The U.S. Supreme Court recently issued its opinion in Commil USA LLC v. Cisco Systems Inc. on the doctrine of induced patent infringement and, in particular, on the issue of the accused inducer's subjective knowledge and intent regarding the underlying act of direct infringement. The Commil decision, however, may not resolve some problematic issues confronting district courts and litigants on the knowledge and intent elements of induced infringement, in part because knowledge and intent have temporal aspects while patent infringement is often an ongoing tort. Knowledge can be gained at a later time and that knowledge can affect an accused inducer's intent. While Commil did not explicitly address the temporal aspects of the knowledge and intent elements, this article notes some problems arising because of them and makes some observations for litigants.
Induced Infringement and the Commil Decision
Induced infringement attaches liability to a defendant for the direct infringement of a patent actually carried out by a third party. This prohibition is stated at 35 U.S.C. § 271(b), which provides "[w]hoever actively induces infringement of a patent shall be liable as an infringer." Unlike direct infringement, which is often considered a strict liability tort, courts have interpreted induced infringement to require additional proofs to establish scienter by the accused inducer. In particular, the inducer must also know of the patent and, as stated in the court's earlier Global-Tech opinion, have "knowledge that the induced acts constitute patent infringement."
Commil, which is the third Supreme Court case on induced infringement in four years, specifically considered whether an accused inducer could assert a good faith belief about the invalidity of a patent as a defense to negate the intent element for inducement. The Federal Circuit, in the underlying decision, extended its earlier holding in DSU Med. Corp. v. JMS Co. Ltd., that a defendant can disprove the intent element by arguing it truly believed the patent was not infringed, to also include good faith beliefs in invalidity.
The Supreme Court reversed. As to the main issue, the Supreme Court held "because infringement and validity are separate issues in the Act, belief regarding validity cannot negate the scienter required under § 271(b)." Due to this axiomatic distinction, the Federal Circuit was wrong to extend its DSU decision that a belief as to noninfringement can negate intent. In a substantial prelude to its decision in chief, the Supreme Court discussed and reaffirmed its earlier holding in Global-Tech. The court rejected arguments by the appellant and by the U.S. government that Global-Tech did not require knowledge of the underlying infringement for induced liability. Instead, "liability for induced infringement can only attach if the defendant knew of the patent and knew as well that the 'induced acts constitute patent infringement.'" The Supreme Court even presented the following hypothetical:
In other words, even if the defendant reads the patent's claims differently from the plaintiff, and that reading is reasonable, he would still be liable because he knew the acts might infringe. Global-Tech requires more.
Throughout the opinion, the court treated knowledge and intent as binary concepts: The accused inducer either possessed knowledge and intent or it did not. Unfortunately, as explained below, this understanding does not reflect the realism of litigation in the district courts.
Presuit Vs. Post-Suit Knowledge and Intent
Although Commil affirmed that an inducer must (1) know of a patent and (2) know the induced acts infringe the patent, it provides slight guidance on how these elements can be established or even plead. This is complicated by the fact that filing and serving a complaint for patent infringement places the accused inducer on notice of both the patent and the accused conduct. A host of problems therefore arise at the outset of litigation which have divided district courts and which will not be readily resolved by Commil.
One question splitting courts is whether, to survive a motion to dismiss, a complaint must allege the accused inducer knew of the patent prior to filing of the suit or whether the complaint itself can establish that knowledge, at least as of the filing date. One faction follows the rule adopted in Proxyconn Inc. v. Microsoft Corp. that "a complaint fails to state a claim for indirect patent infringement where the only allegation that purports to establish the knowledge element is the allegation that the complaint itself or previous complaints in the same lawsuit establish the defendant's knowledge of the patent." Absent allegations that the accused inducer had presuit knowledge of the patent, dismissal is appropriate.
These courts explain that a contrary rule allowing an inducement claim to go forward based on knowledge obtained from the complaint would eviscerate the knowledge and intent elements of induced infringement. Allowing a plaintiff to bootstrap knowledge from the complaint, without more, to meet the pleading standards would also subject litigants to abuse because a "plaintiff would be enticed to roll the dice with litigation to receive some recovery for any indirectly infringing conduct taken by a defendant after the filing of a complaint, when the issue could have been resolved more efficiently beforehand."
