September 10, 2012
LES Insights
Authored by D. Brian Kacedon, Douglas W. Meier, Jason W. Melvin, and John C. Paul
The Federal Circuit recently issued its long-awaited en banc decision in the combined cases Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corporation (collectively Akamai).1 In this decision, the court held that the law of infringement of a method patent does not require that a single actor perform all the steps of the method. Specifically, the court held, liability for induced infringement can arise when multiple actors perform the claimed steps.
Until the Akamai decision, Federal Circuit precedent has limited liability for either direct or induced infringement to situations where one party either performs all the steps of a claimed method or at least directs or controls the performance of those steps. Now, the court has held that a defendant may be liable for induced infringement by performing some steps of a claimed method and inducing other parties to perform the remaining steps (as in the Akamai case), or by inducing multiple other parties to collectively perform all the claimed steps (as in the McKesson case). In other words, the law no longer requires that a single party perform all the steps itself or either direct or control the performance of those steps. The court reached this conclusion through statutory construction, precedent, and its view of sound patent policy.
When multiple parties perform separate steps of a claimed method (so-called divided infringement), the Federal Circuit has previously applied a standard for direct infringement similar to vicarious liability: if multiple actors collectively performing the method have an agency relationship or when one may be said to direct or control the actions of the others, then the controlling party may be liable for direct infringement. Without some relationship between the actors that meets this standard, direct liability cannot apply to a party that does not perform all the steps of a claimed method. This may have applied even if the parties had arranged to "divide" their acts of infringing conduct for the specific purpose of avoiding infringement liability.
Although it had been a focus of briefing and argument, the Federal Circuit did not address this "single-entity rule." Instead, it held that the Akamai and McKesson cases (and others like them) can be resolved through an application of the doctrine of induced infringement. Under section 271(b) of the Patent Act, when one party induces direct infringement by another, the first party may be liable for induced infringement.
Prior to the Akamai decision, the requirement of predicate direct infringement limited induced infringement to instances where a single party may be identified as directly infringing. In the Akamai decision, however, the Court held that the direct infringement underlying induced infringement does not require that any particular party be liable for that direct infringement. As a consequence, the predicate direct infringement may result from the actions of multiple actors. The Federal Circuit explained that because section 271(b) extends liability to a party who advises, encourages, or otherwise induces others to engage in infringing conduct, it is well suited to impose liability on a party who induces infringing conduct notwithstanding that no single "induced" entity commits all infringing acts or steps.
As mentioned, the Federal Circuit's decision turned on the notion that the predicate direct infringement for inducement does not require liability for that direct infringement. Thus, the Akamai court expressly reversed the Federal Circuit's earlier holding from 2007 in BMC Resources, Inc. v. Paymentech, L.P. Although it accepted both that (1) liability for induced infringement requires proof of direct infringement and (2) liability for direct infringement requires that a single party commit all the acts necessary to constitute infringement, the Akamai court rejected the conclusion that, in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement.
The Federal Circuit reasoned that if a party has knowingly induced others to commit the acts necessary to infringe a 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 acts necessary to give rise to liability for direct infringement. Indeed, as the Federal Circuit noted, it would be a bizarre result to hold someone liable for inducing another to perform all the steps of a method claim but to hold harmless one who goes further by actually performing some of the steps himself.
To support its view, the Federal Circuit looked to the legislative history of the 1952 Patent Act. Before the 1952 Act, inducement and contributory infringement (selling parts that others combine into an infringing machine) were both referred to under the rubric of contributory infringement. The 1952 Act, then, separated the two ideas into distinct subsections of section 271: induced infringement in subsection (b) and contributory infringement in subsection (c). The Federal Circuit explained that Giles Rich, one of the principal drafters of the statute, made clear during an early House hearing that the revised provisions on infringement were intended to reach cases of divided infringement, even when no single entity wouldbe liable for direct infringement.
The Federal Circuit also looked to parallels in other areas of the law, such as the aiding-and-abetting provision in the federal criminal code, which uses language similar to the language of section 271(b). That statute, the Federal Circuit explained, has been construed to permit the conviction of an accessory who induces or causes a criminal offense even when the principal is found not guilty for the unlawful conduct. The court also looked to parallels in tort law, which also recognizes the doctrine of liability for inducing innocent actors to commit tortious acts.
Turning to the language and structure of the Patent Act, the Federal Circuit explained that section 271(a) does not define the term "infringement." Instead, it simply sets forth a type of conduct that qualifies as infringing—it provides that anyone who makes, uses, or sells, etc., any patented invention "infringes the patent." Section 271(b), according to the Federal Circuit, sets forth another type of conduct that qualifies as infringing—it provides that anyone who induces infringement "shall be liable as an infringer." But nothing in the text of either subsection suggests that the actof "infringement" required for inducement under section 271(b) must qualify as an act that would make a person liable as an infringer under section 271(a), the Federal Circuit reasoned.
The court identified other examples of infringement defined by the Patent Act that were not tied to section 271(a). Section 271(e)(2), for example, makes it an "act of infringement" to submit an application to the FDA for a drug, or the use of a drug, claimed in a patent. And that use of the term "infringement" is not in any way tied to the use of the term "infringes" in section 271(a). Similarly, section 271(f) provides that a party shall be "liable as an infringer" if it supplies in the United States a substantial portion of the components of a patented invention in such manner as to induce the combination of those components outside the United States. Again, the statutory term "infringer" is not tied to the requirements of section 271(a).
Thus, having examined its precedent on the issue of induced infringement, the legislative history of the Patent Act, and the language of various sections of the Patent Act, the Federal Circuit arrived at its conclusion that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that a single party would be liable for direct infringement and therefore not necessary that all the steps were committed by a single entity.
This holding, however, did not go undisputed. Judge Newman dissented, preferring that the Federal Circuit should "acknowledge that an all-purpose singleentity requirement is flawed, and 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." Judges Linn, Dyk, Prost, and O'Malley also dissented, as a separate group, to explain their view that "direct infringement is required to support infringement under § 271(b) or § 271(c) and properly exists only where one party performs each and every claim limitation or is vicariously liable for the acts of others in completing any steps of a method claim, such as when one party directs or controls another in a principal-agent relationship or like contractual relationship, or participates in a joint enterprise to practice each and every limitation of the claim."
It will be interesting to see how courts apply induced infringement in light of the Federal Circuit's Akamai decision. In many ways, it expands on possibilities for liability when multiple actors perform the steps of a claimed method. The boundaries of the law, however, remain to be determined.
Endnotes
1 The Federal Circuit's Akamai decision can be found here (link no longer available 03/16/2020).
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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