Divided Infringement Uncertain Despite en banc Ruling by CAFC
|Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog
Zies, Widerman & Malek
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Posted: Sep 12, 2012 @ 7:25 am
Recently the United States Court of Appeals for the Federal Circuit issued two decisions that relate in ways to indirect infringement. The first was the Court’s en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc. (Fed. Cir., August 31, 2012). The second was the Court’s decision in Mirror Worlds, LLC v. Apple, Inc. (Fed. Cir., Sept. 4, 2012).
Some have said is seems bizarre that the panel decision in Mirror Worlds did not mention or cite Akamai, and while that is perhaps a fair point at first glance, the cases are quite different. It seems to me that people are putting to much emphasis and question where it doesn’t belong. At the end of the day in Mirror Worlds the panel simply agreed with the district court that the plaintiff did not offer evidence sufficient to allow a reasonably jury to find in their favor. While a passing reference to Akamai might have been nice, it seems to me as if it was hardly required given the procedurally dispositive issues associated with a JMOL due to failure to offer required proof. See Apple Operating System Does Not Infringe.
With this in mind, the far more important of the two cases for the broader patent community is Akamai. The Federal Circuit started out it per curium decision by setting the table to identify the dueling legal principles at play:
When a single actor commits all the elements of infringement, that actor is liable for direct infringement under 35 U.S.C. § 271(a). When a single actor induces another actor to commit all the elements of infringement, the first actor is liable for induced infringement under 35 U.S.C. § 271(b). But when the acts necessary to give rise to liability for direct infringement are shared between two or more actors, doctrinal problems arise.
The issue of divided infringement comes into play particularly in the scenario of method patents. In the case of method patents it is possible, if not increasingly likely given the evolution of technologies, that there will be joint performance of the patented invention. More specifically, one party may perform the preparatory steps and an end user may complete the defined method by engaging in one or more additional steps.
Recently the Federal Circuit has been interpreting 25 U.S.C. 271(b) 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 would be plainly being violated if the actions of the various partiers were combined. The Federal Circuit decided to go a different route and broke with that line of cases, specifically saying: “We now conclude that this interpretation of section 271(b) is wrong as a matter of statutory construction, precedent, and sound patent policy.”
The Federal Circuit went on to explicitly acknowledge the overruling of BMC, saying:
[W]e reconsider and overrule 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. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007). To be clear, we hold 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.
As a result of the Federal Circuit’s decision, there is a new test for liability for inducement under 271(b) in the scenario of divided infringement. The Court explained:
[L]iable 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.
This decision was over significant opposition, with 6 judges Rader, Lourie, Bryson, Moore, Reyna and Wallach) in the majority and 5 judges dissenting (Newman, Linn, Dyk, Prost and O’Malley). Judge Newman captured the disagreement in her separate dissent saying:
This en banc court has split into two factions, neither of which resolves the issues of divided infringement. A scant majority of the court adopts a new theory of patent infringement, based on criminal law, whereby any entity that “advises, encourages, or otherwise induces,” maj. op. 14, or “causes, urges, encourages, or aids the infringing conduct,” id. at 15, is liable for the infringing conduct. The majority further holds that only the “inducer” is liable for divided infringement, and that the direct in- fringers are not liable although the patent rights are “plainly being violated by the actors’ joint conduct.” Id. at 10. These are dramatic changes in the law of infringe- ment.
On this new “inducement-only rule,” the inducing en- tity 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. It raises new issues unrecognized by the majority, and contains vast potential for abuse. In turn, the two cases here on appeal can readily be resolved under existing law, as the majority opinion almost acknowledges in its remand instructions. Maj. op. 35–36.
In contrast, a significant minority of the en banc court continues to favor the “single-entity rule,” whereby di- vided infringement is not actionable at all unless all of the participants are in a contract or agency relationship that is directed or controlled by a single “mastermind.”
