In Akamai Techs. Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012) (No. 2009-1372), the Federal Circuit decided the appeals of Akamai Techs. Inc. v. Limelight Networks, Inc. and McKesson Techs., Inc. v. Epic Systems Corp, which the Federal Circuit previously consolidated for rehearing en banc.  The per curiam decision, decided by a single vote, explicitly overrules the Federal Circuit’s 2007 BMC Resources, Inc. v. Paymentech, L.P. decision holding that liability for induced infringement could only be found if a single entity performed every step of a method claim.  Here, instead of focusing on whether direct infringement can be found when no single entity performs all of the claimed steps of the patent, the Federal Circuit applied the doctrine of induced infringement.

Factually, the cases present two extremes on the inducement spectrum, in Akamai only the last step was induced while in McKesson every step was induced.

Akamai owns a patent covering a method for the efficient delivery of web content.  As claimed in the patent, Limelight maintains a network of servers and enables efficient content delivery by placing some content elements on its servers.  Limelight argued, however, that because it did not perform the last step, modification of the content providers’ web pages, it could not infringe.  Akamai argued that Limelight instructs its customers on the steps needed to do that modification and knew that the modification would be performed.  Therefore, Akamai argued that Limelight should not be allowed to avoid infringement by carefully splitting steps in the method patent among different parties.

Similarly, McKesson owns a patent covering a method of electronic communication between healthcare providers and their patients.  Epic argued that because it does not perform any of the patent’s claimed steps, it could not infringe.  McKesson argued that Epic was still responsible for the activities of its customers, the healthcare providers, because of their contractual relationship.  The only step not performed by Epic’s customers, initiating the communications, was performed by the patients of the healthcare providers.  Epic argued that neither it, nor the healthcare providers, control or direct the patient to initiate communications with the healthcare provider.  McKesson argued that Epic knew that patients would perform that step, and that the lack of a contractual relationship should not allow Epic to facilitate activities that would otherwise infringe the patent.

In each case, there was no single entity that performed all the steps recited by the claims.  That is, there was no single entity that would be liable for direct infringement.  Therefore, in both cases, the district courts granted summary judgment of non-infringement applying the rule that indirect infringement required proof of direct infringement by some single entity.

The Federal Circuit analyzed the problem as one of induced infringement under 35 U.S.C. § 271 (b), which extends liability to a party who advises, encourages, or otherwise induces others to engage in infringing conduct.  The Federal Circuit determined that an accused inducer must knowingly induce infringement and possess specific intent to encourage another’s infringement in order to be liable under § 271 (b).  Contrary to earlier decisions, the Federal Circuit ruled that inducement does not require that the induced party or parties be an agent of the inducer or be acting under the inducer’s direction or control.  Moreover, the majority held that inducement can give rise to liability only if the inducement leads to infringement, that is all of the claimed steps are performed.  So long as all of the steps in the claimed method are performed, proof is not required that a single party would be liable as a direct infringer for performing those steps.   

The Federal Circuit reviewed the 1952 Patent Act and found it to be consistent with this analysis.  Prior to 1952, inducement and contributory infringement were both referred to under the rubric of contributory infringement.  The 1952 Patent Act split these concepts between §§ 271 (b) and 271 (c), and, in the legislative history, Congress described the inducement section as “recit[ing] in broad terms that one who aids and abets an infringement is likewise an infringer.”  The Federal Circuit found inducement to be similar to both aiding and abetting in the Federal Criminal Code and tort law.  Both recognize fault or liability for inducing innocent actors to carry out harmful acts.

In the majority opinion, the Federal Circuit cautioned that this decision should not be read to define direct infringement differently for the purposes of establishing liability under §§ 271 (a) and (b), responding to the concerns expressed in Judge Linn’s dissenting opinion.  The majority indicated that neither section defines infringement, but, rather, that the subparts of § 271 each set forth types of conduct that qualify as infringing activities.  There is no requirement that the sections overlap.  Nor is there a requirement that what is required to be induced in § 271 (b) be the same as that required to be liable under § 271 (a).  The other subparts of § 271 support this analysis, each defining conduct that makes one liable as an infringer (e.g. § 271(e)(1) makes it an act of infringement to submit an application to the FDA for a drug, or the use of a drug, claimed in a patent).  Prior to BMC, a single entity was never required to perform all the steps of a method claim for the patent to be infringed.  This proposition seems to have arisen from the Supreme Court’s decision in ARO Mfg. Co. v. Convertible Top Replacement Co.  ARO, however, was a product patent case—not a case involving method claims—and when the last component was combined direct infringement resulted regardless of the prior separate acts.

