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Supreme Court's Decision in Commil v. Cisco: Big Win for Pharmaceutical Industry

On May 26, 2015, the Supreme Court reversed the Federal Circuit’s decision in Commil USA, LLC v. Cisco Systems, Inc. and held that a defendant’s belief regarding patent validity is not a defense to an induced infringement claim.  In a 6-2 decision authored by Justice Kennedy, the Court held that “because infringement and validity are separate issues under the [Patent] Act, belief regarding validity cannot negate the scienter required under §271(b).”

The Supreme Court’s decision is a big win for the pharmaceutical industry, where method of treatment patents provide important protection for innovative medical therapies.  Because such patents cannot practically be enforced against direct infringers, doctors and patients, holding liable companies that induce their infringement – i.e., know the patents are being infringed by users of the therapies – is critical.  The Federal Circuit’s recognition of a good-faith belief in invalidity defense risked gutting liability for the infringement of method of treatment patents.  The Supreme Court’s reversal, however, allows these valuable patents to be enforced against parties that induce infringement.

In its decision, the Supreme Court relied upon long-standing precedent, including its own decision in Cardinal Chemical Co. v. Morton Int’l, Inc., 508 U.S. 83 (1993), which establishes that noninfringement and invalidity are “separate matters under patent law” that constitute “separate defenses” and “alternative grounds” for dismissing a suit.  Simply put, when “infringement is the issue, the validity of the patent is not the question to be confronted.”

The decision is consistent with themes that the Justices had raised during oral argument on March 31, 2015.  Building on Justice Kagan’s comment that the “presumption of validity exists and that th[e] question of validity functions in a patent suit only as an affirmative defense,” the decision holds that allowing the “new defense” regarding validity would “undermine a presumption that is a ‘common core of thought and truth’ reflected in [the] Court’s precedents for a century…[that] a patent is “presumed valid.’” Moreover, the Supreme Court went on to state that “if belief in invalidity were a defense to induced infringement...[t]hat would circumvent the high bar Congress is presumed to have chosen: the clear and convincing standard.”

The Supreme Court’s decision also reiterates practical considerations that were raised during oral argument.  In line with Chief Justice Roberts’ questioning as to why the accused infringer “shouldn’t…bear th[e] risk” of a mistaken belief in invalidity, the decision recognizes the importance of considerations such as “the allocation of the burden to persuade on [validity] questions, and the timing for the presentations of the relevant arguments, [which] are concerns of central relevance to the orderly administration of the patent system” in reversing the Federal Circuit.  The decision also reflects the skepticism Chief Justice Roberts expressed during oral argument towards adopting an “ignorance of the law as an excuse” regime.  The decision states that the general rule “that ignorance of the law or a mistake of law is no defense…mirrors this Court’s holding that belief in invalidity will not negate the scienter required under §271(b).”

While the Federal Circuit’s good-faith belief in invalidity defense may not have impacted litigation under the BPCIA (or the Hatch-Waxman Act) because the validity of the asserted patents in this context is typically determined prior to launch, the decision could have permitted a company to escape inducement liability in situations of “at risk” launch, where a company launches its biosimilar or generic product prior to a district court’s determination as to the patents’ validity and infringement.  The Supreme Court’s decision deters such “at risk” launches since the inducing party will not be able to escape liability in the interim window between launch and rejection by the district court of its invalidity arguments.

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