Court Dismisses Divided Infringement Claim Because Customer's Data Entry Steps Were Not Attributable to the Defendant Software Vendor

Authored by D. Brian Kacedon, John C. Paul, and Andrew E. Renison

Abstract

Liability for direct infringement requires all steps of a patented method to be actually performed by a single entity or to be attributable to a single entity that directs or controls other entities that perform the remaining steps. However, such direction or control by a vendor over its customers is not established merely because the customers receive a benefit from using software supplied by the vendor.

Direct infringement of a method patent occurs when all steps of a claimed method are performed by a single entity or when all steps are attributable to a single entity, such as when that entity directs or controls the performance of others or when the actors form a joint enterprise. Recently, in PerDiem Co. LLC v. Geotab Inc., a Texas Court dismissed an infringement claim because the seller of software did not have "direction or control" over customers using the software.

Background

PerDiem sued Geotab for infringing a patented method on a system for locating and tracking objects using a location source, such as a GPS satellite, that conveys location information about an object to one or more users.

Geotab's telematics system allows companies to manage different aspects of their fleet vehicles using devices placed in vehicles that collect and transmit vehicle data to servers, which in turn, process, store, and forward the data to Geotab servers upon request. Geotab admitted that it performed certain limitations of the patent claims, but it contended that two steps were performed by Geotab’s customers rather than Geotab itself.

The PerDiem v. Geotab Decision

PerDiem argued that even if Geotab's customers performed the two steps, the performance of those steps should be attributable to Geotab because: (1) Geotab "directs or controls" the customers' performance of the steps because Geotab's software establishes what data customers can enter and how they can enter it; (2) Geotab "conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance"; and (3) Geotab does not provide the full benefit of the accused fleet-tracking services unless customers enter the requisite data.

The court found that these facts did not show the requisite direction or control by Geotab over its customer to establish that the customer's performance of these steps were attributable to Geotab. The court reasoned that while a user's benefit from using software will increase as the user explores additional functionality, this is not conditional participation as required by the Federal Circuit in Akamai to establish direction or control sufficient to attribute the actions of a customer to its supplier. In Akamai, the accused infringer required customers to sign a standard form contract that delineated which claimed steps the customers "must perform."

Strategy and Conclusion

A customer's mere use of software provided by a vendor accused of infringement may not necessarily be attributable to the vendor and therefore may not necessarily support a claim for divided infringement against the vendor based on the activities of the customer.

Further Information

The PerDiem decision is available here.