Supreme Court Strikes Down New Defense to Inducing Patent Infringement

Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896)

On May 26, 2015, the Supreme Court issued its decision in Commil USA, LLC v. Cisco Systems, Inc. (No. 13-896), rejecting the accused patent infringer’s argument that a good faith belief that the patent is invalid is a defense to induced infringement under 35 U.S.C. § 271(b). In the majority opinion by Justice Kennedy,[1] the Court confirmed its previous holding in Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. __ (2011) that to be liable for inducing infringement the inducer must have knowledge (1) of the patent, and (2) that the induced acts constitute infringement. Slip Op.at 6. Thus, if the alleged inducer reasonably https://pocketoption.br.com/download-app believes that the acts it induces are not infringing, there can be no liability for inducing infringement. Slip Op. at 9. The accused inducer in this case, Cisco, argued that a good faith belief that the patent is invalid should likewise preclude a finding of inducement because an invalid patent cannot be infringed, and a belief of invalidity therefore negates any knowledge that the induced acts constitute infringement.

The majority rejected this argument for several reasons. First, the majority notes that the Patent Act treats infringement and invalidity separately. The infringement statute, Section 271, is found in Part III of the Act, entitled “Patents and the Protection of Patent Rights,” while the patentability statutes, Sections 101, 102, and 103, etc., are in Part II, entitled “Patentability of Inventions and Grants of Patents.” See Slip Op. at 10. Second, the majority further noted that non-infringement and pocketoption.br.com/download-app invalidity are listed as separate defenses under Section 282, and allowing a good faith belief of invalidity to defeat an inducement claim would contradict the presumption of validity that issued patents enjoy pursuant to that section. See Slip Op. at 10. Because patents are presumed valid, they must be proved invalid by clear and convincing evidence, as opposed to the lower preponderance-of-the-evidence standard used for proving infringement. According to the majority, this difference further dictates that infringement and invalidity should not be conflated. See Slip Op. at 10. Lastly, the majority noted that allowing the defense would make litigation more burdensome and confuse juries by making them distinguish between the defendant’s belief regarding validity and the actual issue of validity. See Slip Op. at 12.

Interestingly, the majority went out of its way to note that accused infringers still have multiple ways to defend against frivolous patent infringement claims, especially claims by patent assertion www.pocketoption.br.com/download-app entities or “trolls.” The majority stressed that Rule 11 of the Federal Rules of Civil Procedure and 35 U.S.C. § 285 allow district courts to award sanctions and attorney fees against parties who bring frivolous cases. Slip Op. at 14. According to the majority, these deterrents, combined with post-grant review proceedings at the Patent Office, warrant maintaining the separation between infringement and validity.

 

[1] Justice Scalia and Chief Justice Roberts dissented, while Justice Breyer did not take part in deciding the case.

Tom Brady, Deflategate, and Florida Non-Competes

On far too many levels, Tom Brady is a star. “Deflategate” or not. Whether he actively participated in deflategate, passively participated in deflategate, or did not at all participate in deflategate, Tom Brady is a star. He belongs in the Hall of Fame. The committee no-doubt will vote him into the Hall of Fame at his earliest eligibility. He’s earned it.

Brady is competitive. No one questions that Brady’s competitive drive is one of the many keys to his continued success and longevity. Indeed, the well-known fact that Brady is competitive has caused many pundits to presume that he was either actually aware of the deflated footballs or was simply experienced enough to greatly suspect something was awry. Competition drives athletes.

Competition also drives successful businesses.

Free trade, in theory, increases competition. Competition forces innovation, higher productivity, better quality, lower prices or some combination of these elements to allow the marketplace to provide suitable options for everyone. Americans embrace competition. Americans reward competition. Our legal system is intentionally set up as an “adversary system” that demands competition.

Florida law recognizes this.

