On April 12, 2011, the U.S. Court of Appeals for the Federal Circuit issued its decision in McKesson Technologies Inc. v. Epic Systems Corp., No. 2010-1291, slip op. (Fed. Cir. April 12, 2011). In this long-anticipated decision, a sharply divided panel composed of Judges Newman, Bryson, and Linn determined that a patentee who was unable to attribute the performance of all of the steps of the asserted method claims to a single entity had failed to prove direct infringement. The Court’s decision is notable in that it produced three opinions: a majority opinion, a concurrence suggesting that en banc consideration of the question of joint infringement might be warranted, and a vigorous dissent arguing that the majority—in its application of the “single entity rule”—had ignored controlling precedent. This opinion provides a useful discussion and application of the recent cases addressing liability for alleged joint infringement as well as a preview of a case that the Court might decide to review en banc.
McKesson is the assignee of U.S. Pat. No. 6,757,898. The ’898 patent is directed to a method for using personalized Web pages to facilitate communication between health care providers and their patients. For example, the ’898 patent discloses an embodiment of the invention that provides patients with online visit-specific information, including “significantly more information than [the patient] could have absorbed during a typical visit with the physician.” ’898 patent, col.4, ll.63-65. The Web page also can allow the patient to manage appointments and request prescription refills online.
Epic is a software developer that licenses its software to health care providers. One of its products, MyChart, is a software package that allows health care providers to associate a patient’s medical records to a personalized Web page. MyChart also allows a patient to communicate with the health care provider though the Web page.
Because Epic licenses its MyChart software to health care providers as part of a larger package, each provider is free to choose whether to use the record association and communication features provided by MyChart. None of Epic’s licensees that chooses to make these features available actually requires its patients to use these features. Rather, a patient must choose to use these features by initiating a communication to the provider, which is done by logging on to the provider’s MyChart Web page. Once authenticated, the patient is presented with a personalized Web page allowing the patient access to medical records and communication with the health care provider.
In 2006, McKesson sued Epic for inducing infringement of the ’898 patent by licensing MyChart to health care providers. Claim 1 of the ’898 patent is representative of the asserted claims:
A method of automatically and electronically communicating between at least one health-care provider and a plurality of users serviced by the health-care provider, said method comprising the steps of:
initiating a communication by one of the plurality of users to the provider for information, wherein the provider has established a preexisting medical record for each user;
enabling communication by transporting the communication . . . ; electronically comparing content of the communication . . . ;
returning the response to the communication automatically . . . ;
said provider/patient interface providing a fully automated mechanism for generating a personalized page or area within the provider’s Web site for each user serviced by the provider; and
said patient-provider interface service center for dynamically assembling and delivering customer content to said user.
’898 patent col. 44 l.60–col. 45 l.24 (emphasis added).
In September 2009, the District Court entered summary judgment against McKesson. McKesson Info. Solutions LLC v. Epic Sys. Corp., No. 06-cv-2965 (N.D. Ga. Sept. 8, 2009). Citing the Federal Circuit’s decision in 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), the District Court determined that McKesson could not have succeeded on a claim of indirect infringement because it had failed to demonstrate that a single party directly infringed the ’898 patent. Epic’s provider customers did not directly perform the method’s “initiating” step (in italics above), nor did they exercise control or direction over the patients who did perform this step.
The Majority Opinion
On appeal, the panel majority affirmed the District Court’s judgment applying the Federal Circuit’s decisions in BMC Resources, Muniauction, and Akamai Technologies, Inc. v. Limelight Networks, Inc., 629 F.3d 1311 (Fed. Cir. 2010) (summarized online at http://tinyurl.com/3dr6z5a). As Judge Linn, writing for himself and for Judge Bryson, explained, in BMC Resources and Muniauction the Court “concluded that ‘where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises ‘control or direction’ over the entire process so that every step in the process is attributable to the controlling party.’” McKesson, slip op. at *6 (citing Muniauction, 532 F.3d at 1329; BMC Res., 498 F.3d at 1379). Moreover, in Akamai, the Court addressed a situation where the patentee sought to have a customer’s actions attributed to a service provider to establish that all of the steps of the claimed method were being performed. It held that “‘there can only be joint infringement when there is an agency relationship between the parties who perform the methods steps or when one party is contractually obligated to the other to perform the steps.’” Id. at *7 (quoting Akamai, 629 F.3d at 1320).
