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A patent owner claiming induced infringement no longer has to show that a single induced entity is liable for direct infringement, the U.S. Court of Appeals for the Federal Circuit, sitting en banc, ruled Aug. 31 in a 6-5 split (Akamai Technologies Inc. v. Limelight Networks Inc., Fed. Cir., No. 2009-1372, 8/31/12; and McKesson Technologies Inc. v. Epic Systems Corp.,Fed. Cir., No. 2010-1291, 8/31/12).
The change in the inducement standard was the court's way of resolving the issue that was actually argued in the case: the standards for how two entities could be jointly liable for direct infringement of a method claim.
The court's precedent on joint liability since 2007 has made it difficult to find direct infringement when some of the steps of the claim were performed by one party and the remaining steps by a second party. The court took two cases en banc to address changing the standards for joint liability, but, it 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.”
One dissenting opinion called the new standards “dramatic changes in the law of infringement.” Another faulted the majority for “assum[ing] the mantle of policy maker” and defining infringement to “mean different things in different contexts.” That second dissent also referred to the decision as a “sweeping change to the nation's patent policy.”
Joint liability for infringement is at issue when a claim of a patent is unlikely to be infringed by a single party. In recent cases, asserted claims have been directed to actions by both the computing systems of an online application service provider and a user of that application. The patent owner in each case charged infringement by the service provider, even though the service provider did not perform all the steps of the method claim or own all the components of the claimed system.
The key case BMC Resources Inc. v. Paymentech LP, 498 F.3d 1373, 84 USPQ2d 1545 (Fed. Cir. 2007) (185 PTD, 9/25/07), held that the alleged infringer must have “direction or control” over the party performing the additional steps of a method claim.
Then, Muniauction Inc. v. Thomson Corp., 532 F.3d 1318, 87 USPQ2d 1350 (Fed. Cir. 2008) (137 PTD, 7/17/08), added that only an agency relationship or a contractual obligation can support a finding of direction or control.
Muniauction said that the high hurdle for proving joint liability was justified because “proper claim drafting” by the patent owner--such that a claim's steps could be infringed by only one party--would allow adequate patent enforcement against competitors.
The court agreed to hear both cases en banc and scheduled oral arguments the same day (225 PTD, 11/22/11).
The court said, “we believe that BMC and the cases that have followed it changed the pre-existing regime with respect to induced infringement of method claims, although admittedly at that time there were relatively few cases in which that issue had arisen.”
And the court now held:
Requiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer. If a party has knowingly induced others to commit the acts necessary to infringe the plaintiff's patent and those others commit those acts, there is no reason to immunize the inducer from liability for indirect infringement simply because the parties have structured their conduct so that no single defendant has committed all the acts necessary to give rise to liability for direct infringement.
The court took that same approach and applied it to the Akamai case. Akamai had claimed inducement, but did not press it at trial and the appeals court's panel decision was not dependent on inducement theories. However, the en banc court accepted the argument that Akamai's lower court decision not to press for inducement was based on a “mistaken view” that is overruled in the current case.
The court reversed the district court decision in Akamai as well and remanded with instructions for the proof necessary for finding Limelight liable for induced infringement:
Chief Judge Randall R. Rader and Judges Alan D. Lourie, William Curtis Bryson, Kimberly Ann Moore, Jimmie V. Reyna, and Evan J. Wallach joined the per curiam opinion.
Rader had written the BMC opinion, now overruled, and had joined theAkamai panel opinion.
“With all due respect to my colleagues in the majority, the question of 'joint infringement' liability under §271(a) is essential to the resolution of these appeals,” Linn said. “Divorcing liability under § 271(a) from liability under § 271(b) is unsupported by the statute, subverts the statutory scheme, and ignores binding Supreme Court precedent.”
The dissent identified passages from the congressional record in the development of the Patent Act of 1952 supporting its position; the majority responded with other passages and events from the same record to rebut the dissent.
The high court case the dissent relied on most significantly is Aro Manufacturing Co. v. Convertible Top Replacement Co., 365 U.S. 336, 128 USPQ 354 (1961), and again the majority responded with a different interpretation of its holding.
“The well established doctrine of vicarious liability is the proper test for establishing direct infringement liability in the multi-actor context,” Linn's dissenting opinion said. “Absent direct infringement, the patentee has not suffered a compensable harm.”
The dissent concluded with a recitation of the standards established inBMC and Muniauction.
Newman noted the “two factions” on the en banc court and faulted both for not resolving the divided direct infringement issue that was actually argued before the court.
Newman's dissent called the majority's main holding a “distortion of the inducement statute, 35 U.S.C. §271(b), [that] has no support in theory or practice. This new rule simply imposes disruption, uncertainty, and disincentive upon the innovation communities.”
After enumerating multiple potential consequences of this “distortion,” Newman ultimately argued that the Federal Circuit's prior jurisprudence favoring “an all-purpose single-entity requirement is flawed, and [the court should] restore direct infringement to its status as occurring when all of the claimed steps are conducted, whether by a single entity or in interaction or collaboration.”
Donald R. Dunner of Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., represented Akamai. Aaron M. Panner of Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, D.C., represented Limelight.
Daryl L. Joseffer of King & Spalding, Washington, D.C., represented McKesson. William H. Boice of Kilpatrick, Townsend & Stockton, Atlanta, represented Epic.
By Tony Dutra
Dunner is a member of this publication's board of advisors.
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