Contrary to the rule adopted in Proxyconn, however, the second faction, lead by the district court in Walker Digital LLC v. Facebook Inc., has concluded "there is no legal impediment to having an indirect infringement cause of action limited to post-litigation conduct." Walker Digital precludes liability for the accused inducer's past conduct but allows a claim for liability and damages to go forward for the inducer's post-filing knowledge and actions, merely by identifying the patent in the complaint.
The Walker Digital faction justifies its rule as a matter of common sense: Any actions by the defendant after receiving the complaint are clearly done with knowledge of the patent. As stated by one court, a "defendant should not be able to escape liability for postfiling infringement when the complaint manifestly places the defendant on notice that it allegedly infringes the patents-in-suit." A further justification asserts that allowing inducement claims limited to prospective liability strikes a balance between compensating a patent holder for ongoing infringement while protecting the accused inducer for its otherwise innocent past conduct.
A third approach, adopted in Zond Inc. v. SK Hynix Inc., attempts to reconcile Proxyconn and Walker Digital. In Zond, the district court ruled that "pleading actual knowledge as of the date of the filing of the original complaint sufficiently states a claim for induced infringement, but only in a later amended complaint." The court acknowledged its rule will result in the filing of multiple complaints, but believes the rule ensures the pleadings accurately allege the actual sequence of when the accused gained knowledge and thereafter acted culpably, thereby complying fully with Rule 11.
Another problem involves how a patentee pleads the accused inducer affirmatively acted with intent to encourage infringement of the patent, in accordance with Commil and Global-Tech, if there is no prefiling knowledge. The Walker Digital faction answers this problem by considering the accused infringer's post-filing actions in view of the knowledge gained from the complaint. "[A] defendant's decision to continue its conduct despite knowledge of the patents-in-suit gleaned from the complaint is sufficient to establish the intent element required to state a claim for indirect infringement." An accused inducer may therefore be liable for its continued sales of accused products or promotion of accused activities once they are on notice of the complained of behavior.
Other courts have been hesitant to allow the complaint to become a self-fulfilling prophecy on specific intent. "The problem with [plaintiff's] argument is that doing nothing is not active inducement." These courts require allegations beyond the accused inducer's post-filing inaction, and have required those allegations to appear in the complaint, to establish culpable intent to encourage infringement. This is especially difficult if the complaint itself is relied upon to establish the knowledge predicate for specific intent.
Because both the Commil opinion and the earlier Global-Tech opinion presupposed the knowledge and intent elements to be fixed concepts, they offer little guidance for resolving issues that arise when the accused inducer's knowledge has undoubtedly changed. Still, some simple observations should be readily apparent from the foregoing discussion.
For a defendant charged with induced infringement, promptly determining the prevailing law in the jurisdiction of suit is perhaps most important. Even if the entire complaint cannot be dismissed under the Proxyconn rule, a defendant can quickly limit exposure by having prefiling conduct excluded from the scope of the suit. Further, in view of Commil's hypothetical about reasonably different readings of the claims, a defendant may want to promptly raise noninfringement positions and consider seeking a noninfringement opinion even after being served with the complaint. These actions might prevent the defendant's knowledge of the patent, as gleaned from the complaint, from leading to a further finding of culpable intent with respect to any post-filing conduct or communications with the alleged direct infringers. Accordingly, damages for liability might not accrue until a final determination of infringement.
For plaintiffs, finding jurisdictions that follow Walker Digital is imperative; otherwise the plaintiff may be unable to plead the requisite knowledge and intent elements and the court may readily dismiss the complaint. Even in jurisdictions following the Walker Digital rule, a plaintiff should draft the pleadings to clearly cover both prospective and past inducement, possibly even breaking them into separate claims or allegations. Perhaps more difficult is alleging specific acts by the accused inducer to encourage infringement. Early and detailed communication of the specific manner in which the patent is allegedly being infringed to the defendant may support an argument that, despite the clear notice, the defendant's continued or unabated conduct constitutes disregard and contempt for the patentee's rights, painting the defendant in a negative light.
Although in Commil the Supreme Court did answer the narrow question before it, there are still many unsettled issues regarding the doctrine of induced infringement, and litigants should best be aware of them.