Commil v. Cisco

CORRECTED 10.25.2013
United States Court of Appeals
for the Federal Circuit
______________________
COMMIL USA, LLC,
Plaintiff-Appellee,
v.
CISCO SYSTEMS, INC.,
Defendant-Appellant.
______________________
2012-1042
______________________
Appeal from the United States District Court for the
Eastern District of Texas in case no. 07-CV-0341,
Magistrate Judge Charles Everingham.
______________________
ON PETITION FOR REHEARING EN BANC
______________________
MARK S. WERBNER, Sayles Werbner, P.C., of Dallas,
Texas, filed a petition for rehearing en banc for plaintiff-
appellee. With him on the petition were RICHARD A.
SAYLES and MARK D. STRACHAN. Of counsel on the
petition were LESLIE V. PAYNE, NATHAN J. DAVIS and
MIRANDA Y. JONES, Heim, Payne & Chorush, of Houston,
Texas.
WILLIAM F. LEE, Wilmer Cutler Pickering Hale and
Dorr LLP, of Boston, Massachusetts, filed a response to
the petition for defendant-appellant. With him on the
response were MARK C. FLEMING, JONATHAN W. ANDRON,
and FELICIA H. ELLSWORTH; and WILLIAM G. MCELWAIN, of
Washington, DC. Of counsel on the response were HENRY
B. GUTMAN, Simpson Thacher & Bartlett LLP, of New
York, New York; and JEFFREY E. OSTROW, HARRISON J.
FRAHN, IV, PATRICK E. KING, and JONATHAN SANDERS, of
Palo Alto, California.
______________________
Before RADER, Chief Judge, NEWMAN, LOURIE, DYK,
PROST, MOORE, O’MALLEY, REYNA, WALLACH, TARANTO,
and CHEN, Circuit Judges.1
REYNA, Circuit Judge, with whom RADER, Chief Judge,
NEWMAN, LOURIE, and, WALLACH Circuit Judges, join,
dissents from the denial of the petition for rehearing en
banc.
NEWMAN, Circuit Judge, with whom RADER, Chief Judge,
REYNA and WALLACH, Circuit Judges, join, dissenting
from the denial of the petition for rehearing en banc.
PER CURIAM.
______________________
ORDER
A petition for rehearing en banc was filed by plaintiff-
appellee, and a response thereto was invited by the court
and filed by defendant-appellant. The petition for
rehearing en banc was first referred as a petition for
rehearing to the panel that heard the appeal, and
thereafter the petition for rehearing en banc and response
were referred to the circuit judges who are authorized to
request a poll of whether to rehear the appeal en banc. A
poll was requested, taken, and failed.
1 Circuit Judge Hughes did not participate.
Upon consideration thereof,
IT IS ORDERED THAT:
(1) The petition of plaintiff-appellee for panel
rehearing is denied.
(2) The petition of plaintiff-appellee for rehearing en
banc is denied.
(3) The mandate of the court will issue on November
1, 2013.
FOR THE COURT
October 25, 2013 /s/ Daniel E. O’Toole
Date Daniel E. O’Toole
Clerk
United States Court of Appeals
for the Federal Circuit
______________________
COMMIL USA, LLC,
Plaintiff-Appellee,
v.
CISCO SYSTEMS, INC.,
Defendant-Appellant.
______________________
2012-1042
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 07-CV-0341, Magistrate
Judge Charles Everingham.
______________________
REYNA, Circuit Judge, with whom RADER, Chief Judge,
and NEWMAN, LOURIE and WALLACH, Circuit Judges, join,
dissenting from the denial of the petition for rehearing en
banc.
The Commil majority established a substantive, prec-
edential change in patent law by expressly “hold[ing] that
evidence of an accused inducer’s good-faith belief of inva-
lidity may negate the requisite intent for induced in-
fringement.” Commil USA, LLC v. Cisco Sys., Inc., 720
F.3d 1361, 1368 (Fed. Cir. 2013). Its analysis may be
summed by its expressed view that because “[i]t is axio-
matic that one cannot infringe an invalid patent” there is
“no principled distinction between a good-faith belief of
invalidity and a good-faith belief of non-infringement for
2 COMMIL USA v. CISCO SYSTEMS
the purpose of whether a defendant possessed the specific
intent to induce infringement of a patent.” Id.
