In a precedential opinion, the Federal Circuit held that a defendant's supposed objectively reasonable basis for believing that use of its accused products did not infringe an asserted patent, based on the district court's claim construction ruling, did not justify excluding evidence of inducement to infringe after the date of that ruling, where the defendant did not have a subjective belief of non-infringement.
In TecSec, Inc. v. Adobe Inc., et al., Case No. 2019-2192, the Court reversed the district court's exclusion of all evidence of induced infringement from the date of the claim construction ruling through the expiration of the patents at issue and remanded for further proceedings on TecSec's claim of induced infringement. (The Court also rejected Adobe's cross-appeal of the district court's order denying Adobe's motion that the asserted claims were patent-ineligible under 35 U.S.C. § 101. That portion of the Court's opinion is not addressed herein.)
The relevant factual background is convoluted. TecSec sued Adobe, IBM and others in 2010, alleging infringement of a group of related patents. On March 3, 2011, after staying the case as to all defendants but IBM, the district court construed several claim terms and, based on those constructions, granted IBM's motion for summary judgment of noninfringement.
The case then proceeded in district court against Adobe and other defendants. Relevant here, on April 23, 2012, TecSec and Adobe stipulated that, under the claim construction already adopted (which TecSec reserved the right to appeal), TecSec could not show that Adobe or the users of its accused products infringed the asserted patents. The next day, the district court entered a judgment of noninfringement for Adobe. (The Federal Circuit later reversed the district court's construction of one claim term and remanded for further proceedings under the correct construction.)
In May 2015, the district court granted Adobe's motion for summary judgment of noninfringement, later reversed and remanded by the Federal Circuit.
In May 2017, the district court denied Adobe's motion for summary judgment of patent-ineligibility under § 101. In June 2018, the district court denied Adobe's new motion for summary judgment of noninfringement. In August 2018, Adobe stipulated that "on at least one occasion," "there was direct infringement of the asserted claims" by an Adobe employee. The stipulation referred to an Adobe employee performing the steps of the method claims using an accused version of Adobe's product, as reflected in a February 2009 blog post.
In October 2018, Adobe moved in limine, inter alia, to "preclude argument, evidence, or testimony on Adobe's intent to induce or willfully infringe between" the claim construction date and the expiration of the asserted patents, unless TecSec conceded admissibility of certain documents, including a Stipulation of Non-Infringement.
At an oral argument on the motion, the district court indicated that it intended to preclude "any reference" to Adobe's post-claim construction conduct, making admission of the documents immaterial. On November 13, 2018, before any ruling by the court, TecSec filed a supplemental brief stating expressly that even if the district court allowed Adobe to present evidence of lack of intent, "the Court should not preclude TecSec from presenting evidence on Adobe's intent to induce infringement."
The district court granted Adobe's motion, excluding all evidence of induced infringement after the March 3, 2011 claim construction order. The district court held that, after the favorable claim construction, reasonable though later reversed, it was impossible as a matter of law for Adobe to have had the requisite intent to induce infringement. The court also said that allowing TecSec to argue induced infringement without permitting Adobe to introduce documents at issue would prejudice Adobe, while admitting that evidence would prejudice TecSec and confuse the jury.
At trial, TecSec offered the deposition testimony of an independent technology consultant, as evidence of direct infringement by third parties allegedly induced by Adobe. However, the district court excluded part of the testimony relating to activities occurring after March 3, 2011, the end of the inducement period.
The jury, inter alia, found that Adobe had directly infringed all asserted claims, but had not committed inducement of infringement.
On appeal, the Federal Circuit rejected both rationales offered by the district court for ruling that there could be no proof of post-March 3, 2011 inducement. As for the district court's argument that the March 3, 2011 claim construction and stipulation of non-infringement made it legally impossible for Adobe to have had, after that date, the knowledge required for inducement, the Federal Circuit noted that the intent element for induced infringement, requiring "knowledge that the induced acts constitute patent infringement," can be met by proof of a defendant's subjective state of mind. Per the Court, as a logical matter, a defendant may have the liability-supporting subjective state of mind even if a person could believe, with objective reasonableness (though wrongly), that the induced conduct was not infringing. Here, Adobe may have had the requisite knowledge of infringement if it subjectively believed (as the Court ultimately held) that the claim construction was incorrect, even if that construction was objectively reasonable.
The Court analogized to its ruling on willfulness, namely, a non-precedential decision explaining that a district court's prior judgment of noninfringement, and statement to the parties that the plaintiff's inducement claim was objectively weak, did not prevent the plaintiff, as a matter of law, from proving the subjective intent element of induced infringement, a fact issue. Referring to the Supreme Court's decision in Cheek v. U.S., 498 U.S. 192 (1991), the Court said that the question whether the defendant subjectively had what turned out to be the correct belief (here, that Adobe believed that the claims meant what the Court eventually held) is not answered as a matter of law by the objective reasonableness of a contrary belief.
Per the Court, then, the district court here erred when it concluded as a matter of law that, after its (later reversed) claim construction, Adobe "lacked the requisite intent to induce infringement." Per the Court, the district court's explanation—that Adobe was entitled to rely on the court's erroneous ruling in its favor on infringement, as proof that the relevant induced acts were non-infringing—made dispositive what Adobe, with objective reasonableness, could have believed. However, the inducement standard can be met by proof of what Adobe in fact subjectively believed. For example, per the Court, Adobe might have believed that the claim construction ruling was erroneous and would likely be reversed (as it was). Thus, that claim construction ruling could, at most, create a factual question.
The Court also held that the district court erred in relying on its second rationale for precluding TecSec from proving inducement after the date of the claim construction ruling, viz., that doing so would result in unfair prejudice and jury confusion. The Court said that the district court's exclusion of all evidence of inducement after the claim construction ruling was "materially different" from any application of Fed. R. Evid. 403 identified by Adobe.
Per the Court, any conclusion that post-claim construction inducement could not be fairly tried would have required consideration of what other admissible evidence TecSec had that was relevant to intent, as well as of possible measures for reducing jury confusion. However, the district court did not—and, given Adobe's motion, could not—undertake that consideration. Per the Federal Circuit, given the framing of Adobe's motion, the district court lacked the basis to consider the totality of TecSec's post-construction inducement evidence to determine whether that issue could fairly be tried. And the court did not consider the totality of such evidence, nor did it provide an analysis of potential means for reducing jury confusion and allowing a fair trial considering the totality of relevant evidence.
The Federal Circuit noted that, when the district court stated that it would be "substantially and unduly prejudicial and confusing for the jury to see" the claim construction ruling and TecSec's stipulation, it was determining that the evidence Adobe was entitled to introduce would be "unduly prejudicial" to TecSec. But TecSec never stated that, if that evidence had to be admitted, it would drop its inducement claim for the post-claim construction period. Indeed, TecSec reiterated its intent to present the inducement case even if Adobe's evidence were admitted. Thus, per the Federal Circuit, the district court furnished no justification for making that determination itself instead of leaving to TecSec to determine if the prejudice to it was too severe for the issue to be tried at all.
(The Court also reversed the district court's exclusion of the deposition testimony for the period after the claim construction ruling, saying, "Because we conclude that the district court erred in its motion in limine ruling that was the basis for the exclusion of the [deposition] testimony at issue, we reverse that evidentiary exclusion as well.")
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