The Federal Circuit Opens the Door to an Additional Defense to Inducement

It is well established law that liability for inducement requires the specific intent to induce another to infringe.  It is also well established law that a defendant may rely on a good faith belief that the there is no patent infringement to defeat the intent element.  See DSU Medical Corp. v. JMS Co. Ltd., 471 F. 3d 1293 (Fed. Cir. 2006) (en banc).  What was not clear from the Federal Circuit's precedent, was whether a defendant’s good faith belief that the patent in question was invalid could also be used as evidence to overcome an allegation of inducement.  That question has now been answered.  In Commil USA v. Cisco Systems 2012-1042 (Fed. Cir. June 25, 2013), the majority held that “evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.”  Opinion at  11.  This holding, however, does not establish a bright line defense, as the Court went on to say “[t]his is, of course, not to say that such evidence precludes a finding of induced infringement. Rather, it is evidence that should be considered by the fact-finder in determining whether an accused party knew  ‘that the induced acts constitute patent infringement.’” Id. (citations omitted).

Judge Newman was on the three judge panel and issued a strong dissent.  A small snippet from her dissenting opinion captures the theme:

A good-faith belief of patent invalidity may be raised as a defense to willfulness of the infringement, but it is not a defense to the fact of infringement. Patent invalidity, if proved, eliminates an invalid patent and thus is a total defense to infringement. However, a “good-faith belief” in invalidity does not avoid liability for infringement when the patent is valid.1 No rule eliminates infringement of a valid patent, whether the infringement is direct or indirect. Newman Dissent at 2

The practical impact of this decision is significant.   Evidence that a party believed a patent was invalid, such as an opinion of counsel of invalidity or a well-founded reexamination request, is now clearly admissible evidence that can be presented not only to defend against willfulness (a damages issue), but also to defeat a showing of liability when the theory of infringement rests on inducement.

En Banc Federal Circuit Permits Appeals Prior to Damages and Willfulness Determinations

One of the guiding principles of appellate jurisdiction is the “final judgment rule” that defers jurisdiction of an appellate court “until there has been a decision by the district court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.”  Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 373 (1981).  Much to the chagrin of many a patent litigator and litigant, it is this principle that precludes most interlocutory appeals (such as review of claim construction orders), no matter how important the issue may be.  There is, however, an exception to the final judgment rule with respect to the Federal Circuit’s jurisdiction hidden away in 28 U.S.C. 1292(c)(2), that permits interlocutory appeals when a judgment is final “except for an accounting.” The en banc Federal Circuit in Robert Bosch, LLC v. Pylon Manufacturing Corp., 2011-1363, 1364, June 14, 2013, took on the question (sua sponte) whether an “accounting” as used in Section 1292(c)(2) includes (1) a trial on damages; and (2) a trial on the issue of willfulness.  A divided court (yet again) held that, yes, the Federal Circuit does have jurisdiction over a case that is final on all issues other than damages and willfulness.

               The en banc decision comes complete with the majority opinion, two opinions concurring-in-part and dissenting-in-part and a fourth opinion by O’Malley dissenting.  It would be both fun and worthwhile to dive into the details of the four opinions and analyze the continued fractures in the court on this issue (and in general), but other than law school professors, who has the time!   Suffice it to say that unless and until the Supreme Court chimes in on this issue, district court judges now know that should they decide to bifurcate issues of damages and willfulness (as is Judge Robinson’s practice in D. Del.),  that decision will not impair the ability of the parties to appeal a judgment on the liability issues.