UPDATED The US Supreme Court has ruled against Cisco in the company’s appeal against a patent infringement judgement.
The case concerns a wireless networking patent held by IP-holding entity Commil USA LLC. In 2011, Commil was awarded over $63 million in damages against Cisco for infringement of that property, to which was subsequently added over $10 million in interest. Cisco has been fighting the verdict through the courts since then.
However, the small print of the ruling may benefit Cisco and other technology innovators in the long run, as one of the presiding judges has slammed what he called “patent trolls” in a written dissenting opinion on the 6-2 majority verdict.
Why the ‘small print’ is vital
The case is important to the IT and communications sectors for two reasons. The first is that it removes the possibility for patent infringers – in this case Cisco – to claim that they acted in good faith.
Cisco had claimed that it believed Commil’s patent to be invalid, a defence supported by the US Court of Appeals for the Federal Circuit. The Supreme Court has now struck down Cisco’s good-faith defence, saying that a patent owner merely has to prove that the other party knew of the patent before infringing it.
However, the second reason for the ruling’s importance has greater long-term resonance, and in this regard Cisco has widespread support in the IT sector.
It concerns so-called ‘patent trolling’ – the holding of intellectual property by non-practising entities (NPEs), shell companies that have no plans to develop the patents themselves. The implication is that such companies hold IP with the sole purpose of extracting money from active players in the industry, such as Cisco.
Justice Antonin Scalia was one of two Supreme Court judges to dissent from the majority verdict, and for the first time in US legal history used the term “patent troll” in a written opinion, supported by the other dissenting judge, Chief Justice John Roberts. Scalia said that the ruling “increases the in terrorem [intimidatory] power of patent trolls”.
By calling out IP-holding shell companies as “patent trolls” in this way, Judge Scalia has placed a marker in the US legal system that suggests the future may no longer go the trolls’ way.
Another judge also acknowledged the existence of the practice. “Some companies may use patents as a sword to go after defendants for money, even when their claims are frivolous,” wrote Justice Anthony Kennedy, for the 6-2 majority. “This behaviour can impose a ‘harmful tax on innovation’.”
Until this point, using the term ‘patent trolls’ to describe NPEs has been a risky endeavour for US journalists and commentators, because it has appeared to be derogatory and partial. From this point on, expect to hear it used a lot more widely in both case law and industry commentary.