On August 31, 2012, a sharply divided Federal Circuit, sitting en banc, reversed and remanded the prior panel decisions in both Akamai Technologies v. Limelight Networks, 629 F.3d 1311 (Fed. Cir. 2010), and McKesson Technologies v. Epic Systems, No. 2010-1291, 2011 WL 1365548 (Fed. Cir. April 12, 2011). The per curiam opinion of the Court (Judges Rader, Lourie, Bryson, Moore, Reyna and Wallach) held that to establish liability for inducing infringement of a method claim under 35 U.S.C. § 271(b), “it is not necessary to prove that all the steps were committed by a single entity” (Slip. Op. at 10), overruling the Court’s prior decision in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007)(indirect infringement requires one party to have committed the entire act of direct infringement).

To start, the Court declined to revisit its previous decisions that a party must perform all the steps, either personally, or through another person acting under the party’s direction and control, in order to be liable for direct infringement of a method claim under Section 271(a). Instead, the Court considered whether there could be liability for induced infringement under Section 271(b), even if the steps of the claimed method were divided between multiple parties who were not necessarily acting under one party’s direction and control. Notably, the Court concluded that there could be such liability.

To reach that result, the Court saw a distinction between proving that “that there has been direct infringement as a predicate for induced infringement” and proving “that a single party would be liable as a direct infringer.” (Slip. Op. at 16)(emphasis in original). The Court found that only the former was required, and determined that “infringement” in the context of Section 271(b) simply means performing all the steps of a claim, with no requirement that all the steps needed to be performed by one actor (as is required for infringement liability under Section 271(a)). Accordingly, for liability to arise 35 U.S.C. § 271(b), the Court indicated that plaintiff need only show that (1) the defendant knew of the patent at issue, (2) the defendant induced performance of a patent claim, and (3) all the steps of the claim were in fact performed – but there was no need to show direct infringement under Section 271(a) as a predicate.

The Court distinguished on its facts the Supreme Court case of Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 345 (1961)( “In a word, if there is no infringement of a patent there can be no contributory infringer”), by observing that Aro was a repair/reconstruction case that involved product claims and did not involve multiple parties.

Judge Newman in dissent criticized the Court’s ruling of finding liability for indirect infringement of a method claim in the absence of any liability for direct infringement. She pointed out that making liable only inducers, but not those who actually perform the steps of the claim, was a dramatic change in the law of infringement. In addition, she indicated that while the review of the “control or direction” test or the narrower single-entity rule, where liability for direct infringement can be found in a divided infringement situation only through contract or agency relationships, was the sole reason for the rehearing en banc, the Court failed to resolve this issue.

Judge Linn in dissent (joined by Judges Dyk, Prost and O’Malley) likewise criticized the Court’s ruling of finding liability for indirect infringement of a method claim in the absence of any liability for direct infringement, stating that the Court’s holding was contrary to the Patent Act and Supreme Court precedent, and indeed an effective rewriting of the 35 U.S.C. §§ 271(a) and (b).

Given the view expressed by the Judge Linn dissent regarding a potential encroachment on Congressional areas, it will be interesting to see whether we have received the final words on direct and indirect infringement of a method claim whose steps are performed by multiple persons.