Plaintiffs are no longer required to prove the existence of direct infringement to establish liability for inducement.
On August 31, the U.S. Court of Appeals for the Federal Circuit released its combined en banc opinion in Akamai Technologies, Inc. and The Massachusetts Institute of Technology v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp. Akamai Techs., Inc. v. Limelight Networks, Inc., Nos. 2009-1372, -1380, -1416, -1417, available here. The per curium majority opinion overruled portions of BMC Resources and its progeny and held that a defendant can be liable for induced infringement even if there is no single party (including agents of a party) who performed all the steps in a patented method. In other words, the court held that a party can be liable for induced infringement even in circumstances where it is possible that no one is liable for direct infringement.
Traditionally, "for a party to be liable for direct patent infringement . . . that party must commit all the acts necessary to infringe the patent, either personally or vicariously. In the context of a method claim, that means the accused infringer must perform all the steps of the claimed method." Akamai, slip op. at 12 (internal citations omitted). Under a theory that has become known as "divided infringement," a plaintiff cannot combine the actions of multiple parties in an effort to meet the steps of a method claim unless one party directs or controls the actions of those who perform the remaining steps. In BMC Resources, Inc. v. Paymentech L.P., 498 F.3d 1373 (Fed. Cir. 2007), and with further clarification in Muniauction, Inc. v. Thompson Corp., 532 F.3d 1318 (Fed. Cir. 2008), the combining of multiple actors for direct infringement was approved only in situations where the plaintiff could show that all acts constituting infringement were performed by the accused, an agent of the accused, or another party acting pursuant to the accused infringer's direction or control. See BMC, 498 F.3d at 1381; see also Muniauction, 532 F.3d at 1329.
The recent en banc decision in Akamai and McKesson was a review of two earlier panel decisions related to different articulations of what it means to be under an accused infringer's direction and control. In Akamai, the panel rejected Akamai's theory that the parties (admittedly independent entities whose actions were combined to meet the claimed steps) were acting in concert and, while the parties were not principal and agent, that they knowingly collaborated. In McKesson, the panel rejected McKesson's attempt to combine the actions of healthcare providers and patients when, together, they used software provided by defendant Epic Systems. In the August 31 opinion, the Federal Circuit remanded both cases for adjudication of potential liability, but the decision was "not predicated on the doctrine of direct infringement," and the court saw "no occasion at this time to revisit any of the principles regarding the law of divided infringement as it applies to liability for direct infringement under 35 U.S.C. § 271(a)." Akamai, slip op. at 13.
Instead of direct infringement, the court found potential liability in both cases under an expanded view of liability for induced infringement. Prior to the August 31 opinion, no theory of induced infringement was sustainable under the ruling of the panels in these cases because it was considered axiomatic that there can be no indirect infringement (such as inducement) without actionable direct infringement. See, e.g., Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 526 (1972); Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961). The BMC opinion found that "[i]ndirect infringement requires, as a predicate, a finding that some party amongst the accused actors has committed the entire act of direct infringement." BMC at 1379. Thus, post-BMC, it was established that "liability for induced infringement requires proof of direct infringement and . . . liability for direct infringement requires that a single party commit all the acts necessary to constitute infringement." Akamai, slip op. at 15–16 (summarizing its holding in BMC). Therefore, since neither Akamai nor McKesson could prove direct infringement, no inducement was possible.
In its opinion, the Federal Circuit overturned the requirement that a single entity be liable for direct infringement before a party can be liable for inducement. Id. at 10. While it is still required that all steps of the method claim be performed (presumably even by combining multiple separate actors), it is not necessary to prove that all the steps have been committed by a single entity. Id. The court's opinion does more than simply overturn the requirement that the actions be performed by a single entity; it seems to remove any requirement that anyone actually be liable for direct infringement.
Requiring proof that there has been 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. If a party has knowingly induced others to commit the acts necessary to infringe the plaintiff's patent and those others commit those acts, 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. A party who knowingly induces others to engage in acts that collectively practice the steps of the patented method—and those others perform those acts—has had precisely the same impact on the patentee as a party who induces the same infringement by a single direct infringer; there is no reason, either in the text of the statute or in the policy underlying it, to treat the two inducers differently.
Id. at 16 (emphasis in original).
Of the eleven members in the en banc panel, six joined in the per curium opinion. Three judges joined Judge Richard Linn in his dissent, and Judge Pauline Newman filed her own dissent. The majority spent a significant portion of its opinion citing multiple examples from tort law, criminal law, and testimony from the House of Representatives hearings that led to the 1952 Patent Act (which created the current form of 35 U.S.C. § 271(a)) in order to justify its decision. Both dissents take significant issue with the majority's characterization of these precedents.
There are several practical points to take note of in the two dissents. First, Judge Newman takes great issue with the majority's finding, calling it a "spontaneous judicial creation [that] is wrong." Akamai, slip op. at 7 (Newman, J., dissenting). But it is not clear that Judge Newman's strong feelings stem from the actual holding. Judge Newman articulates several times that it is wrong for the majority to hold "that only inducement to infringe is actionable when the claim is practiced by two or more entities, and that there can be no liability for direct infringement." Id. at 17. She goes on to say that "[a]ccording to the court's new ruling, it appears that the patentee cannot sue the direct infringers of the patent, when more than one entity participates in the infringement." Id.at 25. But the majority's holding does not specifically preclude charges of direct infringement when multiple parties participate in the infringement. The majority explicitly leaves alone the body of divided infringement precedent allowing plaintiffs to bring such charges. What the majority has done is allow a plaintiff to sue for liability under inducement even if no direct infringement exists.
In a more clear-cut disagreement, Judge Linn states, "[t]he majority opinion is rooted in its conception of what Congress ought to have done rather than what it did." Akamai, slip op. at 3 (Linn, J., dissenting). He goes on to lay out the previous understanding of the operation of 35 U.S.C. § 271(a)–(c) prior to this opinion: namely, that Congress defined what it meant to "infringe" in 35 U.S.C. § 271(a), and then added two additional forms of liability for those who did not directly infringe (indirect infringers) in 35 U.S.C. § 271(b) and (c). Judge Linn concludes with the same point as Judge Newman, that the majority's opinion violates the "'generally recognized' principle that 'there can be no conviction for aiding and abetting someone to do an innocent act.'" Id. at 18 (quoting Shuttlesworth v. City of Birmingham, 373 U.S. 262, 265 (1963)). All five dissenters take great issue with the idea that someone can be liable for inducing actions that by themselves do not infringe a patentee's rights.
Divided infringement remains a viable defense to accusations of direct infringement, especially with respect to method claims. The August 31 opinion leaves in place the jurisprudence on this issue. However, for method claims where showing "direction or control" is either problematic or simply very expensive to prove, plaintiffs may now forgo even trying. This may result in new patent infringement complaints that do not even allege direct infringement. Operators of e-commerce portals should be particularly cognizant of this. Many of the patents currently being asserted by plaintiffs have some action required by the customers or users of the websites in question. Under this expanded theory of induced infringement, plaintiffs may simply skip trying to prove that a defendant "controls" its customers and focus instead on whether a defendant induced the customers' actions. This may come at the expense of recovering pre-suit or pre-notice damages, which—in turn—may motivate patentees to send out notice letters or file suit earlier than they might otherwise choose to.