Federal Circuit Establishes New Standard on Divided Infringement and Inducement
The US Court of Appeals for the Federal Circuit (Federal Circuit) has now issued its long-awaited en banc decision in Akamai Technologies, Inc. v. Limelight Networks, Inc. In that decision, the court significantly expanded the liability for “induced” infringement, which is a type of indirect infringement where a party that does not itself directly infringe a patent can be held liable for inducing others to infringe.
A narrowly divided court (6-5) held that a patent holder may prove induced infringement of a claim to a method or process by merely establishing that the defendant induced others to perform all the steps of the method. The court ruled this would be the case even where multiple parties perform the steps (commonly called “divided infringement”), leaving none of them individually liable for direct infringement.
This decision overruled the 2007 BMC Resources decision, which held that a single entity must perform all the steps of the method before the inducing party can be held liable for induced infringement.
This broader standard for proving inducement gives patent holders a powerful new tool – especially in the software, Internet, and biotech/pharma fields, where accused products often involve actions of multiple parties. The strong dissent by five of the 11 judges, and the surprising reasoning in the majority opinion, however, suggest the Supreme Court may grant review and change the standard yet again.
The Supreme Court held in the landmark Aro cases (successfully argued by Wolf Greenfield’s David Wolf) that a patent owner seeking to recover for indirect infringement (such as, for instance, the inducing of others to infringe) must first prove that the defendant caused someone to directly infringe the patent. For a method claim, which requires performance of a series of steps, a patent owner proves direct infringement by showing that someone performed all of the steps of that method.
Normally, the patent owner will identify a single entity that performed all the steps of – and thus directly infringed – the claim. The development of the Internet and distributed network technologies, however, has presented the courts with cases where no single entity performs all of the claimed steps. Instead, multiple entities act in concert to perform those steps. In these cases of "concerted action," the courts have had to decide whether to attribute the performance of some steps to other entities.
The Federal Circuit first addressed the issue in BMC Resources in 2007. In that case, the court held that inducement required proof of underlying direct infringement by a single entity that bore responsibility for performing all the steps of the method claim. The court eased the requirement slightly, however, by ruling that the single entity need not directly perform all of the steps itself, so long as it exercised “control or direction” over all the entities that performed the claimed steps. Subsequent decisions (including the original Akamai panel decision) clarified that “control or direction” meant that any separate entity involved in the direct infringement must act as the agent of, or by contract with, the party the court referred to as the “mastermind” of the entire performance.
In 2011, the Federal Circuit granted a full court rehearing of Akamai to reconsider the “control or direction” test.
Federal Circuit En Banc Decision
In Akamai, the court reaffirmed that inducement requires proof of direct infringement, and that all the steps of the claimed method must be performed to find induced infringement. But surprisingly, the Federal Circuit’s decision side-stepped the “control or direction” question. Instead, the majority overruled the requirement of BMC Resources that a single entity bear responsibility for the direct infringement.
Rather, the court held that the patent owner does not have to prove that a single entity committed all the steps. As the court stated: “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 majority based its decision on the structure of the patent statute, its legislative history, and analogies to criminal and tort law.
Under the court's decision, all that a patent holder now needs to show to prove inducement is that (1) the defendant knew of the patent, (2) it induced the performance of the steps of the method claimed in the patent, and (3) those steps were performed.
Two dissenting opinions were filed, increasing the chances the Supreme Court will grant further review. One dissent sharply criticized the majority for ignoring Aro and would have reaffirmed the BMC Resources standard. Judge Newman dissented separately, calling for a new test that would find direct infringement wherever all of the claimed steps are performed, whether by a single entity or more than one entity in interaction or collaboration.
Liability for inducement still requires proof the inducer had specific intent to cause infringement, proof that it induced the performance of the steps of the method, and proof of actual performance of all the steps.
This decision, however, significantly expands the ability to prove inducement in a "divided infringement" context, to the advantage of patent holders – especially in the software, Internet, and biotech/pharma fields. A court may now find an entity liable for indirect infringement if the entity either performs some of a method claim’s steps and induces another entity to perform the remaining steps, or induces two or more entities to perform all of a method claim’s steps.
The decision will encourage patent holders to review existing patents and ongoing litigation to determine if claims that had previously raised divided infringement problems now support stronger inducement claims. However, as previously stated, given the narrow split, the majority’s unexpected reasoning, and the intensity and importance of the dispute, chances are good the Supreme Court will review the case.
Given the likelihood of such further review, for patents still being prosecuted, applicants should try to avoid the divided infringement problem altogether by drafting method claims with steps that do not require performance by more than one entity.