By holding that a good faith belief in the invalidity of
a patent may negate the requisite intent for induced
infringement, the two-judge Commil majority created a
new noninfringement defense to induced infringement
that is premised on the accused infringer’s belief of inva-
lidity. As Judge Newman aptly points out in her dissent,
“This absolution applies, according to the panel majority,
although the patent receives the presumption of validity,
and validity is sustained in litigations.” (Newman, J.,
dissenting from the denial of the petition for rehearing en
banc, at 1.)
Because I believe the Commil majority opinion is
without foundation in law and precedent, and for the
reasons stated below, I respectfully dissent from the vote
taken of the court to not conduct an en banc review of the
majority opinion in Commil.
I.
My primary dispute with the majority holding is that
it wrongly rearranges the legal foundation that underpins
the enforceability of valid patents and the finding of
liability for infringement.
First, the induced infringement statute states simply
that “[w]hoever actively induces infringement of a patent
shall be liable as an infringer.” 35 U.S.C. § 271(b). The
law recognizes that the statute’s use of the words “active-
ly induces” imparts an intent requirement into the stat-
ute. As stated by the Supreme Court, “[t]he addition of
the adverb ‘actively’ suggests that the inducement must
involve the taking of affirmative steps to bring about the
desired result.” Global-Tech. Appliances, Inc. v. SEB
S.A., 131 S. Ct. 2060, 2065 (2011). In § 271(b), the “de-
sired result” that a party accused of inducement must be
COMMIL USA v. CISCO SYSTEMS 3
affirmatively seeking to bring about is defined in the
statute as simply “infringement.”
The term “infringement” is used consistently through-
out § 271 to mean that all of the limitations of a patent
claim are satisfied by an accused product or accused
conduct. See, e.g., TecSec, Inc. v. Int’l Bus. Mach.
Corp., --- F.3d ----, No. 2012-1415, 2013 WL 5452049, at
*13 (Fed. Cir. 2013) (citations omitted) (“An act of in-
fringement occurs when all the elements of a claimed
product or method are met by the accused device or pro-
cess.”). In Global-Tech, the Court concluded that in order
to satisfy the intent element of induced infringement
under § 271(b), an accused infringer must possess
“knowledge that the induced acts constitute patent in-
fringement,” Global-Tech., 131 S. Ct. at 2068, but it did
not alter the fundamental meaning of “infringement.”
Our recent en banc decision in Akamai further confirms
that “infringement” in the context of “induced infringe-
ment” is resolved solely with reference to the limitations
of a patent claim. See Akamai Techs., Inc. v. Limelight
Networks, Inc., 692 F.3d 1301, 1306 (Fed. Cir. 2012) (“we
hold that all steps of a claimed method must be performed
in order to find induced infringement”).
The legislative history explains that the language of
§ 271(b) “recites in broad terms that one who aids and
abets an infringement is likewise an infringer.” H.R. Rep.
No. 82–1923, at 9. Neither the statute nor its legislative
history provides that one who knowingly and successfully
induces another to engage in conduct that infringes a
valid patent can escape liability by showing it held a good
faith belief that the patent was invalid. Indeed, the
rationale for imposing liability on the party who is induc-
ing infringement is simple: one who causes, urges, en-
courages, or aids in an infringement is just as, if not more,
culpable for the invasion of the patentee’s exclusive rights
than those who actually perform the acts of infringement.
See generally Akamai, 692 F.3d at 1309-13. Yet, under
4 COMMIL USA v. CISCO SYSTEMS
the majority’s holding, an accused inducer that is deriving
a benefit by knowingly and intentionally inducing an
unsuspecting third party to directly infringe patent rights
can itself escape liability based on a belief that the patent
is invalid while the unsuspecting third party cannot. This
situation is directly contrary to the plain language and
purpose of the induced infringement statute.
II.
