Divided court revives divided infringement

Intellectual Property and Technology News

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A recent Federal Circuit decision restores a type of patent infringement claim that it had extinguished five years earlier. The issue is: can a defendant be liable for infringement of a method claim when no single actor commits all the acts that constitute direct infringement? In its 2007 BMC decision, the Federal Circuit’s answer to this question was a qualified “no.”1 The Federal Circuit held that unless the defendant controls or directs the actions of the parties who collectively perform the claimed method, there can be no liability for infringement. Truly “divided” infringement of method claims became unviable, and defendants could often obtain early dismissal.

But in the Akamai and McKesson cases, decided in August 2012, the Federal Circuit (sitting en banc with all eleven active judges) changed its answer to a qualified “yes.”2 The Federal Circuit held that a defendant may be liable for induced infringement where multiple parties collectively perform all steps of a claimed method, even though no single party performs all of the steps itself. Overruling its earlier BMC decision, the court held it was not necessary to show that one party controlled or directed the actions of any other party to prove this type of claim. A plaintiff, however, must also prove the other elements of induced infringement (including knowledge of the patent) before it can ultimately prevail on a divided infringement claim.

While changing the law for induced infringement of these claims, the Federal Circuit declined to determine whether a defendant may be liable for direct infringement in these circumstances. The court therefore revived divided (or “joint”) infringement claims for inducement claims, but left the BMC rule intact for direct infringement claims. And the court did so by the thinnest of margins: six judges were in the majority, and five dissented.

The issue of divided infringement typically arises in either of two scenarios. The first is when the plaintiff alleges the defendant has performed some steps of a claimed method itself and one or more third parties perform the remaining steps. The second is when the plaintiff alleges the defendant has induced multiple third parties collectively to perform all the steps of a claimed method, but no single party has performed all of the steps itself. In Akamai and McKesson, the Federal Circuit held that both types of allegations can support an induced infringement claim under 35 U.S.C. § 271(b).

In the first scenario, the alleged inducer contributes one or more of the acts that constitute performance of the method. A plaintiff must then prove the alleged inducer knowingly induced some third party or parties to perform the remaining steps of the method and specifically intended to encourage infringement. This requires proof that the alleged inducer knew of the patent and knew that the accused acts constituted patent infringement. Likewise, in the second scenario, a plaintiff must prove that the alleged inducer knowingly induced multiple third parties collectively to perform all of the method’s steps and specifically intended to encourage infringement. The Federal Circuit did not modify the standards relating to the state of mind required for inducement. Rather, the only change was revoking the general requirement that a single actor perform all steps of the claimed method.

The Federal Circuit’s decision is simultaneously narrow and sweeping. It is narrow in the sense that it affects only inducement claims for patented methods that are not performed by a single actor. If a plaintiff proves that a single actor performs all steps of the method to supply the direct infringement needed for an infringement claim, then divided infringement is not an issue. If a plaintiff alleges infringement of a system or apparatus claim, then divided infringement is not an issue because the party that installs the final part is the potential direct infringer. And the Federal Circuit did not change the BMC rule for claims of direct infringement of method claims under 35 U.S.C. § 271(a). For direct infringement under § 271(a), a plaintiff still must prove either that a single entity performed all steps of the claimed method or that the accused infringer directed or controlled performance of all the claimed steps.3

Yet the Federal Circuit’s decision is sweeping in the sense that it revives an entire category of infringement claims that the Federal Circuit had extinguished in BMC. Absent proof of control or direction, a patentee could not successfully assert a method claim where – whether because of the way the claim was drafted or because of the way the method is carried out in practice – it could not identify a single direct infringer. From a defendant’s perspective, after BMC such claims posed little or no threat. Akamai/McKesson has reinvigorated these claims. Of course, a plaintiff still must prove collective performance of the entire method and the specific intent element of induced infringement. The strength of individual claims therefore will depend on the particular facts. But the Federal Circuit has now removed from defendants’ arsenals a legal argument that had proven very useful.

For more information about this decision, please contact Stan Panikowski.

 


1. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007).

2. Akamai Technologies., Inc. v. Limelight Networks, Inc., Federal Circuit Appeal Nos. 2009-1372, -1380, -1416, -1417 and McKesson Technologies, Inc. v. Epic Systems Corp., Federal Circuit Appeal No. 2010-1291 (both decided on August 31, 2012 in a single published opinion) at 692 F.3d 1301 (Fed Cir. 2012) (en banc).

3. The Federal Circuit noted that much of the briefing in Akamai and McKesson centered on the question of direct infringement claims. The court chose only to address induced infringement. This leaves intact the BMC rule on direct infringement but does not foreclose the Federal Circuit from revisiting divided infringement under § 271(a) in the future.