Federal Circuit Eases Standard for Induced Infringement

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[author: Richard P. Gilly]

In a pair of long-awaited en banc decisions, the Federal Circuit surprised many practitioners by easing the standard for holding a party liable for inducing patent infringement where multiple actors are involved in performing computer-driven processes. Prior to the en banc holding, in order to establish that a defendant induced another party to infringe a patented method, the patent plaintiff had to establish that one party, either by itself or through its agents, directly infringed the patented method by performing all of the claimed steps. Now, after the two en banc rulings (Akamai Technologies, Inc. v. Limelight Network, Inc., and the companion case McKesson Information v. Epic Systems, Aug 31, 2012, Case Nos. 2009-1372, -1380, -1416, -1417), the underlying direct infringement required for induced infringement instead may be established, under certain circumstances, through collective acts of multiple parties.

For example, a plaintiff may establish induced infringement by proving that the accused inducer (i) knowingly induced one or more third parties to perform some steps of its method patent; while (ii) the inducer performed other steps, with the result that the parties collectively practiced all of the steps in the patent (the fact pattern of the Akamai case). Second, a plaintiff may establish induced infringement by proving that a party knowingly induced others to infringe its patent such that the other parties, without the participation of the inducer, collectively perform all steps in the patented method (McKesson).

Notably, the en banc holdings do not appear to disturb another requirement for a finding of inducement, namely that the accused infringer intend to cause the inducement. This intent element requires that the accused inducer know that the induced acts in fact constitute patent infringement, a requirement which was recently upheld by the U.S. Supreme Court in Global-Tech Appliances v. SEB, S.A., 563 U.S. ___ (2011). The en banc opinions may be found here.

Background

The court's en banc decisions in Akamai and McKesson resolve an issue of law consolidated from two patent infringement cases before two previous three-judge panels of the Federal Circuit. The first case involved Akamai's method patent for delivering web content. The patented method involved storing web content on Akamai's servers, and then modifying the content provider's webpage to retrieve the content stored on Akamai's servers. Limelight used the same method to deliver web content, except that it did not perform the second step—Limelight did not modify the content provider's website to retrieve web content from Limelight's servers. Instead, Limelight gave instructions to customers on how to modify their websites so that they could retrieve their web content from Limelight's servers.

The McKesson case involved a patented method of electronic communication between healthcare providers and their patients. Accused infringer Epic created a similar method, except that Epic's method required actions of patients and healthcare providers in order for all of the method's steps to be performed.

Akamai and McKesson argued that Limelight and Epic, respectively, induced infringement of their patents. In both cases, the alleged inducer gave instructions to a customer to perform steps that would infringe the plaintiff's patent, but neither the alleged inducer nor any of its agents performed the entire patented method.

In its previous panel rulings of the Akamai and McKesson cases, the Federal Circuit found neither direct infringement nor inducement of infringement, on the grounds that neither patent holder had established the requirement that one single entity perform all the steps in the patented method, or that a single mastermind directed or controlled its agents to perform all the steps in the patented method.

The Federal Circuit's Ruling on Induced Infringement

In its en banc rulings in Akamai and McKesson, the Federal Circuit reversed its previous panel decisions and remanded, and in so doing, eased the standard for establishing induced infringement under 35 U.S.C. § 271(b) by removing the requirement of a single direct infringer.

The Federal Circuit reasoned that its prior holdings on inducement of infringement mistakenly required proof that a single party is liable for direct infringement, when induced infringement merely should require that there has been direct infringement of a party's patent, even if by more than one actor. The court further reasoned that such infringement may occur when multiple actors, including the alleged inducer itself, collectively perform all the steps in another's method patent, even if those parties lack an agency relationship with each other. To support its ruling, the court advanced various arguments based on statutory interpretation, 35 U.S.C. § 271's legislative history, and principles of inducement in criminal and tort law.

The en banc decision was nonetheless sharply divided. Only six out of eleven judges on the Federal Circuit's en banc decided to overturn the "single-entity rule" for induced infringement, which requires a plaintiff to prove that one party performed all the steps in a patented method. The decision produced two dissents - one authored by Judge Newman and another authored by Judge Linn. Judge Newman's dissent argued that the majority dramatically changed the law and greatly enlarged the liability for induced infringement as a party could be liable for inducement for merely advising or encouraging acts that constitute direct infringement. Judge Linn's dissent, joined by 3 other judges, criticized the court for "assuming the mantle of policy maker" and departing from the single-entity rule. In particular, Judge Linn's opinion disagreed with the court's interpretation of the inducement statute, and argued that the plain language and legislative history of the inducement statute clearly requires one party to perform all steps in a method for induced infringement to occur.

Conclusion

The Federal Circuit's en banc rulings in Akamai and McKesson cases relax the previous requirements for establishing induced infringement. Under the new standard, a plaintiff no longer, as a predicate to a finding of inducement, establish that a single entity directly infringed, or that there was an agency relationship between multiple parties which created direct infringement. While a plaintiff must still establish that the accused inducer had the required specific intent to induce infringing acts, inducement of infringement may be found by collective acts of the defendant and/or those it induces.
 

Published In: Civil Procedure Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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