Second, infringement and invalidity are separate is-
sues under the patent code and our precedent. This is not
controversial. We have “long recognized that patent
infringement and invalidity are separate and distinct
issues.” Pandrol USA, LP v. Airboss Ry. Prods., Inc., 320
F.3d 1354, 1365 (Fed. Cir. 2003). This distinction is
further reflected in the organization of the patent code,
which places the issues of infringement and invalidity in
separate “Parts.” Compare 35 U.S.C. §§ 251-329 (Part III:
“Patents and Protection of Patent Rights”), with 35 U.S.C.
§§ 100-212 (Part II: “Patentability of Inventions and
Grant of Patents”).
Given this, there is no reasonable basis to impute
questions of invalidity or liability into § 271(b) through
the term “infringement.” If a patent is found invalid, that
is a complete defense to liability because it negates the
patent’s existence and thereby extinguishes any exclu-
sionary rights. Conversely, if there is a patent—i.e., it is
not invalid—then the question is merely whether there
has been conduct that actively induces acts of infringe-
ment per se. This too is not controversial under our
precedent because we have long recognized that “[t]hough
an invalid claim cannot give rise to liability for infringe-
ment, whether it is infringed is an entirely separate
question capable of determination without regard to its
validity.” Medtronic, Inc. v. Cardiac Pacemakers, Inc.,
721 F.2d 1563, 1583 (Fed. Cir. 1983) (emphasis added).
COMMIL USA v. CISCO SYSTEMS 5
Despite that “Supreme Court precedent and our cases
make clear that patent infringement and patent validity
are treated as separate issues,” Pandrol, 320 F.3d at
1365, the Commil majority nevertheless imputes ques-
tions of invalidity into induced infringement under the
guise of “intent.” It attempts to justify this departure
from controlling precedent on the premise that “[i]t is
axiomatic that one cannot infringe an invalid patent.”
Commil, 720 F.3d at 1368. But this “axiom” is materially
wrong in the present context and does not withstand
scrutiny in view of controlling precedent. See, e.g., Med-
tronic, 721 F.2d at 1583. A more accurate statement of
our precedent is that liability for patent infringement
depends on an infringed claim being valid and enforcea-
ble; that is, one cannot be liable for infringement of an
invalid patent.
III.
Third, the Commil majority holding wrongly conflates
the defense of noninfringement with the defense of inva-
lidity. “An important limitation on the scope of induced
infringement is that inducement gives rise to liability only
if the inducement leads to actual infringement.” Akamai,
692 F.3d at 1308. The Commil majority expands the
inquiry regarding noninfringement to include invalidity
on grounds that it “see[s] no principled distinction be-
tween 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 in-
fringement of a patent.” Commil, 720 F.3d at 1368. This
statement ignores the statutorily-mandated presumption
of validity, see § 282(a), in that it sets up all patents as
invalid, at least in the mind of the inducer. In doing so,
the majority strikes at the very heart of the presumption
of validity by eroding patent rights that have been duly
granted by the PTO based solely on an erroneous—albeit
good faith—belief that the PTO erred in granting the
6 COMMIL USA v. CISCO SYSTEMS
patent. This has profound and negative implications that
are not contemplated by the patent statute.
Conflating infringement and invalidity also unneces-
sarily complicates the induced infringement inquiry. In
this regard, infringement and non-infringement are
opposite sides of the same coin whereas infringement and
invalidity are altogether entirely different coins. The
intent element of § 271(b) is met when the accused in-
fringer acts with actual knowledge of the patent claim
and was “actively inducing” conduct that it knew to be
within the scope of an asserted claim. See Akamai, 692
F.3d at 1308. Whether the accused infringer held a good
faith belief that it was inducing conduct that fell outside
the scope of the claims is directly relevant to this intent
inquiry. But whether the accused infringer held a good
faith belief in invalidity—e.g., an erroneous belief regard-
ing obviousness—is wholly unrelated to the accused
infringer’s conduct vis-à-vis the limitations of a presump-
tively valid patent claim. These fundamental differences
between the defenses provide a reasoned and legally
sound basis for differentiating between a good faith belief
of non-infringement and a good faith belief in invalidity in
the context of induced infringement.
* * *
There exists another axiom of more universal applica-
tion that is appropriate here: “if it’s not broken, don’t fix
it.” The Commil majority has strained to fix current law
without ever showing exactly what is broken, and its fix
has been to create an entirely new infringement defense,
a new rule of law.
