Supreme Court Sides With Patent Trolls

from the bad-news dept

Well, this is unfortunate. Last fall, we wrote about yet another patent case being heard by the Supreme Court. This one (Commil v. Cisco) involved the question of whether or not a company could be found liable for “inducing infringement” when it believed that the patent in question was clearly invalid. The appeals court (CAFC) had overturned a lower court, saying that it was wrong for a judge to instruct a jury that Cisco could be found guilty of inducing patent infringement if it “knew or should have known that its actions would induce actual infringement.” The big question was about the “should have known” part. Cisco argued — and the CAFC agreed — that the “should have known” statement created a negligence standard, which is not appropriate in such cases. Further, CAFC rightly pointed out that “one cannot infringe an invalid patent.”

Unfortunately, the Supreme Court has now mostly sided with the patent holder Commil, and said that believing a patent is invalid is no defense to an inducement claim in a patent infringement case. The reasoning — in an opinion by Justice Kennedy — is basically “infringement and validity are two separate issues.” True… but… sorta misses the point. The Court, thankfully, didn’t go quite as far as it could have gone in saying that you could induce infringement even without knowledge that something is infringing, but it rejected the idea that a belief the patent was invalid is a “defense” to an inducement claim. All because it insists that validity and infringement are two entirely separate issues.

When infringement is the issue, the validity of the patent is not the question to be confronted.

But this presumption of validity is problematic in any real world scenario, and the ruling doesn’t seem to care, focusing on the procedural issues of when certain arguments are made and who has the burden at what point:

To say that an invalid patent cannot be infringed, or that someone cannot be induced to infringe an invalid patent, is in one sense a simple truth, both as a matter of logic and semantics. See M. Swift & Sons, Inc. v. W. H. Coe Mfg. Co., 102 F. 2d 391, 396 (CA1 1939). But the questions courts must address when interpreting and implementing the statutory framework require a determination of the procedures and sequences that the parties must follow to prove the act of wrongful inducement and any related issues of patent validity. ?Validity and infringement are distinct issues, bearing different burdens,different presumptions, and different evidence.? 720 F. 3d, at 1374 (opinion of Newman, J.). To be sure, if at the end of the day, an act that would have been an infringement or an inducement to infringe pertains to a patent that is shown to be invalid, there is no patent to be infringed. But the allocation of the burden to persuade on these questions, and the timing for the presentations of the relevant arguments, are concerns of central relevance to the orderly administration of the patent system.

Right. But that means that anyone who is aware of what they know to be an invalid patent would first need to have the patent itself rejected before they can go on with their business, and that creates a huge hurdle to innovation.

But what’s interesting is that the Supreme Court then delves into a discussion on the fact that this ruling has a big impact on patent trolling situations. First, from the opinion by Kennedy:

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.?… 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.? … This behavior can impose a ?harmful tax on innovation.?….

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.?…

But, in the dissent, Justice Scalia rips into the practice, and (for the first time) calls out patent trolling as patent trolling, and notes that the majority ruling gives more power to patent trolls:

I may add, however, that if the desirability of the rule we adopt were a proper consideration, it is by no means clear that the Court?sholding, which increases the in terrorem power of patent trolls, is preferable.

Scalia also rips apart the arguments in the majority opinion:

Because only valid patents can be infringed, anyone with a good-faith belief in a patent?s invalidity necessarily believes the patent cannot be infringed. And it is impossible for anyone who believes that a patent cannot be infringed to induce actions that he knows will infringe it. A good-faith belief that a patent is invalid is therefore a defense to induced infringement of that patent.

As for the fact that validity and infringement are different issues, Scalia simply notes:

That is true. It is also irrelevant. Saying that infringement cannot exist without a valid patent does not ?conflate the issues of infringement and validity,? … any more than saying that water cannot exist without oxygen ?conflates? water and oxygen. Recognizing that infringement requires validity is entirely consistent with the ?long-accepted truth . . . that infringement and invalidity are separate matters under patent law.?

Scalia also trashes the idea that without this ruling it would undermine the presumption of validity. Not so, says Scalia, as it only would matter in cases where, in fact, the patent is not valid.

This presumption is not weakened by treating a good-faith belief in invalidity as a defense to induced infringement. An alleged inducer who succeeds in this defense does not thereby call a patent?s validity into question. He merely avoids liability for a third party?s infringement of a valid patent, in no way undermining that patent?s presumed validity.

Either way, I think Scalia got this one right, and unfortunately the majority of the court went the other way. The Supreme Court had been making a bunch of good rulings on patent law lately, so I guess it was bound to issue a stinker eventually. The overall impact won’t be as big as some of the other cases, and I guess it’s nice to see that the Supreme Court absolutely recognizes that patent trolling problem, as that will be handy in future cases.

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Companies: cisco, commil

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Comments on “Supreme Court Sides With Patent Trolls”

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kenichi tanaka (profile) says:

While I have a mostly negative attitude against patent trolls, I have to say that after reading the article above and what was written in this article, I have to agree with the court’s decision. This wasn’t about the validity of their patents but rather if they could be held liable for what ‘might be infringed’ or ‘could be’ infringed. The judge clearly showed a bias in his statement to the jury.

Anonymous Coward says:

This seems to be a rough analogy of what we have here.

