In this very significant and highly anticipated decision, the United States Supreme Court unanimously held that a defendant will not be liable for inducing infringement of method claims in a “patent under 35 U. S. C. §271(b) when no one has directly infringed the patent under §271(a) or any other statutory provision.” With its decision, the Supreme Court restored the standard for proving inducement to where it was about two years ago, before the Federal Circuit’s en banc holding in Akamai Technologies v. Limelight Networks, Inc., 692 F. 3d 1301 (Fed. Cir. 2012).
By way of background, prior to the en banc decision in Akamai, the Federal Circuit had repeatedly held that liability for inducement could only be found where there was an underlying act of direct infringement under 35 U.S.C.§ 271(a). It had also held that direct infringement of a method claim required that all steps of the claimed method be performed either by a single entity, or by entities in which a “mastermind” was exercising direction or control over the other(s). In Akamai, the majority of a deeply divided en banc Federal Circuit expressly overruled longstanding precedent that had held “for a party to be liable for induced infringement, some other single entity must be liable for direct infringement.” In doing so, the Federal Circuit drew a distinction between liability for an act of direct infringement under 271(a), i.e., where all of the steps of the method claim are performed by a single entity, and an act of “infringement” taking place even if no party could be found liable for direct infringement under 271(a), such as where each of the steps of the method claim are performed by multiple, unrelated entities, and held that a party could be liable for inducement in this latter situation.
The unanimous Supreme Court rejected both the reasoning and holding of the Federal Circuit. First, the Supreme Court looked at its own precedent and pointed out that “our case law leaves no doubt that inducement liability may arise ‘if, but only if, [there is] . . . direct infringement.’” Opinion at 5, citing Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1966). In a sharp rebuke, the Supreme Court stated that “[t]he Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.” The Supreme Court continued by stating the truism that a method claim “is not infringed unless all steps are carried out.” Finally, the Supreme Court pointed to the Federal Circuit’s own holding in Muniauction v. Thomson Corp., that held that “a method’s steps have not all been performed as claimed by the patent unless they are all attributable to the same defendant, either because the defendant actually performed those steps or because he directed or controlled others who performed them.” Opinion at 5-6, citing Muniauction, 532 F. 3d 1318, 1329-1330 (Fed. Cir. 2008). The Supreme Court did not actually endorse Muniauction’s holding with respect to this point, declining to address the issue of direct infringement under 35 U.S.C. § 271(a) since that that issue was not properly before it.
Even though the Supreme Court did not specifically address the issue of direct infringement, we believe that the most probable result of the Supreme Court’s decision is that, to establish inducement, a patent holder will now need to establish a predicate act of direct infringement by showing that a single actor performed all steps of the claimed method or directed or controlled others to do so (i.e., the old Muniauction standard.) A failure of this entity or entit(ies) to perform even one step of the claimed method will result in no direct infringement under 35 U.S.C. § 271(a) and no liability for inducement under 35 U.S.C. § 271(b). For patent owners, this means that care needs to be taken during patent prosecution to draft method claims with an eye to having all steps performed by one party. For companies that are accused of infringement of a method claim, this decision may provide them with a defense if performance of a claimed method is distributed among two or more parties. Indeed, prior to the en banc holding of the Federal Circuit, several defendants successfully asserted this defense, especially in the context of technology and internet-related inventions, where performance of a method is often distributed over a computer network and involve a number of participating entities.