The U.S. Court of Appeals for the Federal Circuit closes induced infringement loophole, holding there can be liability for inducement when no one entity performs all the steps of a method claim.
On August 31, 2012, in a controversial en banc 6-5 opinion in the cases of Akamai Technologies Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corporation, the U.S. Court of Appeals for the Federal Circuit (“CAFC”) held that an act of direct infringement of a method patent under 35 U.S.C. § 271(a) is not required in order for there to be liability for inducement of infringement under § 271(b). In a per curiam opinion, the majority held: “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.”
FILLING THE METHOD PATENT INDUCEMENT LOOPHOLE
The CAFC was troubled by the method patent loophole for induced infringement whereby an inducer could escape liability by instructing multiple entities to each perform only some steps of a patented method. In its 2007 BMC Resources, Inc. v. Paumentech, L.P. decision, the CAFC held that inducement could only be found when direct infringement was committed by a single entity. Faced with the scenario in Akamai and McKesson where patented steps of a method claim were being conducted by multiple entities, the CAFC granted a rehearing en banc to decide the issue of whether such divided infringement qualifies as patent infringement under § 271(a). The CAFC, however, decided instead to address the issue under § 271(b), overturned BMC Resources, and held that direct infringement under § 271(a) is not required for inducement of infringement under § 271(b), noting that “nothing in the text of either subsection suggests that the act of ‘infringement’ required for inducement under section 271(b) must qualify as an act that would make a person liable as an infringer under 271(a).” The CAFC remanded the case to the district court, noting that Limelight could be liable for inducement if it had the requisite intent, performed all but one of the steps of Akamai’s patented method, and induced its web content providers to perform the missing step.
In a vehement dissent, Judge Linn criticized the majority opinion, noting that loopholes are to be filled by Congress, such as § 271(f), which prohibits the exportation of uncombined components to induce their infringing combination outside the U.S. “The majority opinion is rooted in its conception of what Congress ought to have done rather than what it did,” wrote Judge Linn, noting “it is beyond our power to rewrite Congress’s laws.” Judge Newman, also dissenting, explained that the majority’s ruling represents “dramatic changes in the law of infringement” that are “not in accordance with statute, precedent, and sound policy.”
The CAFC effectively created a new basis for finding patent infringement that previously was not recognized to be supported by the Patent Act and for which there is no remedy against the purported “infringers.” While Akamai apparently strengthens the rights of patent owners to enjoin inducers, its practical effect is not as apparent. Since § 284 only permits damages “to compensate for the infringement,” it remains unclear how damages will be calculated for induced infringement under § 271(b). Moreover, the original question of divided infringement presented to the CAFC remains unanswered: can direct infringement be found when no single entity performs all the steps of a method claim?
It remains to be seen whether these cases will be appealed to the U.S. Supreme Court.