Suppose you believed that a law banning you from speaking was unconstitutional (and it actually was). And so you speak. Then you’re brought to court for breaking the law. In your defense you claim the law is unconstitutional, and it is established in court that it is actually the case, but they convict you anyway because you knowingly broke a law.

Now, combined with the logic from that previous case where they ruled that a non-existent law is probable cause for a police officer to stop and search you and the ability of cops to lie to you, we can now be arrested, convicted, and jailed for made up laws!

Cop pulls some one over.
Tells that person that its illegal to blink.
That person, not believing it’s illegal to blink, blinks anyway.
Cop arrests them.
Goes to court where it’s established that it’s not illegal to blink.
But they convict you with intent to commit a crime because you knew about the ‘law’ against blinking.

kenichi tanaka (profile) says:

Fact is, we have never had such a law. When a new law is passed by congress, it’s most often that challenges are filed against those new laws in the federal courts. The simple matter is, patent trolls are not a violation of the law and congress has refused to do anything to curb them in. They are protected by Democrats and Republicans.

Simple matter is, the judge acted inappropriately when he addressed the jury in the way that he did, which could be seen as influencing the jury in a manner that compromises the jury verdict.

This is undoubtedly why the supreme court ruled in favor of the patent troll. The judge overseeing the case should have known better.

kenichi tanaka (profile) says:

Mike, nothing confusing about my statement at all. It’s like finding someone guilty of a crime they’ll commit in the future. This is exactly what the judge did, when he issued his instructions to the jury. The judge’s comments basically placed the patent troll in an unfavorable view to the jury and this is exactly why the supreme court overturned the lower court’s decision.

I’m not saying that patent trolls are a good thing. I despise patent trolls but this is one of those rare cases where the judge in the case made a grievous error. He should never have injected his own opinions into his instructions to the jury and his remarks were biased.

Judges are not supposed to care who wins or loses, they are only to preside over the case and ensure everyone is following the rule of law and the rules of evidence. The judge simply made a bad decision and he got called out for it judging by the Supreme Court’s decision.

Anonymous Coward says:

Just goes to show you if you want to be an innovator don’t do it in our back yard. Try eastern Europe or India instead. What the Court needs to do, but so far has not shown the willingness, is twist the arm of we the peoples congress to do something , anything, about our broken patent system, before it is too late. They got us into this mess with their rigging of a system that once made us the envy of the world, and they can damned well get us out of it.

kenichi tanaka (profile) says:

Mike, if I’m not mistaken, the reason patent trolls are allowed to exist is because Democrats AND Republicans have refused to pass any kind of meaningful reform regarding patent reform and you get some bad decisions by judges, like the one in this case, who decided to create a problem with the jury verdict.

I’m not saying that what the patent trolls are doing is right only that the judge made an error when he addressed the jury with his biases comments.

The fact that you’re missing is that nobody can be held liable for what “MIGHT” happen in the future. Otherwise, everyone could be arrested for crimes that they’ll commit in the future. The verdict in the original trial, added to the comments made by the judge, may very well be why the Supreme Court overturned the ruling by the lower court.

If we want to stop patent trolls, truly stop them, then write to your congressman and request that they do something to put a stop to this practice that patent trolls are engaging in.

kenichi tanaka (profile) says:

Mike, I understand exactly what I’m posting about. What I’m saying is that neither business entities nor people can be held liable for “what might happen”. What the judge did, was put it into the minds of the jury that the patent troll in this case could be held liable for it.

The judge is not a plaintiff or a defendant in this particular case and yet he exposed his personal views to the jury.

What you’re saying is that you agree with the judge. THAT is a biased view. If the plaintiff had proven his case, that would be one thing. But, the moment the judge exposed his personal views to the jury, he crossed the line. THAT is the point I’m trying to make here.

Patent trolls are an evil in this country that should be roped in. This problem has been escalating for such a long time that our government has failed to do anything to stop it. If a company owns a patent, then they shouldn’t be able to sue if they don’t make use of that patent. They exploit the laws of pour country because our elected representatives have failed to do anything to close those loopholes.

I’m not trying to argue with you over this but you fail to see the point I’m trying to make here. Fact is, business entities, people … they cannot he held liable for conduct that MIGHT happen. What you’re saying is that the patent troll should be held liable.

Once you’ve crossed that line, then you set a dangerous precedent with the point of view that individual people can also be held liable for conduct that might happen.

John Fenderson (profile) says:

Re: Re:

“What I’m saying is that neither business entities nor people can be held liable for “what might happen””

Of course they can, if the elements line up right. For example, if I take an action that a reasonable person understands as posing a substantial risk of serious injury to others, then I have committed the crime of “reckless endangerment” — even if nobody got hurt.

nasch (profile) says:

Re: Re:

What the judge did, was put it into the minds of the jury that the patent troll in this case could be held liable for it.

‘The appeals court (CAFC) had overturned a lower court, saying that it was wrong for a judge to instruct a jury that Cisco could be found guilty of inducing patent infringement if it “knew or should have known that its actions would induce actual infringement.”‘

Read those two things at least five times each. Now come to an understanding that the patent troll in this case is not Cisco, but Commil. Then finally realize that you have had the entire case backwards the whole time. OK?

Lower court: Cisco can be found liable for inducing infringement of a patent it believed to be invalid.

CAFC: No, it can’t.

Supreme Court: Yes, it can.

Got it now?

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