Litigator’s Perspective: Judicial About-Face Has Just Made Joint Infringement Easier to Prove

Kerry L. Timbers

By Kerry Timbers. Co-Chair of our Litigation Practice Group

October 2012 IP Update

The Federal Circuit has been grappling of late with the problem of joint infringement — also called divided infringement — where every step of a method claim is performed, but not by the same entity.

As we reported last year, a three-judge panel of the Federal Circuit held in Akamai v. Limelight Networks that there can be no infringement unless a single actor either performs every step, or controls other actors, either under an agency theory or by contract.

Under this single-actor rule, where multiple actors cooperate — but are not required to act, for example, by contract — to perform a patented method, there is no liability for infringement, even where the activity was coordinated and encouraged by a single actor.

Thus, the defendant in that case, Limelight, was not liable even though, in order to use Limelight’s services, its customers had to perform steps of the method claim, and, collectively, Limelight and its customers performed all the steps.

In Akamai, Limelight maintained servers to efficiently deliver content for its content-provider customers, the use of which involved some steps of the patented method being performed by Limelight, and the remaining steps — modifying certain web pages — being performed by the content providers.

That case, and McKesson Technologies, Inc. v. Epic Systems Corp., were reheard together en banc, that is, by all the judges on the Federal Circuit. In McKesson, Epic Systems had licensed software to healthcare organizations that facilitated electronic communication with patients.

Some of the steps of the patented method were performed by the healthcare organizations, and some by their patients. McKesson, like Akamai, had held there was no infringement by the accused infringer because neither it, nor any other actor, alone performed all the steps of the patented method.

On August 31, the Federal Circuit issued an opinion in these cases that completely reversed course. A divided court held in a 6-5 decision that, contrary to its earlier opinions, as long as the steps of the method are performed by any combination of actors, anyone inducing that activity may be liable for infringement.

The opinion is of ground-shifting significance. A patentee can now prove infringement of divided method claims in common situations where before there was no liability. Inducement still requires an intent to infringe, but now the actual infringement may be performed by multiple parties, some or even all of whom have no knowledge of the patent, the entire method, or even the actions of others.

These multiple actors are not themselves liable for direct infringement, but whoever induces their actions — encourages, facilitates, coordinates — with intent to infringe is liable for inducement.

This remarkable change of the law was made in a per curiam opinion, with no judge taking credit for authoring the opinion. Chief Judge Rader, who would normally assign the job of writing the opinion to a judge, was in the majority, but curiously, in 2007 he actually wrote one of the opinions that the court arguably overturned:BMC Resources, Inc. v. Paymentech, L.P. It is rare for a significant change in the law to be handed down per curiam, especially where the chief judge is switching sides.

The opinion relies on analogies to theories of liability in tort and criminal law. Prominent among these is an “aiding and abetting” concept that is not found in the statute and that, in the majority’s analysis, results in the holding that under the statutory language, an “infringement” does not require an “infringer.”

The language-parsing is byzantine, and the opinion seems more intent on justifying an end result than on the more venerable judicial exercise of “finding the law.”

Also notable are the dissents. Judge Linn, writing for four of the judges, strongly asserts that the “one actor” rule is the right one: There can be no infringement, and no inducement of infringement, unless a single actor (or those it controls) performs all the steps of the method. He faults the majority for over-analogizing to criminal and tort law, and for too artful a dissection of the statutory language.

He reminds the majority that Congress wrote the statute requiring a single infringer under a strict liability rule, in contrast to the “morass of multi-actor infringement theories that were the unpredictable creature of common law.”

Meanwhile, Judge Newman, who has been on the court for nearly 30 years, rejects both the majority opinion and the single-entity rule espoused by Judge Linn. Instead, she calls the majority’s position “a spontaneous judicial creation. And it is wrong.”

Judge Newman would impose liability for direct infringement on the multiple actors involved, whether their actions are by “direction or control, or jointly, or in collaboration or interaction,” assigning liability under common law tort rules. She would treat infringement as a tort, and apportion remedies based on “relative contribution to the injury to the patentee, the economic benefit received by the tortfeasor, and the knowledge and culpability of the actor.”

Judge Newman’s approach is clearly the outlier here, and would be a huge departure from the way infringement has been viewed by the courts.

The court’s opinion exposes a wide rift among the judges on the fundamental questions of what is infringement, and who is an infringer. These are core concepts that many had thought were settled.

From a litigator’s perspective, the majority opinion slows down the court’s previous campaign – carried out in many cases in recent years — to make it harder for patentees to succeed in infringement cases.

The court’s opinion is a gift to patentees who have written broad method claims covering systems where multiple actors are involved, a common occurrence in telecommunications and data processing, or in the medical field, where a claim covers both diagnostic and therapeutic steps performed by different actors.

Defendants in split-claim cases now must pay more attention to the requirements of inducement, including the intent requirement, and ways in which one may show innocent intent. Accused infringers may end up seeking opinions of counsel more regularly.