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En Banc Court Holds That a Party Can Show Induced Infringement of Method Claim Where Inducer and Induced Party Each Perform Some of the Steps

August 31, 2012

Decision icon Decision, en banc

Last Month at the Federal Circuit - September 2012

Judges: Newman (dissenting), Lourie, Bryson, Linn (dissenting), Dyk (joining in Linn's dissent), Prost (joining in Linn’s dissent), Moore, O'Malley (joining in Linn's dissent), Reyna, Wallach (per curiam)

[Appealed from: D. Mass., Judge Zobel]

In Akamai Technologies, Inc. v. Limelight Networks, Inc., Nos. 09-1372, -1380, -1416, -1417 (Fed. Cir. Aug. 31, 2012), and McKesson Technologies, Inc. v. Epic Systems Corp., No. 10-1291 (Fed. Cir. Aug. 31, 2012) (en banc), the Federal Circuit held 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 all the steps were committed by a single entity.” Slip op. at 10.

The Federal Circuit stated that it was righting a perceived error in the law that a finding of induced infringement required a showing of direct infringement by a single entity, the so called “single-entity rule.” In this respect, the Court reversed BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), and its progeny of cases. The Court specifically 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.” Slip op. at 16. The Court noted the “bizarre result” of the single-entity rule, where a party inducing infringement could avoid all liability by merely performing some of the claimed method steps himself. Id. at 16-17. According to the Court, “[t]he party who actually participates in performing the infringing method is, if anything, more culpable than [the] one who does not perform any steps.” Id. at 17. In terms of intent, the Court explained that “inducement does not require that the induced party be an agent of the inducer or be acting under the inducer’s direction or control to such an extent that the act of the induced party can be attributed to the inducer as a direct infringer.” Id. at 14-15. Rather, the Court noted that “[i]t is enough that the inducer ‘cause[s], urge[s], encourage[s], or aid[s]’ the infringing conduct and that the induced conduct is carried out.” Id. at 15 (alterations in original) (citation omitted).

The Court characterized its decision as in line with the text of § 271(b), which provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Id. at 14 (alteration in original) (quoting 35 U.S.C. § 271(b)). According to the Court, “‘infringement’ in this context appears to refer most naturally to the acts necessary to infringe a patent, not to whether those acts are performed by one entity or several.” Id. at 17. Likewise, the Court concluded that the legislative history supported the interpretation of induced infringement as not requiring that a single entity must perform all steps to infringe the claimed method. The Court cited comments by Judge Rich, where he made clear that “the revised provisions on infringement were intended to reach cases of divided infringement, even when no single entity would be liable for direct infringement.” Id. at 19. The Court also found that principles of criminal and tort laws support the holding that a party may be liable for inducing joint infringement.

The en banc Court thus reversed the previous panels’ decisions and remanded the cases, instructing the district courts that liability could be found under induced infringement. For example, the Court stated that “Limelight would be liable for inducing infringement if the patentee could show that (1) Limelight knew of Akamai’s patent, (2) it performed all but one of the steps of the method claimed in the patent, (3) it induced the content providers to perform the final step of the claimed method, and (4) the content providers in fact performed that final step.” Id. at 36.

Writing separately, Judge Newman agreed with the en banc Court’s decision that the panels’ decisions in both cases should be reversed. Judge Newman, however, dissented from the en banc Court’s “inducement-only rule,” arguing that instead, 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.” Newman Dissent at 38. According to Judge Newman, remedies would then be “allocated as appropriate to the particular case.” Id. Even under the inducement standard, however, Judge Newman disagreed with the majority that the cases required remanding. Rather, Judge Newman would have found infringement liability in both cases under either her proposed standard or the inducement standard.

A separate dissent, authored by Judge Linn and joined by Judges Dyk, Prost, and O’Malley, stated that the Court’s decision contravenes 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.” Linn Dissent at 2 (quoting Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961)). The dissent also cited to passages from the congressional record, including testimony of Judge Rich, in support of its position. Id. at 10. According to the dissent, “[t]he well established doctrine of vicarious liability is the proper test for establishing direct infringement liability in the multi-actor context.” Id. at 26. The dissent further noted that “[a]bsent direct infringement, the patentee has not suffered a compensable harm,” id., and concluded with a recitation of the standards discussed in BMC and Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008).