The Supreme Court issued a ruling (PDF) today in Commil USA v. Cisco Systems, one of two patent cases it heard this term. On one key issue, the opinion favors Commil, a "patent troll" that won a $64 million jury verdict against Cisco. But other findings mean that the non-practicing entity won't be getting a payday any time soon—and a final section of the opinion is wholly dedicated to reminding judges to sanction misbehaving patent plaintiffs, something that didn't even come up in this case.

In the Commil USA v. Cisco Systems case, a 6-2 majority of justices held that defendants in patent cases can't evade claims of "induced infringement" by arguing they had a "good faith belief" the patent was invalid. That overturns an appeals court decision favoring Cisco. Justice Stephen Breyer was recused from the case.

The Supreme Court also considered what level of knowledge a defendant needed to be hit with an induced infringement claim. Commil argued it only had to show the defendant knew a patent exists; the majority said more was needed, including "proof the defendant knew the acts were infringing."

That holding, which stops Commil from rolling back existing case law, means the case isn't an outright win for Commil. It makes it clear how difficult it is for a plaintiff to win a patent case based on "induced infringement"—something that's already difficult following last year's ruling in Akamai v. Limelight.

The case now goes back to the US Court of Appeals for the Federal Circuit for further consideration.

Beliefs and consequences

Commil was an Israeli startup founded in 2000. In 2005, the company went under, letting all its employees go and selling off its patents. Re-created as a patent-holding company, Commil USA filed suit against Cisco in 2007 in the Eastern District of Texas.

After two jury trials, Commil won a $63.7 million verdict against Cisco, which was found to infringe its patent, numbered 6,430,395. The Supreme Court didn't consider the technical details of the patent in this case, which describes a way of implementing short-range wireless networks.

The decision emphasizes that infringement and invalidity need to be considered as distinct issues. Invalidity "is not a defense to infringement, it is a defense to liability," the court wrote. If "good faith belief" in invalidity was a defense, it would weaken the "presumption of validity" that patents get under current law.

Creating a defense "of belief in invalidity... would have negative consequences," the majority held. "Litigation would become more burdensome, and juries would have to separate the defendant's belief... from the actual issue of validity."

Trespass can be committed even when someone mistakenly believes she has a right to enter a piece of property. "In the usual case, 'I thought it was legal' is no defense," writes Justice Anthony Kennedy for the majority.

Cisco had argued that not allowing its "good faith belief" defense would be a boon for patent trolls, and "needlessly exacerbate an already serious threat to American businesses." The company was supported in its position by a bevy of tech companies, as well as public interest groups such as Electronic Frontier Foundation and Public Knowledge.

But is it good for the trolls?

The opinion devotes its final page to explaining how district courts can sanction and deter patent trolls—an issue that hasn't come up in this case at all. The inclusion may be meant to emphasize that the ruling in Commil's favor doesn't mean it's unaware of the problem. "Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous," writes Kennedy. "This tactic is often pursued through demand letters... This behavior can impose a 'harmful tax on innovation.'" He continues:

No issue of frivolity has been raised by the parties in this case, nor does it arise on the facts presented to this Court. Nonetheless, it is still necessary and proper to stress that district courts have the authority and responsibility to ensure frivolous cases are dissuaded... It is within the power of the court to sanction attorneys for bringing such suits. It is also within the district court's discretion to award attorney's fees to prevailing parties in 'exceptional cases.'

Those safeguards "militate in favor of maintaining the separation expressed throughout the Patent Act between infringement and invalidity," Kennedy concludes.

In a brief dissent, Justice Antonin Scalia, joined by Chief Justice John Roberts, explains why the "good faith belief" defense should be allowed.

Scalia agrees that infringement and validity are distinct issues—but argues it's irrelevant. An invalid patent is one that can't be infringed, and "it is impossible for anyone who believes that a patent cannot be infringed to induce actions that he knows will infringe it."

"It follows, as night the day, that only valid patents can be infringed," writes Scalia. "To talk of infringing an invalid patent is to talk nonsense."

Scalia takes umbrage at the idea that his viewpoint would "create defenses," arguing he's merely interpreting the Patent Act. He takes a shot at the Commil v. Cisco majority suggesting that, despite protestations to the contrary, they have in fact aided the trolls.

"[I]f the desirability of the rule we adopt were a proper consideration, it is by no means clear that the Court's holding, which increases the in terrorem power of patent trolls, is preferable." (Patent trivia buffs, take note: this appears to be the first time the term "patent troll" has been published in a Supreme Court opinion.)

EFF patent lawyer Vera Ranieri also sees opportunities for patent trolls in this decision, which could be used to extort settlements. Trolls with a good infringement claim, but an almost surely invalid patent, "can strategically dismiss lawsuits to evade having their patent invalidated by a court when actually challenged (a fact the Supreme Court didn't consider)," she writes.