Federal Circuit Sets New Standard for Inducement of Patent Infringement

September 5, 2012

By: Brian T. Moriarty

Hamilton Brook Smith Reynolds Alert

What You Need to Know

  • “Sweeping change to the nation’s patent policy”
  • Inducement liability may exist even when no single entity performs all the steps of a claimed method
  • Inducing acts include causing, urging, encouraging, or aiding one or more steps of a claimed method to be performed
  • Companies may need to revisit their interactions with customers, suppliers, and other third parties to avoid patent infringement

Executive Summary

The Federal Circuit, in a six to five en banc decision, Akamai v. Limelight, held that an alleged infringer may be liable for inducing infringement of a method claim if it (i) performs some of the steps and induces another party to perform the remaining steps or (ii) induces other parties collectively to perform all of the claimed steps.  (August 31, 2012 Order, Akamai Technologies Inc. v. Limelight Networks Inc., Fed. Cir., No. 2009-1372 and McKesson Technologies Inc. v. Epic Systems Corp., Fed. Cir., No. 2010-1291).

Importantly, and contrary to prior Federal Circuit panel decisions, the majority held that inducement liability does not require that there be a single induced party that performs all of the claimed steps, or that the induced party be under the direction or control of the inducer.

Our View

This decision is favorable for patent owners and may give rise to more allegations of patent infringement because (1) inducement liability no longer requires that a single induced actor perform all of the claimed steps, and (2) an inducing act is broadly construed (e.g. causing, urging, encouraging, or aiding).

Likewise, companies that may be accused of inducing infringement may need to investigate whether their customers or suppliers are performing claimed steps, and if so, whether they may be inducing these steps – for example, by providing requirements to suppliers or providing instructions to customers.

Importantly, inducement liability still requires knowledge of the patent.  Thus, a company cannot be liable for inducement before learning of the patent.

The New Standards for Induced Infringement

In what a dissenting opinion called a “sweeping change to the nation’s patent policy,” the Federal Circuit, in a six to five en banc decision, held that a patentee alleging induced infringement of a method claim no longer has to show that a single induced party performed all the steps of the method.  Specifically, a party may be liable for inducing infringement if it is aware of the patent, and either (a) performs some of the steps and induces another party to perform the remaining steps or (b) induces other parties collectively to perform all of the claimed steps.

The Court relied on statutory interpretation in finding that “infringement” in the context of section 271(b), which addresses inducement, refers to the acts necessary to infringe a patent rather than which party, or how many parties, performed those acts.  The Court further explained that “[r]equiring 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.”  The Court also underscored that all of the claimed steps must be performed for inducement liability to attach.  As further support, the Court found that good patent policy would not support allowing alleged infringers to escape inducement liability by structuring their conduct so no single entity performed all the steps.  

In finding that a single entity did not need to perform all the claimed steps in order for there to be inducement liability, the Court expressly overruled the Federal Circuit’s 2007 BMC Resources, Inc. v. Paymentech, L.P. decision and its progeny, which required that an induced party performing only some of the steps be an agent of, or under the direction or control of, the inducer to support a finding that the steps performed by the induced party were attributable to the inducer, a single entity.  In Akamai, the Federal Circuit left unresolved whether direct infringement can be found when no single entity performs all of the claimed steps.  Furthermore, direct infringement still also may exist based on vicarious liability when a party and its agents collectively perform all of the claimed steps.

Judge Linn and Judge Newman wrote dissenting decisions that faulted the majority for, among other things, improperly interpreting the statute and for making policy by providing sweeping and dramatic changes to the law of infringement.

Sharing Our Expertise

Hamilton Brook Smith Reynolds will hold a webinar on September 20, 2012 to provide a more detailed analysis of this decision and to address questions from the web audience.

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This advisory provides information only and no attorney-client relationship is created by presentation of it. The information provided herein does not constitute legal advice and is not a substitute for professional advice and may be considered advertising under the rules of the Supreme Judicial Court of Massachusetts and the U.S.P.T.O.

Recipients of the alert are expressly licensed to circulate the alert to others in substantially the same form. If you wish to republish the contents of this alert, please contact Judy White at 978.341.0036.

