense for induced infringement claims.²⁰

Part II.A discusses patent law's purpose and provides an overview of 35 U.S.C. §§ 271(b) and 282, both of which provide the basis for finding induced infringement. Part II.A also addresses the legal standard of an inducement claim and considers the source of contention implicated by that standard. Part II.B of this Note outlines the progression of Commil from the trial court level up to the Supreme Court.²¹

Part III.A examines the goals of the patenting process and asserts the Supreme Court's holding in Commil reinforced the aims of patent law. Part III.B looks to other areas of law that have a specific intent requirement, as they provide guidance on how to interpret the specific intent requirement of inducement claims in patent law and justify the Supreme Court's ultimate holding. Finally, part III.C considers the implications of introducing the good faith belief of invalidity of a patent as an affirmative defense, ultimately arguing that the Supreme Court correctly rejected the notion that a good faith belief in the invalidity of a patent would negate the specific intent prong of inducement.

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II. Background

A. THE PURPOSE OF PATENT LAW

Patent law is derived purely from constitutional and statutory authority rather than common law.²² Article I, Section 8 of the United States Constitution specifically states that "Congress shall have the power . . . [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."²³ Congress has the ability to promote sciences and the arts by developing incentives for patent holders to create; patent holders develop their patents knowing that they can profit from their creations for at least a limited period of time.²⁴ The limited time provision not only incentivizes creators, but also compensates patent holders for the "enormous costs in terms of time, research and development."²⁵

In 1998, the Seventh Circuit held that the following are the three aims of patent law:

First, patent law seeks to foster and reward invention; second, it promotes disclosure of inventions to stimulate further innovation and to permit the public to practice the invention once the patent expires; third, the stringent requirements for patent protection seek to assure that ideas in the public domain remain there for the free use of the public.²⁶

The law fully realizes these goals by conferring to patent holders "a monopoly right to exclude others from making, using, offering for sale, or selling the patented invention."²⁷ Further, since "[a patent] is an incentive [to] disclose,"²⁸ the Constitution allows for more than just a method of incentivizing the innovation of socially useful products. The limited time aspect of patent

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