Akamai/McKesson Inducement Rule Affects Wide Range of Industries, Practitioners Say

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An Aug. 31 decision by the U.S. Court of Appeals for the Federal Circuit, sitting en banc, changing induced infringement standards in Akamai and McKesson applies to a wide range of industries and technologies that rely on method claims for patent enforcement, according to practitioners.

The court held 6-5 that a patent owner claiming induced infringement no longer has to show that a single induced entity is liable for direct infringement. Akamai Technologies Inc. v. Limelight Networks Inc., No. 2009-1372, and McKesson Technologies Inc. v. Epic Systems Corp. No. 2010-1291 (Fed. Cir. Aug. 31, 2012).

Although the patents in both cases were drawn to internet applications, stakeholders told BNA Sept. 4 that patents on medical diagnostics, medical devices, banking, telecommunications, and other technologies may now have a new tool to enforce patent claims that can only be infringed by multiple parties acting in concert.

Peter F. Corless of Edwards Wildman Palmer, Boston, even suggested a possible “retroactive effect” with lawsuits filed by patent owners who could not prove joint direct infringement before but will now have a chance of succeeding with an inducement charge.

Court Revises Inducement Law.

In short, the two plaintiffs were trying to assert method patent claims that could only be infringed by two parties who together performed all the steps of the claim, but neither single entity performed all the steps by itself.

The court's jurisprudence since 2007, in BMC Resources Inc. v. Paymentech LP, 498 F.3d 1373, 84 USPQ2d 1545 (Fed. Cir. 2007) (185 PTD, 9/25/07), was that the alleged infringer must have “direction or control” over the party performing the additional steps. In Muniauction Inc. v. Thomson Corp., 532 F.3d 1318, 87 USPQ2d 1350 (Fed. Cir. 2008) (137 PTD, 7/17/08), the court added that only an agency relationship or a contractual obligation can support a finding of direction or control.

Joint liability for direct infringement was the focus of the questions presented, the briefing, and the oral arguments before the en banc court. However, the majority said, “It is not necessary for us to resolve that issue today because we find that these cases and cases like them can be resolved through an application of the doctrine of induced infringement.”

Because of the different case circumstances, McKesson was in the better position to make an inducement charge. McKesson argued that, though inducement under 35 U.S.C. §271(b) requires a showing of direct “infringement,” it does not specifically require that a single entity perform all the steps that make up the infringement.

Showing Inducement vs. Direction or Control.

The court's decision left its jurisprudence on joint liability for direct infringement intact, and BNA asked practitioners whether they would find it easier for a patent owner to litigate based on inducement as opposed to joint liability.

An inducement charge brings with it a requirement to show “that the accused inducer act[ed] with knowledge that the induced acts constitute patent infringement,” per Global-Tech Appliances Inc. v. SEB S.A., 131 S. Ct. 2060, 98 USPQ2d 1665 (U.S. 2011)(105 PTD, 6/1/11).

“It's hard to give a general answer,” according to Gene W. Lee of Ropes & Gray, New York. “Both issues are highly fact-dependent. That said, the Global-Tech decision clarified an important aspect of the law of inducement--that is, that relevant knowledge is not merely knowledge of the accused activities and the asserted patent; rather, it is knowledge that the accused activities would infringe the asserted patent. Practically speaking, this is a challenging standard to meet.”

Joseph R. Re of Knobbe Martens Olson & Bear, Irvine, Calif., was nevertheless unequivocal: “It's absolutely easier to prove inducement--regardless of Global Tech--because you no longer need to show someone is liable for the direct infringement,” he said. “That was the hurdle in these 'divided' infringement cases.”

Corless identified a different factor that patent holders might have to consider--remedies “to compensate for the infringement” under 35 U.S.C. §287.

“It remains unclear how damages will be calculated for induced infringement and whether an injunction will bar the infringer, but not the entities performing the steps,” he told BNA. “Thus, while the new inducement [standard] is undoubtedly easier to prove, the available relief is not necessarily as effective as under joint infringement. Patent owners will need to weigh the importance of these issues: ease of proof versus available relief.”

Not Just an Internet Patent Issue.

BNA noted that the patents at issue here were directed to internet-related methods, with a “server-client” relationship typical of many internet-based applications, but that medical diagnostics methods--often requiring separate actions by a diagnostic laboratory and a doctor to infringe, would be affected by the new Akamai-McKesson standard.

Re told BNA that the decision will affect “medical devices generally, not just diagnostics.” He argued, “Often the claim has the manufacturer providing a component and the doctor completing the assembly or putting it into the patient,” pointing for example to Cross Medical Products Inc. v. Medtronic Sofamor Danek Inc., 480 F.3d 1335, 82 USPQ2d 1065 (Fed. Cir. 2007) (60 PTD, 3/29/07).

Corless extended the list of industries affected to those covering “varying technology areas, for example, where a first party manufactures an intermediate product that is further manipulated by one or more other entities, or a first party manufactures a product that is otherwise utilized by one or more distinct entities.”

“I expect the Akamai-McKesson decision to have an impact on how infringement and noninfringement are argued in technologies and industries involving widely distributed networks or activities,” Lee said. “Examples include e-commerce, banking and financial services, telecommunications, and wireless communications.”

Different Standards for Method, System Claims?

Related jurisprudence was offered by the court in Centillion Data Systems LLC v. Qwest Communications International Inc., 631 F.3d 1279, 97 USPQ2d 1697 (Fed. Cir. 2011)(18 PTD, 1/27/11), which held that an infringing use of a patented system occurs when a party “controls the system as a whole and obtains benefit from it.”

The court thus now has different standards for infringement, depending on the type of claim, and this is particularly relevant to the difference between system and method claims. In the court's recent Section 101 decisions on patent eligibility, the court has repeatedly stated that a system that merely implements a patent-ineligible method is also patent-ineligible.

For example, Bancorp Services LLC v. Sun Life Assurance Co. of Canada (USA), No. 2011-1467, 103 USPQ2d 1425 (Fed. Cir. July 26, 2012)(145 PTD, 7/30/12), cautions against different analysis of system and method claims when “[t]he only difference between the claims is the form in which they were drafted.”

“The distinction between method claims and product claims drawn by the majority opinion in Akamai-McKesson is very significant,” Lee said. “It is the first time of which I am aware in which the Federal Circuit, en banc, has stated that a doctrinal difference exists in how method claims and product claims should be analyzed for determining infringement.”

Re, however, said he was not disturbed by the difference.

“The user of a system is always the liable direct infringer--at a minimum,” he said. “This case should not be applicable to system claims.”

But Corless, noting that Centillion considered only direct infringement under 35 U.S.C. §271(a), contended that extending the holding of the current case was reasonable.

“It certainly would be possible for a patent owner to contend that the Akamai-McKesson [inducement] decision can be extended to system claims under relevant circumstances,” he said.

Headed for the Supreme Court?

Re said that he believed this was a good case for high court review. And, consistent with his concern over different standards for different claim types, Lee said, “The Federal Circuit's differential treatment of method claims and product claims might catch the attention of the Supreme Court.”

Corless did not make a prediction, but he said, “A primary appellant argument in Akamai-McKesson will likely be that the Federal Circuit overstepped its authority and created a form of infringement that does not exist under the Patent Act, which is the province of Congress, such as the enactment of Section 271(f) to fill the loophole exploited by infringers who sent component parts over seas to be assembled into an infringing product.”

By Tony Dutra  

Opinion at http://pub.bna.com/ptcj/AkamaiTechnologies2012Aug31.pdf