Federal Circuit Issues Ruling On Induced Infringement Issues

In a long-awaited ruling, the full Federal Circuit decided the consolidated cases in Akamai Techs., Inc. v. MIT, No. 2009-1372 (Fed. Cir. Aug. 31, 2012) and McKesson Techs., Inc. v. Epic Systems Corp., No. 2010-1291 (Fed. Cir. Aug. 31, 2012). The cases addressed important questions regarding infringement of method claims in patents where multiple entities perform the various steps of the claimed method. Due to the proliferation of patent litigation in several industries in which multiple entities may be involved in performing various processes – e.g., web-based technologies resident on retailer e-commerce sites, telecommunications, medical products and pharmaceuticals – many have been awaiting the Federal Circuit’s en banc ruling for guidance and clarity.

In general, the Court ruled that it is not necessary for a single entity to perform all of the steps of a method claim in order to find induced infringement. In so ruling, the Court overruled its 2007 decision in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) in which it held that in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement. The Court issued its per curiam order joined by six judges; five judges dissented (four joined J.Linn’s dissent and J.Newman authored her own dissenting opinion). The decision ends up being a 6-5 decision and assures that subsequent rulings from panels of the Court will be determined by who sits on any particular panel.

Background

The patent laws identify different types of infringement. “Direct infringement” occurs when a party commits all the acts necessary to infringe the patent, either personally or vicariously. 35 U.S.C. 271(a). “Induced infringement” is governed by 35 U.S.C. 271 (b) and provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” Unlike direct infringement which is a strict liability tort, induced infringement requires the accused inducer to act with knowledge that the induced acts constitute patent infringement.

The Court consolidated two cases for en banc review – the Akamai case and the McKesson case. In Akamai, the Court addressed the issues of whether a defendant may be held liable for induced infringement if the defendant has performed some of the steps of a claimed method and has induced other parties to commit the remaining steps. In McKesson, the Court addressed the question whether the defendant has induced other parties to collectively perform all the steps of the claimed method, but no single party has performed all of the steps itself.

Holding/Analysis

The Court limited its analysis to induced infringement under 35 USC 271(b) rather than focus on any issues of direct infringement under 271(a). In relevant part, the Court ruled:

Recent precedents of this court have interpreted section 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 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.

Much of the briefing in these cases has been directed to the question whether direct infringement can be found when no single entity performs all of the claimed steps of the patent. It is not necessary for us to resolve that issue today because we find that these cases and cases like them can be resolved through an application of the doctrine of induced infringement. In doing so, we 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.

While a large portion of the decision deals with statutory construction, legislative history, analogies to other statutory regimes, some of the key policy underpinnings of the decision can be found in the following statements:

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. In particular, there is no reason to hold that the second inducer is liable for infringement but the first is not.

Likewise, a party who performs some of the steps it-self and induces another to perform the remaining steps that constitute infringement has precisely the same impact on the patentee as a party who induces a single person to carry out all of the steps. It would be a bizarre result to hold someone liable for inducing another to perform all of the steps of a method claim but to hold harmless one who goes further by actually performing some of the steps himself. The party who actually participates in performing the infringing method is, if any-thing, more culpable than one who does not perform any steps.

The dissents authored by J.Newman and J.Linn take exception with many of the issues, but one that is worth noting is how to apportion damages in these situations. That is an open ended issue that will likely continue to percolate for a while through the courts.

Immediate Impact

This is an important case for electronic commerce and internet based technologies because many method claims require several steps that had been performed by various entities. This decision will open the door to more litigation of method claims, including assertions against website owners – such as retailers and other entities otherwise not involved in the actual development and deployment of the relevant technology. It is similarly an important case for the pharmaceutical and medical product industries due to the various entities involved in the commercialization and practice of various drug regimes and use of medical products.