Silicon Valley Software Industry Considers Impact of Supreme Court Decision on Patent Invalidity Defense to Claim of Induced Infringement

As I posted yesterday to my blog at Silicon Valley IP Licensing Law Blog, the U.S. Supreme Court has just issued an opinion in the Commil vs. Cisco Systems case, leaving the software industry to consider how the ruling will impact member software companies.

Industry reaction to the ruling has been somewhat muted thus far, despite the fact that the Computer & Communications Industry Association (“CCIA”) representing companies such as Microsoft, Google, Facebook, Amazon, and Intuit had filed an amicus curiae brief in the matter in support of the dissenting view, taking the position that “The adoption of the expansive new version of inducement liability urged by Commil and the government would pose serious consequences for CCIA members and the technology industry as a whole.” In particular, the CCIA had taken the position that”[E]vidence of a good-faith belief of invalidity is clearly relevant to an accused inducer’s intent. . . .if a claim is invalid, “there is nothing to be infringed.”  According to the CCIA brief:

Under [the Commil] theory, mere knowledge of a patent is enough for a manufacturer or service provider to be held to have induced a customer to infringe. . . .By this reasoning, a person would intentionally induce infringement when enabling others to practice a technology even though he believes it to be unpatentable.

What were the “serious consequences” anticipated by the CCIA if the decision reached yesterday were eventually issued?

In its amicus curiae brief, the CCIA articulated two key concerns.  First, the CCIA warned that the ruling adopted yesterday by the majority would increase the leverage that patent monetization entities have against technology companies.  Second, the CCIA warned that the ruling adopted yesterday by the majority would erode the clear standard of demonstrating intent to induce imposed by the Grokster decision.

Obviously, the Grokster decision relates to copyright infringement, and this is a patent infringement case, so I question how significantly yesterday’s ruling will impact copyright law going forward.  However, there is no question that the decision may further incentivize patent monetization entities, since they will have more reason in the future to pursue additional damages for inducement liability on relatively weak patents.

As I asserted in my Silicon Valley IP Licensing Law Blog posting yesterday, however, this decision may have the most significant impact going forward on how patent litigation defense is conducted, since I would argue that the corporate calculations on how to deal with weak third party patents that could be enforced against them may not really change that much as a result of this ruling.  Companies have always had to decide how to proceed with product development when a weak third party patent is identified that they potentially could be deemed to infringe, and I would argue that the calculations of whether or not the patent invalidity defense will be available in cases where an induced infringement claim is made will likely not have a significant impact on a company’s overall decisionmaking process going forward.

Kristie Prinz

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