Applying the clarifications to the law set forth in the majority opinion, the Federal Circuit held that “Epic can be held liable for inducing infringement if it can be shown that (1) it knew of McKesson’s patent, (2) it induced the performance of the steps of the method claim in the patent, and (3) those steps were performed.”  Similarly, “Limelight would be liable for inducing infringement if the patentee could show that (1) Limelight knew of Akamai’s patent, (2) it performed all but one of the steps of the method claimed in the patent, (3) it induced the content providers to perform the final step of the claimed method, and (4) the content providers in fact performed that final step.”  The Federal Circuit then reversed the trial court judgments, each of which had relied on the now overruled BMC, and remanded the cases for further proceedings on the theory of induced infringement.

In his dissenting opinion, Judge Linn, joined by Judges Dyk, Prost, and O’Malley, said that the majority was “assum[ing] the mantle of policy maker,” while promoting the single entity rule of BMC.  Judge Linn argued that the majority was redefining “infringement” to have different meanings within the statute, which was not Congress’s intent.  Judge Linn criticized the majority for ignoring Congress’s removal of joint-actor patent infringement, which he argued was not provided for in 35 U.S.C. § 271 because Congress wanted to “clear[] away the morass of multi-actor infringement theories that were the unpredictable creature of common law.”  Judge Linn also criticized the majority for ignoring Supreme Court precedent interpreting Congress’s laws, in particular ARO, which the majority distinguished as a case involving a product, and not a method patent.  Judge Linn also took issue with Judge Newman’s dissenting opinion, calling it a reversion back to the common law that would “eviscerate[]” the statutory scheme provided by Congress.

Judge Linn indicated that the legislative history and Supreme Court precedent, namely ARO, clearly supported application of a single entity rule.  Thus, because Akamai’s claims were drafted so as to require the activities of both Limelight and its customers for a finding of infringement, Akamai put itself in a position of having to show that the activities of Limelight’s customers were attributable to Limelight.  Infringement was not found because Akamai did not meet the burden of showing that Limelight’s customers were agents or otherwise contractually obligated to Limelight, or that they were acting in a joint enterprise when performing steps in the method claim.  Likewise, there was no infringement of McKesson’s patent because the healthcare providers, who are customers of Epic, are not in any joint enterprise with their patients, nor are the patients in any agency contractual relationship with the healthcare providers to perform any steps in the patented method.

Judge Newman authored a separate dissent, stating that neither the “scant majority” nor Judge Linn’s dissenting opinion resolved the issues of divided infringement that were presented to the Court.  Instead the majority adopted a new “inducement-only rule,” which would apparently provide liability for merely advising or encouraging acts that may not themselves constitute direct infringement.  In contrast, a significant minority dissent supported the single entity rule, where divided infringement would not be actionable absent a contract or agency relationship that is directed and controlled by a single “mastermind.”  The majority avoids addressing direct infringement, apparently on the theory that the inducement-only rule makes the point moot.  Judge Newman commented that, the single entity rule wasn’t in accord with the infringement statute, but neither is the majority’s inducement-only rule.

In Judge Newman’s view, the majority’s new inducement only rule creates more problems than it solves.  For example, if the direct infringers are not liable for infringement, may they still be subject to damages or an injunction?  In response to the single-entity rule supported by Judge Linn’s dissenting opinion, Judge Newman notes that cleverness or luck in claim drafting should not determine the presence or absence of infringement.  The proper outcome would be to throw out both rules and restore infringement to its status as occurring when all the claimed steps are performed, whether by a single entity  or more than one entity, whether by direction or control, or jointly, or in collaboration or interaction.