Commil USA, LLC v. Cisco Sys., Inc.

• Decision Date: 26 May 2015
• Docket Number: No. 13–896.,13–896.
• Citation: 191 L.Ed.2d 883,575 U.S. 632,135 S.Ct. 1920
• Parties: COMMIL USA, LLC, Petitioner v. CISCO SYSTEMS, INC.
• Court: U.S. Supreme Court

575 U.S. 632

135 S.Ct. 1920

191 L.Ed.2d 883

COMMIL USA, LLC, Petitioner

v.CISCO SYSTEMS, INC.

No. 13–896.

Supreme Court of the United States

Argued March 31, 2015.

Decided May 26, 2015.

Mark S. Werbner, Dallas, TX, for the petitioner.

Ginger Anders for the United States as amicus curiae, by special leave of the Court, supporting the petitioner.

Seth P. Waxman, Washington, DC, for the respondent.

Mark S. Werbner, Counsel of Record, Richard A. Sayles, Mark D. Strachan, Darren P. Nicholson, Sayles@Werbner P.C., Dallas, TX, Leslie V. Payne, Nathan J. Davis, Miranda Y. Jones, Heim, Payne & Chorush, LLP, Houston, TX, for Petitioner.

Jeffrey E. Ostrow, Harrison J. Frahn IV, Patrick E. King, Jonathan Sanders, Simpson Thacher & Bartlett LLP, Palo Alto, CA, Henry B. Gutman, Simpson Thacher & Bartlett LLP, New York, NY, William F. Lee, Counsel of Record, Mark C. Fleming, Felicia H. Ellsworth, Eric F. Fletcher, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, Seth P. Waxman, Francesco Valentini, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for Respondent.

Justice KENNEDY delivered the opinion of the Court.^*

A patent holder, and the holder's lawful licensees, can recover for monetary injury when their exclusive rights are violated by others' wrongful conduct. One form of patent injury occurs if unauthorized persons or entities copy, use, or otherwise infringe upon the patented invention. Another form of injury to the patent holder or his licensees can occur when the actor induces others to infringe the patent. In the instant case, both forms of injury—direct infringement and wrongful inducement of others to commit infringement—were alleged. After two trials, the defendant was found liable for both types of injury. The dispute now before the Court concerns the inducement aspect of the case.

I

The patent holder who commenced this action is the petitioner here, Commil USA, LLC. The technical details of Commil's patent are not at issue. So it suffices to say, with much oversimplification, that the patent is for a method of implementing short-range wireless networks. Suppose an extensive business headquarters or a resort or a college campus wants a single, central wireless system (sometimes called a Wi–Fi network). In order to cover the large space, the system needs multiple base stations so a user can move around the area and still stay connected. Commil's patent relates to a method of providing faster and more reliable communications between devices and base stations. The particular claims of Commil's patent are discussed in the opinion of the United States Court of Appeals for the Federal Circuit. 720 F.3d 1361, 1364–1365, 1372 (2013).

Commil brought this action against Cisco Systems, Inc., which makes and sells wireless networking equipment. In 2007, Commil sued Cisco in the United States District Court for the Eastern District of Texas. Cisco is the respondent here. Commil alleged that Cisco had infringed Commil's patent by making and using networking equipment. In addition Commil alleged that Cisco had induced others to infringe the patent by selling the infringing equipment for them to use, in contravention of Commil's exclusive patent rights.

At the first trial, the jury concluded that Commil's patent was valid and that Cisco had directly infringed. The jury awarded Commil $3.7 million in damages. As to induced infringement, the jury found Cisco not liable. Commil filed a motion for a new trial on induced infringement and damages, which the District Court granted because of certain inappropriate comments Cisco's counsel had made during the first trial.

A month before the second trial Cisco went to the United States Patent and Trademark Office and asked it to reexamine the validity of Commil's patent. The Office granted the request; but, undoubtedly to Cisco's disappointment, it confirmed the validity of Commil's patent. App. 159, 162.

Back in the District Court, the second trial proceeded, limited to the issues of inducement and damages on that issue and direct infringement. As a defense to the claim of inducement, Cisco argued it had a good-faith belief that Commil's patent was invalid. It sought to introduce evidence to support that assertion. The District Court, however, ruled that Cisco's proffered evidence of its good-faith belief in the patent's invalidity was inadmissible. While the District Court's order does not provide the reason for the ruling, it seems the court excluded this evidence on the assumption that belief in invalidity is not a defense to a plaintiff's claim that the defendant induced others to infringe.

