U.S. SC rules against Cisco in patent infringement lawsuit

By Jessica M. Karmasek | May 27, 2015

WASHINGTON (Legal Newsline) - The U.S. Supreme Court on Tuesday threw out a ruling by a federal appeals court in favor of Cisco Systems Inc.


On a 6-2 vote, the nation’s high court sided with Commil USA LLC. The case now will return to the U.S. Court of Appeals for the Federal Circuit.


The case centers on whether Cisco is legally liable for infringement of Commil’s patents by inducing others to infringe those patents.


The Supreme Court in December agreed to review the Federal Circuit’s ruling that threw out the $63.8 million patent infringement verdict against Cisco.

Justice Anthony Kennedy, who wrote the majority’s 14-page decision, said there are “practical reasons” not to create a defense based on a good-faith belief in invalidity.


“First and foremost, accused inducers who believe a patent is invalid have various proper ways to obtain a ruling to that effect,” he wrote. “They can file a declaratory judgment action asking a federal court to declare the patent invalid. They can seek inter partes review at the Patent Trial and Appeal Board and receive a decision as to validity within 12 to 18 months. Or they can, as Cisco did here, seek ex parte reexamination of the patent by the Patent and Trademark Office. And, of course, any accused infringer who believes the patent in suit is invalid may raise the affirmative defense of invalidity.


“If the defendant is successful, he will be immune from liability.”


Creating a defense of belief in invalidity also would have negative consequences, Kennedy pointed out.


“It can render litigation more burdensome for everyone involved. Every accused inducer would have an incentive to put forth a theory of invalidity and could likely come up with myriad arguments,” he wrote. “And since ‘it is often more difficult to determine whether a patent is valid than whether it has been infringed,’ accused inducers would likely find it easier to prevail on a defense regarding the belief of invalidity than non-infringement.


“In addition the need to respond to the defense will increase discovery costs and multiply the issues the jury must resolve. Indeed, the jury would be put to the difficult task of separating the defendant’s belief regarding validity from the actual issue of validity.”


And while the issue of frivolity was not raised by either party in this case, Kennedy said it is still “necessary and proper” to stress that federal 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,” he wrote, referring to so-called patent “trolls.” “It is also within the district court’s discretion to award attorney’s fees to prevailing parties in ‘exceptional cases.’


“These safeguards, combined with the avenues that accused inducers have to obtain rulings on the validity of patents, militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and validity. This dichotomy means that belief in invalidity is no defense to a claim of induced infringement.”


Commil had asked the court to decide whether the Federal Circuit, which hears all U.S. patent appeals, was correct to set aside the verdict and order a new trial.


In 2011, a jury for the U.S. District Court for the Eastern District of Texas found in favor of Commil.


The company, based in The Woodlands, Texas, sued Cisco -- one of the largest designers, manufacturers and sellers of networking equipment -- over a patent covering wireless networking technology.


The verdict later was bumped to more than $73 million with the addition of prejudgment interest, but was nullified in 2013 by the Federal Circuit.


The Federal Circuit held that Cisco should have been allowed to enter evidence that it had a good faith belief that the infringed Commil patent was invalid. The patent was found to be valid by jurors in an earlier trial in 2010.


Both the U.S. Solicitor General and the U.S. Patent and Trademark Office backed Commil’s request for the court to hear the case.


Commil and its supporters argued that the Federal Circuit’s decision flew in the face of the federal Patent Act, which holds that all issued patents are presumed to be valid.


Attorneys from the Dallas law firm Sayles Werbner, which represented Commil in the long-running lawsuit and argued the case before the Supreme Court in March, said the ruling means companies can’t avoid infringement liability simply by arguing they didn’t think a patent was valid.


“We are pleased with the Supreme Court’s ruling, which protects patent owners against those who induce infringement of their patents,” attorney Mark S. Werbner said Tuesday.


“This decision restores the common-sense notion that patents approved by the U.S. Patent and Trademark Office are presumed valid.”


Werbner, along with firm attorneys Richard A. Sayles, Mark D. Strachan and Darren Nicholson, worked on the case. Commil also was represented by attorneys Leslie V. Payne, Nathan J. Davis and Miranda Y. Jones from Houston law firm Heim Payne & Chorush.


Justice Antonin Scalia wrote a dissenting opinion. He was joined by Chief Justice John Roberts. Justice Stephen Breyer recused himself from the case.


From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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