For years, courts have struggled with the concept of induced infringement. 35 U.S.C. § 271(b) states that "whoever actively induces infringement of a patent shall be liable as an infringer," while § 271(a) describes direct infringement, which occurs when a single actor commits all of the steps necessary to infringe a patent. Courts have typically found induced infringement when a party induces another such that each of the steps of a patented method are performed, but have been more reluctant to find liability when a single party induces two or more parties such that each of the steps of the patented method are collectively performed (i.e., divided infringement).
Should a patentee be able to recover when one party has performed some of the steps of a patented method and induced other parties to perform the remaining steps, or similarly, when one party has induced multiple parties to collectively perform all of the patented method steps? In a recent groundbreaking decision, the Federal Circuit answered this question with a yes, reversing its own previous ruling.
An en banc Federal Circuit court recently heard Akamai Technologies, Inc. v. Limelight Networks Inc. and McKesson Technologies, Inc. v. Epic Systems Corporation and, surprisingly, overturned its previous decision in BMC Resources Inc. v. Paymentech L.P.
Akamai Technologies, Inc ("Akamai") owns a patent including claims directed to a two-step method for the efficient delivery of web content. The first step involves placing some of a content provider’s content elements on outside servers, and the second step includes modifying the content provider’s webpage to instruct web browsers to retrieve the content. Akamai alleged that Limelight Networks, Inc. ("Limelight") induced infringement of Akamai’s patented method by committing the first step of the patented method and then inducing its customers to perform the second step. Thus, in Akamai, the accused was both an inducer and a participant in the joint infringement.
Unlike Akamai, McKesson involves a party that induced others to perform all of the steps of the patented method. McKesson Technologies, Inc. ("McKesson") owns a patent including claims directed to a method for covering electronic communication between doctors and patients. McKesson alleges that Epic Systems Corporation ("Epic"), a software company that licenses software to healthcare organizations, induced infringement of McKesson’s patented method by encouraging its customers to engage in electronic communication with their healthcare providers via Epic’s software.
In its previous BMC decision, the Federal Circuit held that liability for induced infringement required a showing that the accused infringer induced direct infringement by a single party. In Akamai and McKesson, however, the court instead held that if a party induces others to collectively commit the steps of a patented method, either with that party or other parties, then that party may be held liable for induced infringement. This milestone decision demonstrates the Federal Circuit’s growing recognition of the development of web-based technologies, method patents, and end user abilities that are increasingly susceptible to joint and divided infringement, and the need to uphold patents in this context.
The Federal Circuit explained overruling its decision in BMC by identifying a flaw in its previous reasoning. First, the Federal Circuit recognized and affirmed the settled principle that there can be no liability for inducement unless the inducement leads to actual infringement. However, in BMC, the court interpreted this to require not only proof of direct infringement to show induced infringement, but proof that direct infringement was committed by a single actor. Conversely, in Akamai/McKesson, the court stated that requiring proof of "direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer."
In a per curiam opinion, the court noted that there is "no reason to immunize the inducer from liability for indirect infringement simply because the parties have structured their conduct so that no single defendant has committed all the acts necessary to give rise to liability for direct infringement." The Federal Circuit reasoned that a party who induces others to collectively perform the steps of a patented method, or performs some of the steps and induces others to perform the rest of the steps, as compared to a party that induces another single party to perform all of the steps of a patented method, have had a materially identical impact on the patentee. The Federal Circuit in Akamai/McKesson found no reason to preclude one type of infringer from liability and not the other.
While this change in the law of induced infringement is significant, the Federal Circuit recognized a somewhat limited scope of its holding. First, the holding was limited to method patents, as the problem of divided infringement with regard to induced infringement generally occurs with method patents. Patents on products mostly result in direct infringement, as the party that makes, or installs or otherwise uses, or sells, the final part of the patented product will be a direct infringer, while method patents may be performed jointly be several parties such that no single party is directly infringing on the patented method.
Second, unlike direct infringement, induced infringement is not a strict liability tort and requires a showing of specific intent to induce infringement. The Federal Circuit stated that liability for induced infringement required that the accused party "knowingly induce infringement and possess specific intent to encourage another’s infringement." The Federal Circuit reasoned that the specific intent requirement would protect those who may be innocently unaware of the existence of a patent or unaware that there are other parties committing other steps of a patented method.
Finally, the court limited its holding to induced infringement, electing not to consider divided infringement with regard to direct infringement claims. This resulted from the court’s concern that innocent actors might collectively infringe a claim without intending to do so.
Generally, however, this expanded ruling for induced infringement will benefit patent holders. It will be more difficult for alleged infringers to assert the single-entity defense, and patent holders will more likely be able to capture accused infringers who induce multiple parties to perform their claimed steps. Additionally, patent drafters will be able to add claims to patents that previously could not be articulated in a way that could encompass a single infringing party. While the new rule will allow patent holders to recover from parties that have previously been able to induce divided infringement without liability because they induced multiple parties to collectively complete the patented steps, the specific intent requirement that the accused "knowingly induced infringement" will still serve as an obstacle to those seeking recovery. Patent holders will want to give broad notice of their claimed methods to avoid allowing possible inducers to escape liability due to ignorance of the existence of a patent.
The majority opinion of the Federal Circuit was a controversial one, in that it was accompanied by two forceful dissents. One dissent written by Judge Linn, and joined by three additional judges, notes the dangerous "potential for abuse" of this new rule and argues that the majority "assume[d] the mantel of policy maker." Judge Linn argued that the majority was stating its opinion of what Congress "ought to have done rather than what it did," and argues that the BMC court was correct in its holding. Also separately dissenting, Judge Newman agreed that requiring a single-entity rule was bad law, but that the majority should have focused its holding on the law of direct infringement and not induced infringement. Judge Newman suggested that the court "restore direct infringement" to its previous meaning, where any instance in which all of the patented steps are performed, regardless of the number of parties involved, would result in liability. It is likely that the losing parties will utilize these dissents when petitioning the Supreme Court for review and final judgment.