On August 31, 2012, the Federal Circuit, sitting en banc, addressed the “problem of divided infringement.” Akamai Techs., Inc. v. Limelight Networks, Inc., No. 2009-1372, slip op. at 10 (“Akamai“).

In granting en banc rehearing in Akamai, the court requested briefing on the question: “If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?” Akamai Techs., Inc., No. 2009-1372, slip op. at 2 (April 20, 2011).

A majority of six of 11 judges ultimately did not address direct infringement. See Akamai at 10. Instead, the majority 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.” Id.

In doing so, the court overruled, at least in part, its prior decision in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007). See id.

BMC and Muniauction
At issue in Akamai were two prior Federal Circuit decisions: BMC and Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). In BMC, defendant Paymentech provided a computerized system for verifying and paying debit transactions. 498 F.3d at 1375-76. Paymentech did not direct or control the performance of separate process steps performed by the debit networks and financial institutions. Id. at 1381-82.

The Federal Circuit panel held that because Paymentech did not direct or control the actions of the entities, no one party performed all of the steps of the claimed process, precluding a finding of direct infringement. Id. at 1382. The panel further held that without a finding that some party amongst the accused actors directly infringed, there could not be induced or contributory infringement. Id. at 1379.

In Muniauction, the claimed invention was a method of conducting bond auctions over an electronic network, and Muniauction argued that the defendant Thomson directly infringed by controlling access to its auction system and instructing bidders on participating in the system. 532 F.3d at 1321-23.

The Federal Circuit panel expanded upon the direction or control standard of BMC, stating that this “standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party.” Id. at 1330.

Because the plaintiff had not identified any situation in which Thomson would be subject to vicarious liability, the panel held that Thomson did not directly infringe as a matter of law. Id.

En Banc Decision

The Akamai majority, in an unsigned per curium opinion joined by Chief Judge Radar and Judges Lourie, Bryson, Reyna, Moore, and Wallach, concluded that “[b]ecause the reasoning of our decision today is not predicated on the doctrine of direct infringement, we have no occasion at this time to revisit any of those principles regarding the law of divided infringement as it applies to liability for direct infringement under 35 U.S.C. § 271(a).” Akamai at 10.

Instead, the court addressed the “doctrinal problem[]” that “when the acts necessary to give rise to liability for direct infringement are shared between two or more actors,” the court stated that “[r]ecent precedents of this court have interpreted section 271(b) [inducement] to mean that unless the accused infringer directs or controls the actions of the party or parties that are performing the claimed steps, the patentee has no remedy, even though the patentee’s rights are plainly being violated by the actors’ joint conduct. We now conclude that this interpretation of section 271(b) is wrong as a matter of statutory construction, precedent, and sound patent policy.” Id. at 9-10.

The court thus 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.” Id. at 10. In doing so, the court “reconsider[ed] and overrule[d] the 2007 decision of this court in which we held that in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement.” Id.

“Because liability for inducement, unlike liability for direct infringement, requires specific intent to cause infringement, using inducement to reach joint infringement does not present the risk of extending liability to persons who may be unaware of the existence of a patent or even unaware that others are practicing some of the steps claimed in the patent.” Id. at 14, n. 1.

The court then turned to the predicate underlying inducement and stated that there cannot be inducement without performance of “acts necessary to infringe,” but “[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.” Id. at 16 (emphasis in original).

The court observed that a “party who knowingly induces others to engage in acts that collectively practice the steps of the patented method—and those others perform those acts—has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer; there is no reason, either in the text of the statute or in the policy underlying it, to treat the two inducers differently.” Id.

To support this conclusion, the court turned to the structure of the statute itself, the legislative history, and criminal statutes and the Restatement of Torts by analogy. See id. at 17-26.

Addressing the statute, the court noted that section 271(a) “states that a person who performs the acts specified in the statute ‘infringes the patent,'” while “[n]othing in the text indicates that the term ‘infringement’ in section 271(b) is limited to ‘infringement’ by a single entity.” Id. at 17. That is, “[s]ection 271(a) does not define the term ‘infringement,’ but rather simply sets forth a type of conduct that qualifies as infringing.” Id. at 26.

The court also noted that later-added subsections of 271 define other forms of infringement in which “the statutory term ‘infringer’ does not advert to the requirements of section 271(a).” See id. at 26-27. Finally, the court distinguished the Supreme Court’s decision in Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961) by stating that “the Aro Court, dealing only with product claims, was not presented with the divided infringement question we address today.” Id. at 31.

The court distinguished “[t]he cases that predated Aro” by stating that those cases “emphasized that what was induced was the fact of infringement, not liability for direct infringement by a single actor.” Id. at 32.

Application to Akamai and McKesson

The court vacated judgments of noninfringement and remanded for further proceedings in both cases subject to the opinion. In Akamai, the “claimed method consists of placing some of a content provider’s content elements on a set of replicated servers and modifying the content provider’s web page to instruct web browsers to retrieve that content from those servers.” Id. at 11.