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About

September 5, 2012

By: Brian T. Moriarty

Hamilton Brook Smith Reynolds Alert

What You Need to Know

  • “Sweeping change to the nation’s patent policy”
  • Inducement liability may exist even when no single entity performs all the steps of a claimed method
  • Inducing acts include causing, urging, encouraging, or aiding one or more steps of a claimed method to be performed
  • Companies may need to revisit their interactions with customers, suppliers, and other third parties to avoid patent infringement

Executive Summary

The Federal Circuit, in a six to five en banc decision, Akamai v. Limelight, held that an alleged infringer may be liable for inducing infringement of a method claim if it (i) performs some of the steps and induces another party to perform the remaining steps or (ii) induces other parties collectively to perform all of the claimed steps.  (August 31, 2012 Order, Akamai Technologies Inc. v. Limelight Networks Inc., Fed. Cir., No. 2009-1372 and McKesson Technologies Inc. v. Epic Systems Corp., Fed. Cir., No. 2010-1291).

Importantly, and contrary to prior Federal Circuit panel decisions, the majority held that inducement liability does not require that there be a single induced party that performs all of the claimed steps, or that the induced party be under the direction or control of the inducer.

Our View

This decision is favorable for patent owners and may give rise to more allegations of patent infringement because (1) inducement liability no longer requires that a single induced actor perform all of the claimed steps, and (2) an inducing act is broadly construed (e.g. causing, urging, encouraging, or aiding).

Likewise, companies that may be accused of inducing infringement may need to investigate whether their customers or suppliers are performing claimed steps, and if so, whether they may be inducing these steps – for example, by providing requirements to suppliers or providing instructions to customers.

Importantly, inducement liability still requires knowledge of the patent.  Thus, a company cannot be liable for inducement before learning of the patent.

The New Standards for Induced Infringement

In what a dissenting opinion called a “sweeping change to the nation’s patent policy,” the Federal Circuit, in a six to five en banc decision, held that a patentee alleging induced infringement of a method claim no longer has to show that a single induced party performed all the steps of the method.  Specifically, a party may be liable for inducing infringement if it is aware of the patent, and either (a) performs some of the steps and induces another party to perform the remaining steps or (b) induces other parties collectively to perform all of the claimed steps.

The Court relied on statutory interpretation in finding that “infringement” in the context of section 271(b), which addresses inducement, refers to the acts necessary to infringe a patent rather than which party, or how many parties, performed those acts.  The Court further explained that “[r]equiring 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.”  The Court also underscored that all of the claimed steps must be performed for inducement liability to attach.  As further support, the Court found that good patent policy would not support allowing alleged infringers to escape inducement liability by structuring their conduct so no single entity performed all the steps.  

In finding that a single entity did not need to perform all the claimed steps in order for there to be inducement liability, the Court expressly overruled the Federal Circuit’s 2007 BMC Resources, Inc. v. Paymentech, L.P. decision and its progeny, which required that an induced party performing only some of the steps be an agent of, or under the direction or control of, the inducer to support a finding that the steps performed by the induced party were attributable to the inducer, a single entity.  In Akamai, the Federal Circuit left unresolved whether direct infringement can be found when no single entity performs all of the claimed steps.  Furthermore, direct infringement still also may exist based on vicarious liability when a party and its agents collectively perform all of the claimed steps.

Judge Linn and Judge Newman wrote dissenting decisions that faulted the majority for, among other things, improperly interpreting the statute and for making policy by providing sweeping and dramatic changes to the law of infringement.

Sharing Our Expertise

Hamilton Brook Smith Reynolds will hold a webinar on September 20, 2012 to provide a more detailed analysis of this decision and to address questions from the web audience.

-------------------------------

This advisory provides information only and no attorney-client relationship is created by presentation of it. The information provided herein does not constitute legal advice and is not a substitute for professional advice and may be considered advertising under the rules of the Supreme Judicial Court of Massachusetts and the U.S.P.T.O.

Recipients of the alert are expressly licensed to circulate the alert to others in substantially the same form. If you wish to republish the contents of this alert, please contact Judy White at 978.341.0036.

PDF FileView as PDF

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