October 2012 Issue

At the Federal Circuit

Inducement and Claims Drafting

A party may be liable for inducing infringement of a method claim even if no single actor is liable for the underlying direct infringement.  Akamai Techs., Inc. v. Limelight Networks, Inc., Nos. 2009-1372, -1380, -1416, -1417 (Fed. Cir. Aug. 31, 2012) (en banc).  In Akamai, which the Federal Circuit heard en banc together with McKesson Technologies, Inc. v. Epic Systems Corp., No. 2010-1291, two different fact patterns were presented.  In Akamai, the defendant performed only some steps of a method claim, but induced other parties to perform the remaining steps; in McKesson, the defendant did not perform any steps of a method claim, but induced other parties to collectively perform the steps.  The majority decision from the Federal Circuit held that both fact patterns could render the defendants liable for inducing infringement.

In 2007, the Federal Circuit found in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), that induced infringement must be predicated on direct infringement by a single entity (i.e., the “single-entity rule”).  This decision was reinforced by the court in 2008 by Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008).  In Muniauction, the Federal Circuit held that the actions of multiple actors combined to perform every step of a claimed method can result in direct infringement only if one actor exercises “control or direction” over the entire process, although the patentee in that case did not offer such evidence.

The asserted patent in Akamai claimed a method for efficiently delivering web content.  The method called for placing content on replicated servers and modifying a content provider’s web page to instruct web browsers to retrieve the content from those servers.  The defendant, Limelight, performed most of the claimed method by maintaining a network of servers that hosted content.  Limelight did not perform the remainder of the claimed method.  Instead, it explicitly instructed its customers to modify their web pages and perform the remainder of the claimed method.  The asserted patent in McKesson claimed a method for electronic communication between healthcare providers and patients.  The defendant, Epic, did not perform any steps of the claimed method.  Epic did, however, provide software that enabled healthcare providers and patients to communicate electronically, in accordance with the claimed method.

In Akamai and McKesson, the respective district courts found no infringement.  In Akamai, the jury was instructed under BMC Resources and, after a three week trial, found that Limelight infringed Akamai’s patent.  The jury awarded Akamai over $45 million in damages.  Subsequently, the Federal Circuit’s opinion in Muniauction issued.  The district court, on considering Limelight’s motion for judgment as a matter of law, analogized the facts of Muniauction to those of Akamai and reversed the jury’s finding of infringement.  In McKesson, Epic’s motion for summary judgment of noninfringement was granted, because not all steps of the claimed method were performed by a single entity, a direct customer. 

On appeal, the en banc court held that a party may be liable for inducing infringement of a method claim where the performance of the method is carried out by multiple entities.  According to the en banc court, all of the steps of a claimed method must be performed for inducement liability to arise, but it is not necessary that all steps be performed by a single entity.  Specifically, the en banc court held that “[r]equiring 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.”  Thus, in arriving at this holding, the en banc court overruled the earlier panel decision in BMC Resources and its progeny of cases, which established the “single-entity rule.”  Accordingly, the en banc court reversed the judgments in both cases and remanded them for further proceedings.

The en banc court’s opinion was based on the text of the statute, the legislative history pertaining to infringement law, and principles from criminal and tort law.  The decision also relied on patent policy considerations.  In particular, the Court noted the “bizarre result” of the single-entity rule where a party inducing infringement could avoid liability by simply performing some, but not all, of the claimed method steps itself.  The en banc court observed that “[t]he party who actually participates in performing the infringing method is, if anything, more culpable than one who does not perform any steps.”

Two dissenting opinions were filed, one by Judge Newman and another by Judge Linn that was joined by Judges Dyk, Prost, and O’Malley.  Judge Newman agreed with the majority that the panels’ decisions in both cases should be reversed.  Nevertheless, Judge Newman dissented from the majority’s “inducement-only rule,” arguing that 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.”  The dissent authored by Judge Linn argued that the majority’s approach was contrary to the language of the statute and Supreme Court precedent that stands for the proposition that “if there is no direct infringement of a patent there can be no contributory infringement.”  Judge Linn concluded that liability for induced infringement of a method claim may arise only where “a single entity or joint enterprise” performs “all steps of a claimed method,” either alone or vicariously.  According to this dissent, “[t]he well established doctrine of vicarious liability is the proper test for establishing direct infringement liability in the multi-actor context.”

Thus, under Akamai, an inducing party may be found liable for infringement of a patented method even if multiple parties are required to perform the claimed method steps.  Previously, under BMC Resources, patent prosecutors had to carefully craft method claims to capture infringement by a single actor.  Now, with the ruling in Akamai, patent prosecutors have more flexibility in drafting claims designed to cover the actions of multiple parties.  When drafting method claims for inventions that naturally involve the acts of multiple parties, careful thought should be given to which parties will be performing the method (e.g., customers, participants in a joint venture, or independent actors) and which party(ies), if any, will induce their actions.  Where possible, it is still advisable to draft method claims that cover the actions of a single party.  Such claims may be easier to find infringed, both from an evidentiary perspective and a doctrinal perspective.  In addition, while Akamai clearly abolished the single-entity rule, it is possible that the Supreme Court may address the issue itself in coming years.