Judge Newman would go on to say:
The majority holds that there is “a duty not to cause the acts that constitute infringement even if the parties who cause the direct injury are not liable.” Maj. op. 25. I agree that we all have a duty to respect the law, but in the complexities of technology and commerce, one must wonder at the imposition of liability solely for “urg[ing]” or encourag[ing],” id. at 15, while exonerating direct infringers from liability when the patented method is “collectively practice[d].” Id. at 16.
Personally, I find nothing wrong with finding infringement for inducement based on the test laid out by the majority. The reality is that end users are the ones who complete the cycle of infringement and are set up to do so by those who seek to absolve themselves of liability for infringement and who don’t want to pay a royalty to innovators. The end users are the pawns in the scheme, not the willing actors that would otherwise normally qualify as tortfeasors, and certainly not the same type of bad actors associated with the rampant copyright infringement brought about thanks to MP3 and similar technologies. Did anyone really know what they were doing was illegal when they were ripping and sharing MP3s? No reasonable person could have thought what they were doing was legal. To the contrary, are the end users in these method innovations knowingly engaging in the final steps of infringement or are they the convenient straw-person? I think they are a convenient straw-person set up by those who do recklessly (or willfully) encourage the final steps that would complete the infringement cycle.
A legitimate question can be raised about whether this type of decision should be made by Congress or it is appropriate for the Courts, as was raised by Judge Linn. He wrote:
In its opinion today, this court assumes the mantle of policy maker. It has decided that the plain text of §§ 271(a) and (b) fails to accord patentees certain ex- tended rights that a majority of this court’s judges would prefer that the statute covered. To correct this situation, the majority effectively rewrites these sections, 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.
The truth, however, is that there is a conundrum presented with divided infringement. The rules as they evolved do not seem to me to adequately address the unique factual presentations of these cases, which in some situations allows infringement and outright copying to occur without recourse by the innovator. That doesn’t seem to me to be what the Patent Act is supposed to be about. Thus, I personally have no problem with the Court stepping up and choosing a lane, or a different lane. If Congress doesn’t like it then they can always overrule the Court through legislation. That is how the system works. I just don’t see this as judicial activism.
Notwithstanding, Judge Linn does raise an interesting point in his dissent, which was joined by Judges Prost, Dyk and O’Malley.
The majority’s approach is contrary to both the Patent Act and to the Supreme Court’s longstanding precedent that “if there is no direct infringement of a patent there can be no contributory infringement.” [citations omitted]. In 1952, Congress removed joint-actor patent infringement liability from the discretion of the courts, defining “infringement” in § 271(a) and expressly defining the only situations in which a party could be liable for something less than an infringement in §§ 271(b) and (c)—clearing away the morass of multi-actor infringement theories that were the unpredictable creature of common law. Since that time, Congress has on three occasions made policy choices to treat certain special circumstances as tantamount to “infringement.” See 35 U.S.C. §§ 271(e)(2), (f), and (g). In doing so, Congress did not give the courts blanket authority to take it upon themselves to make further policy choices or define “infringement.”
Now that is a much harder argument to overcome, particularly since the majority did not address the issue of whether direct infringement can be found when no single entity performs all of the claimed steps of the patent. It would seem that the majority of the Court would have to be of the opinion that direct infringement can be found when no single entity performs all the claimed steps, otherwise the majority decision here would either be in direct contradiction to Supreme Court precedent (as pointed out by Judge Linn) or it would be a purely academic exercise to say that inducement had been proved but no liability could be found because of the lack of direct infringement.
But let’s not forget that 35 U.S.C. 271(a) says:
(a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.
Does “whoever” need to be one person or could that “whoever” be separate actors in the divided infringement scenario?
I personally agree with the majority here and believe they have reached the right resolution, but wish they hadn’t left the critical question dangling. I don’t see how you can reach the conclusion they did without first reaching the question about whether it is possible for direct infringement to be carried out by separate actors.
About the Author
Gene Quinn is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had many millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, USA Today, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.