At the close of trial, and over Cisco's objection, the District Court instructed the jury that it could find inducement 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."

Id., at 21. The jury returned a verdict for Commil on induced infringement and awarded $63.7 million in damages.

After the verdict, but before judgment, this Court issued its decision in Global–Tech Appliances, Inc. v. SEB S. A., 563 U.S. ––––, 131 S.Ct. 2060, 179 L.Ed.2d 1167 (2011). That case, as will be discussed in more detail, held that, in an action for induced infringement, it is necessary for the plaintiff to show that the alleged inducer knew of the patent in question and knew the induced acts were infringing. Id., at ––––, 131 S.Ct., at 2068–2069. Relying on that case, Cisco again urged that the jury instruction was incorrect because it did not state knowledge as the governing standard for inducement liability. The District Court denied Cisco's motion and entered judgment in Commil's favor.

Cisco appealed to the United States Court of Appeals for the Federal Circuit. The Court of Appeals affirmed in part, vacated in part, and remanded for further proceedings. The court concluded it was error for the District Court to have instructed the jury that Cisco could be liable for induced infringement if it " ‘knew or should have known’ " that its customers infringed. 720 F.3d, at 1366. The panel held that "induced infringement ‘requires knowledge that the induced acts constitute patent infringement.’ " Ibid. (quoting Global–Tech, supra, at ––––, 131 S.Ct., at 2068 ). By stating that Cisco could be found liable if it " ‘knew or should have known that its actions would induce actual infringement,’ " the Court of Appeals explained, the District Court had allowed "the jury to find [Cisco] liable based on mere negligence where knowledge is required." 720 F.3d, at 1366. That ruling, which requires a new trial on the inducement claim with a corrected instruction on knowledge, is not in question here.

What is at issue is the second holding of the Court of Appeals, addressing Cisco's contention that the trial court committed further error in excluding Cisco's evidence that it had a good-faith belief that Commil's patent was invalid. Beginning with the observation that it is "axiomatic that one cannot infringe an invalid patent," the Court of Appeals reasoned that " evidence of an accused inducer's good-faith belief of invalidity may negate the requisite intent for induced infringement." Id., at 1368. The court saw "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." Ibid.

Judge Newman dissented on that point. In Judge Newman's view a defendant's good-faith belief in a patent's invalidity is not a defense to induced infringement. She reasoned that "whether there is infringement in fact does not depend on the belief of the accused infringer that it might succeed in invalidating the patent." Id., at 1374 (opinion concurring in part and dissenting in part). Both parties filed petitions for rehearing en banc, which were denied. 737 F.3d 699, 700 (C.A.Fed.2013). Five judges, however, would have granted rehearing en banc to consider the question whether a good-faith belief in invalidity is a defense to induced infringement. Id., at 700 (Reyna, J., dissenting from denial of rehearing en banc).

This Court granted certiorari to decide that question. 574 U.S. ––––, 135 S.Ct. 752, 190 L.Ed.2d 474 (2014).

II

Although the precise issue to be addressed concerns a claim of improper inducement to infringe, the discussion to follow refers as well to direct infringement and contributory infringement, so it is instructive at the outset to set forth the statutory provisions pertaining to these three forms of liability. These three relevant provisions are found in § 271 of the Patent Act. 35 U.S.C. § 271.

Subsection (a) governs direct infringement and provides:

"Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent."

Under this form of liability, a defendant's mental state is irrelevant. Direct infringement is a strict-liability offense. Global–Tech, 563 U.S., at ––––, 131 S.Ct., at 2065–2066, n. 2.

Subsection (b) governs induced infringement:

"Whoever actively induces infringement of a patent shall be liable as an infringer."

In contrast to direct infringement, liability for inducing infringement attaches only if the defendant knew of the patent and that "the induced acts constitute patent infringement." Id., at ––––, 131 S.Ct., at 2068. In Commil and the Government's view, not only is knowledge or belief in the patent's validity irrelevant, they further argue the party charged with inducing infringement need not know that the acts it induced would infringe. On this latter point, they are incorrect, as will be explained below.

Subsection (c) deals with contributory infringement:

"Whoever offers to sell or sells within the United States or imports into

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