Many owners of Internet patents must be rejoicing. The Federal Circuit, in a 6-5 en banc decision, has overruled its precedent holding "that in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement." The Court explained "that all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity." Akamai Technologies, Inc. v, Limelight Networks, Inc., Nos. 2009-1372, -1380, -1416, -1417, 2010-1291 (Fed. Cir. Aug. 31, 2012). This is a sweeping holding that will surely have far-reaching consequences for much software patent litigation, both ongoing and prospective.
At issue in these consolidated cases were patents owned by Akamai Technologies and McKesson Information Solutions covering, respectively, Internet content delivery and "a method of electronic communication between healthcare providers and their patients." The respective district courts had followed BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), and Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), in granting motions for judgment as a matter of law and summary judgment of non-infringement.
Direct patent infringement under 35 U.S.C. § 271(a) requires that an accused infringer "commit all the acts necessary to infringe the patent, either personally or vicariously," e.g., perform, or direct and control the performance of, all claimed method steps. However, "[d]irect infringement has not been extended to cases in which multiple independent parties perform the steps of the method claim." Because the Court's reasoning in the present case "is not predicated on the doctrine of direct infringement," the Court did not "revisit any of those principles regarding the law of divided infringement as it applies to liability for direct infringement under 35 U.S.C. § 271(a)."
Instead, the Court considered the law of induced infringement under 35 U.S.C. § 271(b). Inasmuch as the law of induced infringement is designed to impose liability on an inducing party based on the conduct of others, it was well-suited to address the problem presented: what to do "when no single 'induced' entity commits all of the infringing acts or steps but where the infringing conduct is split among more than one other entity."
Although induced infringement requires direct infringement, the Court thought 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." A party inducing infringement "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."
The Court further stated that its conclusion was consistent with the wording of Section 271. The direct infringement provision imposes liability on someone who “infringes the patent.” 35 U.S.C. § 271(a). The inducement provision, in contrast, says that an active inducer of “infringement . . . shall be liable as an infringer,” 35 U.S.C. § 271(b), but the word “infringement” simply refers to the acts necessary to infringe a patent, and imposes no requirement that those acts be imposed by a single entity. Thus, the Court disagreed with Judge Linn's dissent that it had defined direct infringement differently for purposes of these two provisions.
After a detailed analysis of the legislative history of the 1952 Patent Act, the Court concluded that the statute clearly contemplated indirect infringement where there was no single direct infringer. Further, the Court analogized to common tort law, which imposes liability for inducing tortious acts independent of liability for acts that the tortfeasor performed or controlled.
The Court also disagreed with Judge Linn's reliance on Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 500 (1964). Aro addressed the “permissible repair” doctrine, and concluded that a direct infringer was necessary for contributory infringement. Aro did not stand in any way “for the proposition that there can be no induced infringement if there is actual infringing conduct but the acts necessary to constitute the infringement are committed by more than one party.”
Judge Newman, and, as noted above, Judge Linn filed dissents. Judge Newman thought that existing law could address issues arising from “interactive methods and collaborative performance.” She further chastised the majority for avoiding the issue for which these cases were taken en banc, that is, whether direct infringement requires a single entity performing all of the acts required to constitute infringement. Judge Newman would have resolved that issue by acknowledging that a single entity is not always present or required for direct infringement, which, according to Judge Newman, is necessary for induced infringement. Thus, she thought that the new “inducement-only rule” avoided the Court's responsibility to define liability for direct infringement.
Judge Linn's dissent was joined by Judges Dyk, Prost, and O'Malley. Judge Linn found it fundamental that indirect infringement requires direct infringement. The majority had impermissibly redefined “infringement” under Section 271(b). Further, the legislative history of the Patent Act was not as clear as the majority would have it be, and moreover, subsequent amendments to Section 271 made clear that it was the province of the legislature, and not the courts, to define infringement. The majority's analogies to common tort law were misplaced, and in fact traditional principles of vicarious liability should still apply. Judge Linn would have affirmed the respective district courts' holdings of noninfringement in both cases.