En Banc Federal Circuit Eases Requirements for Induced Infringement of Method Claims

04 September 2012 PharmaPatents Blog

On August 31, 2012, the Federal Circuit issued an en banc, per curiam opinion deciding both Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp., which each relate to the requirements for establishing infringement when all of the steps of a method claim are not performed by a single party. The court overruled its 2007 decision in BMC Resources, Inc. v. Paymentech, L.P., and held that induced infringement can be found even if a single entity is not liable for direct infringement. While the cases before the court pertain to computer-related inventions, this decision will be important to patents in the field of personalized medicine, where a doctor, patient, and laboratory may be involved in various steps of a diagnostic or therapeutic method.

Direct Infringement of Method Claims

The court did not disturb the principle that in order for “a party to be liable for direct patent infringement under 35 U.S.C. § 271(a), that party must commit all the acts necessary to infringe the patent, either personally or vicariously.” The court explained that, “[i]n the context of a method claim, that means the accused infringer must perform all the steps of the claimed method, either personally or through another acting under his direction or control.” Thus, “this court has rejected claims of liability for direct infringement of method claims in cases in which several parties have collectively committed the acts necessary to constitute direct infringement, but no single party has committed all of the required acts,” unless there was ”an agency relationship between the actors.”

Induced Infringement of Method Claims

The court decided that induced infringement is best suited “to address the problem presented by the cases before us, i.e., whether liability should extend to a party who induces the commission of infringing conduct 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.”

The court noted that to be liable for induced infringement, “the accused inducer [must] act with knowledge that the induced acts constitute patent infringement.” Moreover, “inducement gives rise to liability only if the inducement leads to actual infringement.” Revisiting and overruling its decision in BMC, the court reasoned:

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.

Applying the new interpretation to the cases before it, the court noted:

In the McKesson case, 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 claimed in the patent, and (3) those steps were performed.

* * * * *

[In the Akami case,] 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 court reversed the judgments of non-infringement in both cases, and remanded “for further proceedings on the theory of induced infringement.”

Judge Newman’s Dissent

Judge Newman dissented and criticized the court for failing to resolve the issue of divided direct infringement, and for expanding liability for induced infringement.

This en banc court has split into two factions, neither of which resolves the issues of divided infringement. A scant majority of the court adopts a new theory of patent infringement, based on criminal law, whereby any entity that “advises, encourages, or otherwise induces,” maj. op. 14, or “causes, urges, encourages, or aids the infringing conduct,” id. at 15, is liable for the infringing conduct. The majority further holds that only the “inducer” is liable for divided infringement, and that the direct infringers are not liable although the patent rights are “plainly being violated by the actors’ joint conduct.” Id. at 10. These are dramatic changes in the law of infringement.

Judge Linn’s Dissent

Judge Linn’s dissenting opinion was joined by Judges Dyk, Prost, and O’Malley. These judges disagree with the court’s decision that liability for induced infringement can exist independently of liability for direct infringement:

On this unsound foundation, the majority holds that in the present appeals there has been predicate “infringement” even though § 271(a)’s requirements are not satisfied. On that basis, the majority vacates the contrary judgments of the district courts and remands for further proceedings concerning liability under § 271(b). In my view, the plain language of the statute and the unambiguous holdings of the Supreme Court militate for adoption en banc of the prior decisions of the court in BMC … and Muniauction … , which hold that liability under § 271(b) requires the existence of an act of direct infringement under § 271(a), meaning that all steps of a claimed method be practiced, alone or vicariously, by a single entity or joint enterprise.

Impact on Personalized Medicine Claims

Barring a Supreme Court decision that reverses or refines this holding, the Federal Circuit’s decision in Akami may make it easier to obtain patents in the personalized medicine space that both satisfy 35 USC § 101 as interpreted by the Supreme Court’s Prometheus decision, and that are enforceable against a single infringer or inducer. As I wrote previously, certain aspects of the Prometheus decision encourage method steps that would be carried out by different actors, such as one or more doctors, a testing laboratory, and/or the patient. While it is possible that an agency relationship could link those parties, the holding in Akami may make it easier to assert such patents against an inducer who encourages others to commit some or all of method steps that constitute infringement, even where the parties performing individual steps are acting independently.

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