Because the patients who perform the initiating step are neither the agents of their health care providers nor contractually obligated to the health care providers to perform this step, the panel majority found that there was no direct infringement. The majority point out that McKesson had not identified any viable legal theory under which the patients’ actions could be attributed to the health care providers who licensed MyChart from Epic. The majority further noted that McKesson’s resort to the general principles of tort law regarding concerted action and the Supreme Court’s vicarious liability holdings under copyright law were foreclosed by prior Federal Circuit decisions. Id. at *8-*9. As for McKesson’s invitation to depart from the cited precedents, the majority noted that the prior decision of the panel are binding until overturned in banc. Id. at *9.
Judge Bryson’s one paragraph concurrence begins by noting that he “agree[s] that the decision in this case is correct in light of this court’s decisions in BMC Resources, Muniauction, and Akamai Technologies.” More significantly, Judge Bryson then appears to invite further inquiry into the holdings of those cases or a further en banc review, noting that “Whether those decisions are correct is another question, one that is close enough and important enough that it may warrant review by the en banc court in an appropriate case.” McKesson, slip op. at *1 (Bryson, J. concurring).
In view of this statement, it is likely that any en banc request will be taken quite seriously. BMC Resources, Muniauction, and Akamai Technologies—the three opinions relied upon by the majority opinion here—were joined by five of the 11 currently active members of the Federal Circuit (as well as two judges who now have senior status and cannot vote upon en banc petitions). Thus, it is possible that these opinions do not reflect the views of a majority of the Federal Circuit’s active judges.
The Dissenting Opinion
Judge Newman dissented from the majority’s opinion, arguing that the majority had departed from the Federal Circuit rule that treats the earlier of conflicting panel precedent as controlling. In particular, Judge Newman argues that the Federal Circuit decisions that the majority claims to be bound by—BMC Resources, Muniauction, and Global Patent Holding—conflict with earlier Federal Circuit cases regarding joint infringement. McKesson, slip op. at *7-*8 (Newman, J. dissenting)
The bulk of the Newman dissent details the recent and prior decisions of the Federal Circuit on joint infringement issues, with emphasis on claimed inconsistencies and the fact that earlier cases did not impose the “direction or control” test or require an agency or contractual relationship between the joint tortfeasors. Id. at *8-*14. Judge Newman’s dissent further points out the apparent tension between the cases addressing claims to interactive methods like those at issue in this case, and claims to “interactive systems,” which are not subject to a single entity rule. See, e.g., Centillion Data Sys., LLC v. Qwest Commc’n Int’l, Inc., 631 F.3d 1279, 1285 (Fed. Cir. 2011) (citing NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005)). She also claims that the majority decision further adds to the confusion regarding the §271(a) term “use” in conjunction with a method or system. McKesson, slip op. at *14-*15 (Newman, J. dissenting). She concludes by emphasizing the departure from the common law, the general principles of tort liability, and the resulting negative affect on innovation. Id. at *16-*17.
While the majority decision is consistent with BMC, Muniauction, and Akamai, further en banc review of all of these decisions appears possible. In the meantime, careful analysis of any claims asserted or to be asserted in litigation will continue to be important. A portfolio review, also focusing on potential joint infringement issues, may also be worthwhile, at least to ensure that a company’s highest-value inventions are properly protected.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:
George C. Best
Silicon Valley, California
Cynthia J. Franecki
Vice Chair, IP Litigation Practice
Joseph N. Ziebert
Chair, Electronics Practice