In addition, the majority does not instruct the lower
courts how they are to apply the fix. Is the new rule a
question of fact? Is it a question of law? Is it a question
of law with underlying factual basis? Should the question
of good faith belief of invalidity be tried along with the
invalidity issues, or perhaps before any other issues are
COMMIL USA v. CISCO SYSTEMS 7
heard given its determinative effect on the outcome of the
case?
A grave concern that I have with the new rule is that
it fundamentally changes the operating landscape, much
like waking up and unexpectedly finding that the sky is
now green. The new rule is a powerful tool in patent
litigation in that it establishes an escape hatch from
liability of infringement that is not now in the statute.
This has a compromising effect on the only axiom that we
should all observe, and that is issued patents are pre-
sumed valid.
United States Court of Appeals
for the Federal Circuit
______________________
COMMIL USA, LLC,
Plaintiff-Appellee,
v.
CISCO SYSTEMS, INC.,
Defendant-Appellant.
______________________
2012-1042
______________________
Appeal from the United States District Court for the
Eastern District of Texas in No. 07-CV-0341, Magistrate
Judge Charles Everingham.
______________________
NEWMAN, Circuit Judge, with whom RADER, Chief Judge,
REYNA and Wallach, Circuit Judges, join, dissenting from
the denial of the petition for rehearing en banc.
By decision issued June 25, 2013, a split panel an-
nounced a change in the law of induced infringement,
creating a new rule of law whereby an adjudged inducer
of infringement is absolved of liability for infringement if
the infringer had a “good faith belief” that the patent it
infringed was invalid. This absolution applies, according
to the panel majority, although the patent has a statutory
presumption of validity, and validity of the patent is
litigated and sustained. I explained, in my dissenting
opinion, why this position is contrary to law and prece-
dent. And I took some comfort from the protocol that a
2 COMMIL USA v. CISCO SYSTEMS
panel cannot change the law established by decisions of
the court; only the en banc court can do so.
Indeed, it is not “axiomatic that one cannot infringe
an invalid patent” as the majority opinion states. Prece-
dent is contrary. See Medtronic, Inc. v. Cardiac Pacemak-
ers, Inc., 721 F.2d 1563, 1583 (Fed. Cir. 1983) (“Though an
invalid claim cannot give rise to liability for infringement,
whether it is infringed is an entirely separate question
capable of determination without regard to its validity.”);
Spectra-Physics, Inc. v. Coherent, Inc., 827 F.2d 1524,
1535 (Fed. Cir. 1987) (“The single instruction to the jury
that invalid claims cannot be infringed (a nonsense
statement), one of many on supposed general principles of
patent law, does not operate to convert the interrogatories
on infringement into general verdicts which subsumed all
of Spectra’s invalidity defenses, including best mode.”). If
the court now wishes to change this law, it must be done
en banc. It disserves the public, and diminishes the court,
to continue to issue conflicting statements.
Now, however, the full court’s majority refusal of en
banc review of the panel’s ruling adds uncertainty to the
law and its application. Investors, competitors, and trial
courts cannot be confident as to the law that will be
applied by the Federal Circuit. Such destabilization is a
disservice not only to patentees but also to the public that
benefits from technological advance. A court’s creative
judicial rulings are readily clarified; our refusal to do so in
patent cases not only spawns avoidable litigation but also
is a disincentive to industrial innovation.
To compound the inequity, here the panel majority, on
remanding for retrial of infringement with the defense
that the infringer believed the patent to be invalid, none-
theless does not permit retrial of validity. In the posture
of the remand, the prior jury verdict of validity is the law-
of-the-case. However, the issues of infringement and
validity are interwoven in the new defense of subjective
COMMIL USA v. CISCO SYSTEMS 3
“belief”, and the restricted remand procedure can impart
“confusion and uncertainty, which would amount to a
denial of a fair trial.” Anderson v. Siemens Corp., 335
F.3d 466, 475–76 (5th Cir. 2003). It is only fair that the
new jury, at a new trial for determination of this “belief”,
receives full evidence of the premises. At a minimum, the
panel’s instructions for limited retrial should receive en
banc review.
Thus I must, respectfully, dissent from denial of the
request for rehearing en banc.