Akamai accused defendant Limelight of performing all claimed steps except “modify[ing] the content providers’ web pages,” and “Limelight instructs its customers on the steps needed to do that modification.” Id.

The court held that on remand, “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.

In the companion case McKesson Technologies, Inc. v. Epic Systems Corp., No. 2010-1291, the patent at issue related to “a method of electronic communication between healthcare providers and their patients.” Id. at 11. Defendant Epic “does not perform any steps of the patent. Instead, those steps are divided between patients, who initiate communications, and healthcare providers, who perform the remainder of the steps.” Id. The court held that upon remand, “Epic can be held liable for inducing infringement if it can be shown that (1) it knew of McKesson’s patent, (2) it induced the performance of the steps of the method claimed in the patent, and (3) those steps were performed.” Id. at 35.

Judge Linn’s Dissent

Judge Linn, joined by Judges Dyk, Prost, and O’Malley, stated that the majority “assumes the mantle of policy maker” and “effectively rewrites” sections 271(a) and (b), “telling us that the term ‘infringement’ was not, as was previously thought, defined by Congress in § 271(a), but instead can mean different things in different contexts.” Akamai Techs., Inc. v. Limelight Networks, Inc., No. 2009-1372, slip op. at 2 (Linn, J. dissenting).

Judge Linn would adopt the prior BMC and Muniauction decisions, “which hold that liability under § 271(b) requires the existence of an act of direct infringement under § 271(a), meaning that all steps of a claimed method be practiced, alone or vicariously, by a single entity or joint enterprise.” Id. at 4. “Divorcing liability under § 271(a) from liability under § 271(b) is unsupported by the statute, subverts the statutory scheme, and ignores binding Supreme Court precedent.” Id. “Broadening the doctrine of inducement, such that no predicate act of direct infringement is required, is a sweeping change to the nation’s patent policy that is not for this court to make.” Id. at 12.

In support, Judge Linn cited to the legislative history as confirming “that § 271(a) is, in fact, a declaration of what constitutes infringement in the present statute.” Id. at 7-8 (internal citations omitted). Additionally, Judge Linn noted that the “fact that §§ 271(e), (f), and (g) identify acts not falling under § 271(a) that are to be treated as infringement confirms that, when Congress intended to cover acts not encompassed within the traditional definition of infringement, it knew how to create an alternative definition thereof.” Id. at 15.

The “fact that Congress was aware of BMC and Muniauction when it reformed the 1952 Patent Act indicates that Congress did not intend to abrogate the single entity rule for direct infringement, or broaden indirect infringement liability beyond its intentionally limited scope.” Id.

Judge Newman’s Dissent

Judge Newman criticized both the majority and Judge Linn’s dissent, stating that “neither [] resolves the issues of divided infringement.” Akamai Techs., Inc. v. Limelight Networks, Inc., No. 2009-1372, slip op. at 2 (Newman, J. dissenting). Judge Newman proposed that the “court should simply acknowledge that a broad, all-purpose single-entity requirement is flawed, and restore infringement to its status as occurring when all of the claimed steps are performed, whether by a single entity or more than one entity, whether by direction or control, or jointly, or in collaboration or interaction.” Id. at 16.

Judge Newman then proceeded to address perceived issues arising from both BMC and Muniauction, as well as the majority’s opinon.

Addressing the majority opinion, Judge Newman stated that under “this new ‘inducement-only rule,’ the inducing entity is liable on greatly enlarged grounds, such as merely advising or encouraging acts that may constitute direct infringement. This new rule is not in accordance with statute, precedent, and sound policy.” Id. at 2.

Judge Newman also stated that although “review of the single-entity rule was the sole reason for this rehearing en banc, and the sole question briefed by the parties and the amici curiae, this aspect is not resolved by the majority.” Id. at 3. “In addition to its incorrect treatment of the foundational requirement of direct infringement, the majority creates a new, ill defined, and open-ended theory of liability for patent infringement, simply by “caus[ing], urg[ing], encourag[ing], or aid[ing]” someone to perform separate steps of a patented method.” Id. at 23.

Judge Newman also criticized Judge Linn’s dissent, stating that “[q]uestions of divided infringement are not new, but resolution by way of the single-entity rule is plainly inadequate.” Id. at 8. In particular, Judge Newman focused on the statutory text of section 271(a) and stated that the “word ‘whoever’ in §271(a) does not support the single-entity rule. By statutory canon the word ‘whoever’ embraces the singular and plural.” Id. at 9.

Addressing the argument that “ingenious patent claim drafting can avoid single-entity problems,” Judge Newman stated that “the presence or absence of infringement should not depend on cleverness or luck to satisfy a malleable single-entity rule.” Id. at 15.

This article was prepared by Daniel Leventhal (dleventhal@fulbright.com or 713 651 8360), Richard S. Zembek (rzembek@fulbright.com or 713 651 5283), Jonathan Franklin (jfranklin@fulbright.com or 202 662 0466) and Bert Greene (ggreene@fulbright.com or 512 536 3097) from Fulbright’s Intellectual Property and Technology Practice.