Florida law also recognizes an individual’s freedom to enter into contracts. When it comes to employment, Florida is called “at-will”. That means, essentially, that as long as you don’t violate Florida or federal discrimination laws (or the company’s internal employment rules or agreements), an employer can terminate an employee at any time, for any lawful reason. As anyone familiar with this blog also knows, Florida law also allows “valid restraints of trade” with regard to employment under certain circumstances found among Florida’s anti-trust statutes. The more common phrases for these valid restraints of trade are non-competition agreements or non-compete agreements. In Florida it is lawful for an employer to have the employee enter into a non-compete agreement as a condition of employment. Even a long-term employee can lose her or his job if the employer demands the execution of a non-compete agreement and the employee refuses to enter one. These Florida statutes neither apply to everyone, nor do these statutes apply equally. Florida law distinguishes among employees, allowing longer periods of non-competition for upper level management. As you might expect, Florida law also mandates that the restraint from future employment is reasonably intended to protect the employer’s legitimate ongoing business interests. Because Florida courts generally favor competition over restraints of trade, all Florida non-compete agreements are strictly construed. As a result, it’s critical to involve an experienced attorney when drafting or reviewing a non-compete agreement.

Tom Brady is one seriously competitive quarterback. Nearly every team in the NFL would substantially improve with Tom Brady under center. What if you’re the best at your position? What if you’re the Tom Brady of your profession? What if your competitive nature resulted in your success beyond even your employer’s wildest dreams? Does Florida law allow an exception? Yes and no. Lawyers are not subject to Florida’s restraint of trade statutes. (Go figure.) However Florida’s “valid restraint of trade” laws apply to doctors and nearly all other employees.

Brady is exceptional in many ways. Fortunately for football fans, deflategate suspension or not, Brady’s competitive spirit remains unrestrained.

The Multi-State Non-Compete Agreement “Drilled Down”

Our February article addressed the options available to the multi-state employer attempting to design its non-compete agreements within the “tangled mess” of the various state laws applicable to agreements for employees who reside within those various states. In that article, we advised that unless management has the resources to design, update and manage separate agreements tailored to each applicable state law, the best alternative is to design an “asset protection program” to include as few versions of the agreement as possible, tailoring each version to as many, similar state laws and job categories as possible. In this and subsequent articles, we will dig deeper into the variety of business and state law issues involved in this process.

Initially, employers should identify all employee/independent contractor responsibility levels and titles to be covered by the company’s non-compete agreements and the states in which those employees/contractors reside. Here, it is important to note that most state laws will not support the enforcement of a non-compete covenant unless the employer has a material, protectable interest supporting its post-employment non-compete restrictions. Translated, this means that most state laws will not support the enforcement of non-compete or even customer non-solicitation covenants signed by non-supervisory, non-sales and non-managerial employees. So, don’t expect to enforce a non-compete or non-solicitation covenant when it comes to your administrative assistant or your production employees. Furthermore, a detailed analysis of each employee category in the context of applicable state laws as opposed to a “one-size-fits-all” agreement will aid in the enforcement process. By way of example, it may be ill-advised to include non-compete and customer non-solicitation covenants within the agreements designated for North Carolina-based scientists because such scientists do not have access to customers or secret formulas which could be damaging if they leave for a competitor. In states such as North Carolina where the enforcement of a non-compete or customer non-solicitation is somewhat unpredictable, a good solid confidential information covenant may be preferred.

Along these same lines, this first step will also pave the way for other critical discussions with your counsel. The four primary types of employee restrictive covenants – the non-compete, customer non-solicitation, employee non-solciitaion and confidential information covenants – have varying applications depending on the nature and level of employee to which the agreement is directed. Each occupies what could be described as a “sliding scale of enforceability. Non-compete covenants which, to some degree or another, restrict a former employee’s subsequent employment in the industry are the most difficult to enforce, followed by the customer non-solicitation, the employee non-solicitation and finally, the confidential information covenant. As such a careful categorization of targeted protectable interests for each employee category and the state laws involved for each will help ensure enforcement and reduce the number of agreement versions your Company is required to manage and update.

We will expand on this analysis in future articles, taking a closer look at other key components of this analysis including adequate consideration, blue-penciling laws and the non-compete versus non-solicitation analysis.