In a case that attracted 35 amici and resulted in a 6–5 en banc decision loosening the rules for proving liability under the doctrine of inducing infringement for method claims, the U.S. Court of Appeals for the Federal Circuit addressed the “doctrinal problems” in the relationship between direct infringement under sec. 271(a) and active inducement under sec. 271(b) under prior Federal Circuit case law.  The majority, in a per curiam decision (joined by Chief Judge Rader as well as Judges Lourie, Bryson, Moore, Reyna and Wallach), rejected the prior rule that inducement requires proof of a single actor directly infringing the patent and instead ruled that the underlying direct “infringement” of a process claim by multiple independent actors can still lead to inducement liability so long as all of the steps of the method were actually performed. “[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.”  Akamai Tech. v. Limelight Networks (en banc) Case Nos. 09-1372, -1380, -1416, - 1417; McKesson Tech. v. Epic Systems (en banc)  Case No. 10-1291, (Fed Cir , Aug. 31, 2012) (Newman, J., dissenting) (Linn, J., dissenting, joined by Dyk, J., Prost, J. and O’Malley, J.).

Active inducement is defined in 35 U.S.C. 271(b): “whoever actively induces infringement of a patent shall be liable as an infringer.”  Before this en banc decision, the Federal Circuit rule was that inducement requires both the act of knowing inducement to infringe (with knowledge of the patent) and actual direct infringement of the patent as defined by Section 271(a). BMC v. Paymentech (Fed. Cir., 2007).  In both of the cases at bar, the patentees had a problem proving infringement because the accused infringer had allegedly knowingly encouraged different parties to perform different steps of the patented method.  The Akamai case involved a patent directed to a method of delivering web content in which the defendant was the proprietor of network servers that delivered content to customers who performed one or more of the claimed steps.  In the McKesson case, the patent was directed to method of electronic communications between a health care provider and its patients—and the defendant was neither a health care provider nor a patient—but was a software company that licensed its software to health care providers.

In both of these cases, the respective district courts, citing BMC v. Paymentech, found no infringement since direct infringement under sec. 271(a), the acknowledged predicate for inducement, requires proof that a single-actor (or plural actors acting under the accused infringer’s direction and control) performed all of the claimed steps.  In both cases the patentees were unable to satisfy the second prong of the inducement test (classical direct infringement under sec. 271(a)).  According to the majority, the new decision does not rely on any change in the law of direct infringement (or of direct divided infringement).  Rather, under the new rule articulated by the en banc majority, inducement liability exists if the accused infringer knew of the patent, induced performance of the steps of the method and those steps were actually performed.  The accused infringer will also be liable if it performs some of the steps of the method and then actively induces performance of the other steps.  Under the Akamai/McKesson rule, inducement still requires that the accused infringer have knowingly induced the infringement—that is with knowledge that the steps it is encouraging are covered by the patent—but does not require a classical direct (271(a)) infringer as a predicate.

Although the majority overruled the BMC v. Paymentech single actor rule, it held that an active inducer will only be held liable if one or more parties are induced to practice all the steps of a claimed method.  The majority explained that innocent actors who were “induced” by someone else to perform one or more (but not all) of the claimed steps will not be individually liable. In other words, under this decision, innocent third parties (who are not direct infringers and who do not have culpable intent) will not be held strictly liable for infringement.  In note 1 the majority explains that “[b]ecause liability for inducement, unlike liability for direct infringement, requires specific intent to cause infringement, using inducement to reach joint infringement does not present the risk of extending liability to persons who may not be aware of the existence of the patent or even unaware that others are practicing some of the steps claimed in the patent.” 

The theme of the majority opinion goes to balancing the tension created by the sometimes competing objectives of protecting patentees from intentional infringement while also protecting innocent parties who are not intentionally involved in any infringing activity.

Judge Newman, in dissent, argued that the majority opinion creates “dramatic changes in the law of infringement” and warned that the “greatly enlarged grounds” for proving inducement “contains vast potential for abuse” that “imposes disruption, uncertainty and disincentives upon the innovation [read: design around] communities.” She wondered aloud about the wisdom of the majority in imposing liability under the inducement statute for acts such as “urging or encouraging” while “exonerating direct infringers from liability when the patented method is ‘collectively practiced.’”

Judge Linn also penned a vigorous dissent, his rooted in what he perceives to be the majority’s improper use of this case as a vehicle to make policy rather than interpret statutory text:  “The majority opinion is rooted in its conception of what Congress ought to have done rather than what it did. It is also an abdication of this court’s obligation to interpret Congressional policy rather than alter it. When this court convenes en banc, it frees itself of the obligation to follow its own prior precedential decisions. But it is beyond our power to rewrite Congress’s laws. Similarly, we are obliged to follow the pronouncements of the Supreme Court concerning the proper interpretation of those acts.”

Practice Note:  It remains to be seen how future decisions will sharpen the test in terms of exactly how much knowledge will be required to prove inducement under the Akamai/McKesson case and the  impact (if any) of the “knowledge” requirement for willful infringement knowledge (as set forth in Bard Peripheral Vascular v. W. L. Gore & Assoc. (Fed. Cir., 2012) and In re Seagate (Fed. Cir., 2007) (en banc) (see IP Update, Vol. 10, No. 8) or the inducement knowledge standard as explained by the Supreme Court in its 2011 decision in Global-Tech Appliances v. SEB (in the context of apparatus claims), that while knowledge of a patent is required to prove inducement, one cannot escape liability through “willful blindness” that a copied product is patented. 

It appears that the dissenting opinions (especially that of Judge Linn), were written with an eye toward identifying a serious intra circuit split that requires Supreme Court attention.  In the meantime the takeaway here is that there is now additional value to method claims, especially those that recites steps involving interaction among multiple individuals.