© 2015 The Texas Lawbook.
By Jeff Bounds
(June 1) – Patent infringement cases are usually dry and unemotional, featuring highly technical evidence presented by engineers.
Then there’s Commil USA v. Cisco Systems in Marshall, Texas, an otherwise ordinary case if simply judged by the allegations.
But Commil – commonly referred to in legal circles as the “Bodacious Bar-B-Q case” that initially grabbed headlines when an East Texas lawyer made anti-Semitic comments to play to the pro-Christian biases of local jurors – is anything but unremarkable or boring.
The Supreme Court of the United States made sure last week that the litigation will forever be memorialized in the annals of legal history by re-setting and publicly clarifying the patent rules governing the validity of induced infringement, which is when one party indirectly causes others to violate patents without a licensing agreement.
The justices also used the Commil case to officially add the phrase “patent trolls” into legal lexicon.
Now the case is headed back to East Texas for a third jury trial in which $100 million or more will be at stake.
“It is a bizarre case that every patent lawyer has followed, if nothing more than for the crazy twists it has taken,” said Tom Melsheimer, who is the managing principal of Fish & Richardson’s Dallas office. “The Supreme Court decision only added to it.”
The evidence shows that, in 2006, Commil USA paid an Israeli company for the patent to technology that allows wireless devices, including laptops and handhelds, to stay connected to the network as the user moves around a specific geographic area, such as a corporate campus.
A year later, company officials claim they discovered Cisco, Motorola and other companies were using the technology without a license.
Commil hired prominent Dallas trial lawyer Mark Werbner to sue the two corporate giants for infringement and inducement of infringement. Motorola settled the case for an undisclosed amount of money, according to Commil’s website.
The case took its first bizarre twist when an East Texas lawyer representing Cisco during the trial asked a Commil company official, who was Jewish, if he and an Israeli man who helped invent the technology ate pork when they dined at the nearby Bodacious Bar-B-Q restaurant.
Later, during closing arguments, the same defense lawyer compared the trial against Cisco to the trial against Jesus presided over by Pontius Pilate.
The federal judge ruled that the lawyer’s comments were an anti-Semitic attempt to influence the biases of a pro-Christian East Texas jury. While the lawyer partially apologized, the judge ruled the lawyer’s statements unfairly tainted the trial.
A second trial in 2011 ended with a $63 million verdict against Cisco for induced infringement by others. The judge added another $10 million as interest.
On appeal, lawyers for Cisco argued that company officials had a good faith belief that Commil’s patents were invalid – a position that nearly all courts had previously declared an illegitimate defense for induced infringement.
In 2013, the U.S. Court of Appeals for the Federal Circuit stunned the world of intellectual property law when it reversed damage awards in the Commil trials, saying Cisco’s “good faith” argument is a valid defense in inducement patent cases.
In the months since that decision, companies accused of inducement infringement added the “good faith” argument as a part of their defense strategy.
But the precedent was short-lived.
The Supreme Court last week used the Commil case to firmly reject the validity of the “good faith” defense.
If the Supreme Court had upheld the “good faith” defense, according to Donald Puckett, partner at Dallas-based Skiermont Puckett, “it would have been the death knell for indirect infringement as a viable infringement theory.”
Werbner, a partner at Sayles Werbner in Dallas, said the ruling “restores the common sense notion that patents approved” by the U.S. Patent and Trademark Office are assumed to be valid.
“This re-sets the ground rules,” he said.
Other patent law experts agree.
“Our patent laws clearly and overwhelmingly distinguish the issues of infringement and invalidity,” said J. Austin Curry, principal at Caldwell Cassady Curry, a Dallas firm not affiliated with the case.
But Melsheimer and other lawyers who handle patent disputes contend that the significance of the second part of the Supreme Court’s decision has been missed.
“The Supreme Court gave something to both sides in patent lawsuits, but I think this decision could have significant implications in a lot of patent cases in which inducement is alleged,” said Melsheimer, who is not involved in the litigation.
The justices used the Commil case to publicly re-enforce provisions in the 2011 America Invents Act, which significantly increased the standard for proving induced infringement.
Prior to the Supreme Court’s ruling in the Commil case, many judges told juries that a plaintiff simply had to prove that the defendant “should have known” that its actions created induced infringement, Melsheimer said.
“That will no longer be enough,” he said.
Matt Anderson, a partner in the intellectual property section of Munck Wilson Mandala in Dallas, said the high court’s holding in Commil is important for hundreds of companies that contract with third parties to perform technology services on their behalf or businesses that sell technology products that could infringe patents while in use by their customers.
“In those cases, if the company becomes aware that those actions or products may fall under a patent, they should take steps to evaluate whether there is actual infringement, and to get a professional opinion of non-infringement, if possible, to help negate or defend against accusations that the company knew that they were inducing infringement,” he said.
To prove induced infringement under the 2011 patent law, plaintiffs must show that a defendant both knew both about the patent in question and that what the defendant was doing was resulting in outside parties infringing upon that intellectual property. That is a higher standard of proof than in so-called “direct” infringement, where the plaintiff must simply show the defendant used the protected invention without permission, regardless of what the defendant knew.
Puckett said the knowledge requirement of indirect infringement essentially allows technology makers, including manufacturers of consumer-oriented electronics to avoid liability on a “technicality.” He said these companies can sell their widgets to consumers, and then say, “We didn’t know anything about the patent.”
“The whole intent requirement, in a lot of cases, frankly serves as a loophole to get out of jail free, essentially,” he said.
If the Supreme Court’s decision in the Commil case had stopped there, it would be considered a precedent-setting ruling.
But scholars who studiously monitor the nation’s highest court say the “Bodacious Bar-B-Q case” will go down in the legal history books for yet another odd but potentially important reason: It is the first time the justices ever used the phrase “patent troll” in a written opinion, which had been previously shunned by courts as a pejorative term for companies that have no other business operations other than the acquisition and enforcement of patents.
IP law experts on a handful of trade blogs opined since the court’s decision last week that the justices’ use of the phrase may indicate that at least some justices feel that additional reforms are needed to reign in potentially frivolous litigation by patent assertion entities.
Either way, the case is headed back to East Texas for a third trial.
Werbner said he does not know what changes Cisco may have made to its sales of the wireless networking technology that is at the center of the case that led to the $63 million verdict four years ago.
“Extrapolating from that, the amount we will seek in the third trial could well exceed $100 million,” he said.
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