‘Induced infringement’ broadened by decision

A defendant can be found liable for induced infringement of a method patent if it has performed some of the steps of a claimed method and induced other parties to commit the remaining steps, or if it has induced other parties to collectively perform all the steps of the claimed method, the U.S. Court of Appeals for the Federal Circuit has found. 

In a pair of consolidated cases alleging patent infringement, the defendants relied on prior caselaw that held a single actor must commit all the elements of infringement.

But the Federal Circuit, sitting en banc, reconsidered and overruled prior precedent in a per curium decision.

“[W]e 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,” the court stated.

The 103-page decision is Akamai Technologies, Inc. v. Limelight Networks.

Ripple effect

Lee T. Gesmer, a partner at Gesmer Updegrove in Boston who was not involved in the case, compared the ruling to “a rock dropped in a pond. Ripples are just starting to slowly expand, and as they expand we will see different issues [relating to the opinion] play out.”

Gesmer said he agrees with the dissent’s statement that the majority opinion results in a “sweeping change to the nation’s patent policy.”

The Federal Circuit’s interpretation of induced infringement was a surprise to the entire patent bar, Gesmer added. The court was considering the issue of whether infringement requires a single actor to perform all the steps in a patent — a question that it side-stepped in a decision that creates more questions than it answers, he said.

For example, if A induces B, C and D to perform the steps in a patent under the court’s theory, the opinion suggests that B, C and D are not monetarily liable, a bizarre result if they also engaged in infringement, Gesmer said.

Also, many patent holders seek injunctive relief in an infringement suit, he said, and the decision leaves unanswered if B, C and D can be enjoined for their infringing activities.

Kevin M. Littman, a patent attorney at Foley & Lardner in Boston who was not involved in the case, said the decision has ramifications for all aspects of patent law, from litigation to client counseling to the drafting of patents.

In some ways it will be easier for patentees to allege infringement because they do not have to worry about finding a single party that has committed the infringement, Littman said. But alleging induced infringement presents other problems for patent holders, such as a requirement to establish intent that could have a serious impact on damages.

“At a minimum, the alleged infringer has to have knowledge of the patent,” Littman said, noting that if a defendant is unaware of the patent, damages cannot begin to accrue until it is served with a complaint or a jury verdict is entered against it.

A direct infringement suit does not require a showing of intent, making it easier to start the damages clock, Littman said.

On the prosecution side, given the advantages of filing a direct infringement claim rather than the added burden of intent and remaining questions swirling for induced infringement litigation, Littman said, Akamai “drives home the point that it is better to draft claims so that one party does the infringing. That way the patent holder doesn’t have to rely on the induced infringement theory and all the problems that stem from that.”

Gesmer said the case begs for U.S. Supreme Court review.

Attorneys for both sides in the case — Kara F. Stoll of Finnegan, Henderson, Farabow, Garrett & Dunner in Washington, D.C., for Akamai; and Aaron M. Panner of Kellogg, Huber, Hansen, Todd, Evans & Figel, also in D.C., for Limelight — did not return calls requesting comment.

Method patents

The decision involves two consolidated cases, one of which was tried in federal court in Boston.

Akamai Technologies owns a patent covering a method for the delivery of web content. The method involves actions by both the content provider and the content delivery network.

Akamai filed suit against Limelight Technologies in 2006 alleging both direct and induced patent infringement. A jury found that Limelight infringed all four of the claims asserted by Akamai in U.S. Patent 6,108,703 and awarded the plaintiff $45 million.

Limelight appealed the award, arguing that it could not be liable for infringement because it did not complete all the actions in the method.

Judge Rya W. Zobel granted Limelight’s motion for judgment as a matter of law in 2008, vacating the verdict. A three-judge panel of the U.S. Court of Appeals for the Federal Circuit upheld Zobel’s ruling. But Akamai appealed, seeking en banc review from the full Federal Circuit.

The case was consolidated with another patent case, McKesson Technologies v. Epic Systems Corp., from the U.S. District Court for the Northern District of Georgia.

In that suit, McKesson made allegations of induced infringement based on its method patent for software that allows health care providers to communicate electronically with patients. A federal court judge granted summary judgment for Epic on the grounds that patients — and not the defendant — performed one of the steps in the patent, and, therefore, Epic could not be liable for infringement.

‘Sound patent policy’

For a party to be liable for direct infringement, the defendant must commit all the acts necessary to infringe the patent, either personally or vicariously.

Courts had previously applied that standard, commonly referred to as the “single entity rule,” so that in cases of divided infringement — in which more than one party performed different parts of a single method patent — a patent owner could not successfully claim patent infringement.

While five of the judges sitting en banc voted to uphold the single entity rule in a dissent, the six-judge majority struck it down.

“We now conclude that this interpretation of section 271(b) is wrong as a matter of statutory construction, precedent, and sound patent policy,” the court said.

Turning first to the statute, the relative section of the Patent Act, 35 U.S.C. §271(b), provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

Nothing in the text of the statute indicates that “infringement” is limited to infringement by a single entity, the court said. Instead, the text of the act “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.”

Prior precedent often left method patent holders with no recourse, even when their rights were plainly being violated, the majority said.

“If a party has knowingly induced others to commit the acts necessary to infringe the plaintiff’s patent and those others commit those acts, there is no reason to immunize the inducer from liability for indirect infringement simply because the parties have structured their conduct so that no single defendant has committed all the acts necessary to give rise to liability for direct infringement,” the court said. “It 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.”

The court also found support for its position in the legislative history of the 1952 Patent Act, relying on testimony that revised provisions of the statute were intended to reach cases involving divided infringement, even when no single entity would be liable for direct infringement.

The Federal Criminal Code and tort law both recognize the doctrine of liability for inducing innocent actors to commit illegal or tortious acts, the majority added.

Denying the dissent’s statement that the decision constitutes a “sweeping change to the nation’s patent policy,” the majority said that prior caselaw had actually changed “the pre-existing regime with respect to induced infringement of method claims, although admittedly … there were relatively few cases in which [the issue] had arisen.”

“Based on the legislative history, general tort principles, and prior case law … we are persuaded that Congress did not intend to create a regime in which parties could knowingly sidestep infringement liability simply by arranging to divide the steps of a method claim between them. … In these cases, we conclude that it is unlikely that Congress intended to endorse the ‘single entity rule,’ at least for the purpose of induced infringement, advocated by Epic and Limelight, which would permit ready evasions of valid method claims with no apparent countervailing benefits.”

The panel reversed judgment in both cases and remanded them back to the U.S. District Court for further proceedings on the theory of induced infringement.