The focus of the U.S. Supreme Court's recent decision in Limelight Networks Inc. v.Akamai Technologies Inc. has been on divided infringement, but there is another lesson from the case that might have a greater impact for practioners: the Supreme Court's refusal to expand the doctrine of induced infringement to cover all perceived bad acts. Although the Supreme Court may have stopped the expansion of induced infringement, it did not provide any guidance on the addressing the problems with induced infringement. Discussed below are the ways the courts have expanded induced infringement and some of the other problems induced infringement raises.
35 U.S.C. § 271(b) makes a person who "actively induces infringement" of a patent liable as an infringer. The elements of induced infringement include a finding that a person has knowledge of: (1) the patent, () the alleged acts of infringement, and (3) specific intent to cause the alleged infringement. Induced infringement is meant to capture actors knowingly abusing patent rights of others who fall outside the bounds of direct or contributory infringement.
For example, a homeowner does not want to be liable for using a patented method for trimming his trees so he asks his neighbor to trim his trees for him using the patented method. Although the homeowner did not directly infringe a patent, induced infringement ensures that he does not get away with his bad act of enjoying a patented invention without permission of the patent owner. The problem is that induced infringement has become a catch-all. Any actor trying to unfairly use someone else's patented idea who does not fall within the traditional definitions of either direct or contributory infringement are alleged to be an induced infringer.
Using this rationale, induced infringement has expanded over the years to cover a variety of different actions where there was a perception that a person was violating patent rights but did not necessarily fall into another category of infringement.
For example, software patent claims are often drafted such that the direct infringer is the customer who uses the software. Is it realistic to expect a patentee to track down and sue every customer? Isn't the party that should bear responsibility for this type of infringement the software producer, i.e., the party that gains financially from the infringement? Similarly, a foreign company manufactures and sells an infringing product overseas. The buyer imports it into the U.S. Shouldn't the foreign manufacturer be liable for infringement if it is marketing its products to U.S. customers?
Patentees think that these parties should be liable, but there is no liability for these acts under theories of direct or contributory infringement. In instances like these, patentees have relied on induced infringement as a net to capture all sorts of unrelated activities under the same cause of action.
To illustrate how a broad interpretation of induced infringement can lead to problems, consider our software example, but instead of suing the software producer or the customer, the patentee provides notice of its infringement allegations to retailers and then sues the retailers rather than the software producer. The retailers do not make the software nor likely have any way to verify the patentee's infringement allegations. They simply want out of the litigation (or at least out of the hassle of dealing with the litigation). By suing the retailers, the patentee is betting that the retailers will put pressure on the software producer to settle. The patentee has now stretched induced infringement to gain an advantage. A patentee could take the same course of action for other induced infringement situations, such as with our importer.
Divided infringement was yet another example of the expanding doctrine of induced infringement. In Limelight, the Federal Circuit held a defendant financially liable because it benefited from someone else's invention even though no single entity directly infringed the claims. Here, the defendant performed only some of the steps. Because there was no direct infringer, the Federal Circuit relied on induced infringement to find a cause of action to capture the use of a patented method by multiple entities. The Federal Circuit reasoned that the defendant should be liable for infringement because the defendant performed some steps and was inducing another party to perform the remaining steps of the claim.
The Supreme Court reversed because there can be no induced infringement without direct infringement. The Supreme Court recognized that § 271(b) was not written to be a catch-all. If Congress had intended to prohibit these kinds of acts, it would write a law to barring it, just as it has done for other situations. By ruling as it has, the Supreme Court has likely slowed, if not stopped, the Federal Circuit from using induced infringement as a stop-gap for bad actors.
That, however, is not the end of the story. Another problem with induced infringement is that it is not clear what a person must know to qualify as an induced infringer. Mere knowledge of a patent is not enough. An alleged inducer has to have knowledge that its acts are causing another party to infringe. What neither Congress nor the courts have said is whether the alleged inducer has to have personal knowledge of the alleged infringement.
This distinction is important because it affects several aspects of a case. For example, if a notice letter providing some detail as to the alleged infringement is sufficient to establish inducement, then damages would start to accrue the moment the letter was received. If not, it may take some time for a party to investigate an allegation and acquire personal knowledge of the activity. Under that interpretation, parties could abuse the rule by taking months or years to investigate an allegation. Judges or juries would then have the additional burden of trying to determine when personal knowledge was obtained. There could even be cases where a party could claim that it could never induce infringement because it cannot develop personal knowledge, for example, when it does not have access to third-party confidential information, such as source code for infringing software.
Not requiring personal knowledge has issues too. A patent holder would merely have to add some details to a demand letter to qualify someone as an inducer of infringement. Or, a patent holder could forgo thedemand letter and just file a complaint pleading sufficient facts of the induced infringement to give the defendant adequate knowledge. It does not seem appropriate that a defendant has to acquiesce with what a patent holder says and have that qualify as specific intent to induce.
Furthermore, such information, either via letter or complaint, would mean that the accused infringer developed specific intent instantaneously upon service. The knowledge requirement ensures that an alleged inducer understands that his actions are causing harm before imposing liability and gives him an opportunity to correct his actions. (Or at least have the chance to be willfully blind to it.) But not requiring personal knowledge makes induced infringement almost a strict liability offense, which was probably not Congress' intent, as recognized by prior Supreme Court opinions.
One last wrinkle to consider is an opinion of counsel. Currently, an opinion of counsel may be considered by a jury in determining whether a defendant has the requisite intent, but it is not an absolute defense. That is, merely having an opinion of counsel does not bar a claim of induced infringement. If personal knowledge of infringement was required for inducement, a well-reasoned opinion of counsel should be a bar because the alleged inducer would have reason to believe that the patent was either not infringed or invalid. But because a well-reasoned opinion should not be that hard to develop, such a standard would make avoidance of induced infringement too easy.
On the other hand, if you do not need personal knowledge of infringement, why would an opinion of counsel be relevant to defending an allegation of induced infringement? And why would it matter whether the opinion was issued before or during litigation?
Because Congress has not defined what type of knowledge is needed to be an inducer, the courts have worked backwards to piece together an induced infringement patchwork of standards that is not coherent. There are easy cases such as when the defendant has insufficient knowledge, e.g., only notice of the patent, or when the defendant knows all about the infringement. And there are cases where the courts expand common sense to fit the alleged inducer into an easy bucket. But some cases fall in between.
In those cases, companies are likely not trying to induce infringement. Instead, they have established practices, and, at some point later, someone informs them that there is a patent that covers that practice. In those situations, it would make sense to give these companies time to investigate the allegations and develop the necessary intent before holding them accountable, but there needs to be a check to ensure that the companies do not abuse that liberty.
As with most issues, the remedy to the induced infringement dilemma is for Congress to clarify the patent statute to define not only what type of activities constitute induced infringement but what is the requisite mental state of the inducer. But Congress is not known to act quickly. They have a number of different patent reform proposals to consider already and may not want to tackle a nuanced issue like induced infringement.
The Supreme Court has, at least temporarily, slowed the expansion of induced infringement for whatever the Federal Circuit deems ails patent holders. And while the Supreme Court will likely continue to serve in that role, it only takes a few patent cases a year. That leaves it to us, the practitioners, to navigate these waters as best we can. Just make sure you have a good supply of aspirin.