Recently, the United States Court of Appeals for the Federal Circuit, sitting en banc, decided SCA Hygiene Products Aktiebolag v. First Quality Baby Products, which required the Court to determine the continued applicability of the laches defense for patent infringement actions. This issue presents itself in light of the Supreme Court’s recent decision in Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014), which determined that laches is not a defense to a copyright infringement action brought within the statute of limitation.
Petrella involved an assertion that Metro-Goldwyn-Mayer’s (“MGM”) 1980 film “Raging Bull” infringed a copyright in a 1963 screenplay authored by Frank Petrella. Frank Petrella’s daughter renewed the copyright in 1991, but did not contact MGM until seven years later. Over the next two years, Petrella and MGM exchanged letters concerning Petrella’s copyright claim. Petrella then went silent, and did not file suit until January 6, 2009, about nine years after her last correspondence with MGM. MGM moved for summary judgment based on laches, which the district court granted and the Ninth Circuit affirmed.
On May 26, 2015, the United States Supreme Court decided Commil USA, LLC v. Cisco Systems, Inc., a case that dealt with inducement to infringe. More specifically, the issue considered by the Supreme Court was whether a good faith belief of patent invalidity is a defense to a claim of induced infringement. In a 6-2 decision written by Justice Kennedy, the Supreme Court ruled that belief of invalidity is not a defense to a claim of induced infringement.
Justice Kennedy started his substantive analysis with a discussion of direct infringement, which was joined by Justices Ginsburg, Alito, Sotomayor and Kagan. Justice Thomas, who joined in the majority with respect to Parts II-B and III, did not join the majority relative to the background discussion. Justice Thomas did not write a separate opinion so we can’t know for sure, but it seems that Thomas chose not to join parts of the decision that were historical in nature (Part I) and the part of the decision where the majority discussed substantive legal issues not specifically germane to the issue presented.
Moving beyond direct infringement being a strict liability offense, and inducement requiring direct infringement, Justice Kennedy ultimately reached the question presented, namely whether a good faith belief of patent invalidity is a defense to a claim of induced infringement. Kennedy explained: “[B]ecause infringement and validity are separate issues under the Act, belief regarding validity cannot negate the scienter required under §271(b).” Kennedy concluded: “Were this Court to interpret §271(b) as permitting a defense of belief in invalidity, it would conflate the issues of infringement and validity.”
Kennedy seemed sympathetic to those who argue that an invalid patent cannot be infringed, which seems to make common sense. But he went on to explain that logic and semantics sometimes must give way to interpretation of an otherwise clear statutory framework:
[T]he 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.
In addition to the statutory language that Kennedy found clearly on point, he explained that there were also several practical reasons why a good faith defense should not be allowed. For example, if someone believes that a patent is invalid, they should file a declaratory judgment action (assuming they have standing) or could file a petition for inter partes review with the Patent Trial and Appeal Board (PTAB).
Kennedy also specifically explained that the Court is mindful of abusive litigation tactics employed by so-called patent trolls. Raising the issue seemed wholly out of place and a bit odd given that Kennedy also quickly explained that in this case the parties raised no issue of frivolity. The issue of patent trolls must be weighing on the Court very heavily for it to be inserted by Kennedy in a decision where no one was alleged to have been a patent troll.
Back in December 2014, at Michelle Lee’s first confirmation hearing before the Senate Judiciary Committee, Senator Mazie Hirono (D-HI) succinctly pointed out that “one person’s patent troll is another person trying to protect his or her patent.” Thus, as like so many issues in the law, the questions surrounding the so-called patent troll debate are not nearly as straightforward as you may have otherwise been lead to believe.
In order to bring some empirical rigor to the debate, Stephen Haber, a political scientist from Stanford University, recently published the results of a study he completed that explains exactly why so-called patent trolls play a vital role in the innovation ecosystem. He explains that patent assertion entities, who are the ones most often labeled as patent trolls, play a vital role as an intermediary. Essentially, Haber explained to me that when an intermediary ceases to provide value, the intermediary ceases to exist. Thus, the very fact that an intermediary does exist in the marketplace suggests some valuable role.
In April 2014, the United States Supreme Court addressed the issue of awarding attorney’s fees under 35 U.S.C. § 285 to successful litigants in a patent infringement proceeding. The decision in Octane Fitness, LLC v. ICON Health & Fitness, Inc., was the primary decision simply because that case was treated first by the Court and formed the basis of the Court’s decision in Highmark, Inc. v. Allcare Health Management System, Inc. Essentially, the Supreme Court in these two cases ruled that an appellate court should apply an abuse-of-discretion standard in reviewing all aspects of a district court’s § 285 determination. Those familiar with the abuse-of-discretion standard know that it is a difficult standard of review, which should mean that district courts will have far more latitude to handle attorney’s fee awards without meddling from the Federal Circuit.
After these decisions by the Supreme Court, patent reform died in the Senate after lopsided passage in the House. Politically, and procedurally, the problem for patent reform in 2014 wound up being that the Supreme Court mooted one of the leading drivers of this round of reform — fee-shifting. But that hasn’t stopped patent reform advocates from once again pushing the Innovation Act in 2015, which is identical to the Innovation Act from 2014 that died in the Senate.
Jeff Kichaven (pictured left) is one of California’s leading mediators. I met Kichaven several months ago while I was in Newport Beach, California, to speak at the Orange County Bar Association. At the conclusion of our breakfast meeting I asked if he would be interested in an on the record conversation for publication. He agreed. What follows are except from our conversation, which took place on Monday, December 22, 2014. To read the full transcript of the interview please see Working toward settlement wherever possible.
Here is our dialogue on the reality that in most circumstances neither party really wants a court to make a decision and would be better off reaching a negotiated resolution.
QUINN: … And my experience usually when the judge or the jury makes the decision neither party is happy.
KICHAVEN: That’s true. So many times it has cost so much, taken so long and been so grueling along the way, that even the winner questions whether it was worth it.
KICHAVEN: It’s especially true in intellectual property cases because when people get too involved in litigation focusing on the past and perhaps lose their focus on the marketplace, new competitors can come in and beat them in the marketplace. So it’s important, particularly for technology companies in fast moving industries, to keep their eyes focused on the future and competing in the marketplace rather than focused on the past and competing in the courtroom, other than in a small number of cases where that focus really is absolutely necessary.