Federal Circuit Poised to Clarify Rules on Joint Infringement

Federal Circuit Poised to Clarify Rules on Joint Infringement

    

By Kevin Littman (klittman@foley.com)

The U.S. Court of Appeals for the Federal Circuit's recent decisions in the area of joint infringement have generated disagreements about whether those decisions are consistent. The court recently signaled its intent to clarify the law of joint infringement by calling for en banc review of its decisions in Akamai Technologies, Inc. v. Limelight Networks, Inc., 629 F.3d 1311 (Fed. Cir. 2010), [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]  and McKesson Technologies, Inc. v. Epic Systems Corp., No. 2010-1291, 2011 WL 1365548 (Fed. Cir. April 12, 2011). [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law ].

Joint infringement, sometimes called divided infringement, refers to situations in which a patent claim contains a series of elements that are performed by multiple parties. For a claim to be directly infringed, all of the steps must be performed. This creates a potential non-infringement defense if there are multiple parties performing separate steps. For example, if a claim has four steps, and one entity performs the first two steps and a second entity performs the second two steps, each entity may assert that it cannot be liable for infringement because it does not perform all four steps.

The Federal Circuit's current line of joint infringement law began to develop in 2007 with the court's decision in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007). [enhanced version available to lexis.com subscribers unenhanced version available from lexisONE Free Case Law]. In BMC Resources, the court held that in cases of divided infringement of a method claim, one party must "control or direct" each step of the method for there to be direct infringement.

The Federal Circuit expanded on what it means for an entity to "control or direct" all of the steps of a method claim in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law ]. The patent in Muniauction related to methods for conducting auctions of financial instruments. Like BMC Resources, the claims at issue were method claims, and they were performed by multiple parties, with at least one step performed by auction bidders and the rest performed by the accused software system. The plaintiff argued that there was direct infringement because the defendant controlled access to its system and instructed bidders how to use the system. The court, however, held that merely providing instructions to the bidders was not sufficient to demonstrate "control or direction," and thus found no direct infringement.

At the end of 2010, in Akamai, the Federal Circuit provided its clearest direction about the meaning of "control or direct," stating that an agency or other contractual relationship must exist for there to be direct infringement in cases of divided infringement of method claims. The patents in Akamai included methods directed to content delivery services over the Internet. The court held that there was no direct infringement because the defendant's customers, while provided with instructions on how to use the service and required to perform some of the steps of the claim to take advantage of the service, were not agents of the defendant.

In January 2011, however, the court issued what some view as an inconsistent ruling in Centillion Data Sys. v. Qwest Communs. Int'l, Inc., 631 F.3d 1279 (Fed. Cir. 2011). [enhanced version available to lexis.com subscribers unenhanced version available from lexisONE Free Case Law ].  Centillion involved divided infringement of "system" claims, rather than method claims. The patent in Centillion disclosed a system for collecting, processing, and delivering information from a service provider, such as a telephone company, to a customer. The system processes call data and delivers it to customers in a format appropriate for a personal computer. The claim included a "front-end" portion and a "back-end" portion. Although the accused products included both portions, the customer did not perform the "back-end" portion. In evaluating infringement by the customer, the Centillion court did not apply the agency test announced in Akamai. Instead, it found there was direct infringement by the customer because the customer "puts the system as a whole into service, i.e., controls the system and obtains benefits from it." On the other hand, the court determined that Qwest was not a direct infringer because it did not direct its customers to perform any steps, nor were the customers agents of Qwest.

Finally, and most recently, in McKesson Technologies, Inc. v. Epic Systems Corp., No. 2010-1291, 2011 WL 1365548 (Fed. Cir. April 12, 2011), enhanced version available to lexis.com subscribers unenhanced version available from lexisONE Free Case Law ] the court addressed infringement of a method claim for electronically communicating between a health care provider and the health care provider's customers. The court held that there was no infringement because there was no agency relationship between the providers and the customers.

In view of the court's other decisions involving method claims, McKesson appears to be a straightforward application of the law. In a dissent, however, Judge Newman contended that the Federal Circuit's decisions on joint infringement have been incorrect and inconsistent, citing what she viewed as the different treatment of system and method claims established by the Centillion decision. Similarly, in a concurrence, Judge Bryson suggested that the court's decisions in BMC Resources, Muniauction, and Akamai might be incorrect and that the court should consider en banc review of its joint infringement rules in an appropriate case.

The court quickly found appropriate cases. Just two weeks after the McKesson decision, the court vacated its opinion in Akamai and ordered a rehearing en banc to address the following question: "If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?" Akamai Technologies, Inc. v. The Massachusetts Institute of Technology, No. 2009-1372, 2011 WL 1518909, *1 (Fed. Cir. Apr. 20, 2011). [ enhanced version available to lexis.com subscribers
unenhanced version available from lexisONE Free Case Law

Then, at the end of May 2011, the court granted rehearing en banc in McKesson to address the following two issues: 1) "If separate entities each perform separate steps of a method claim, under what circumstances, if any, would either entity or any third party be liable for inducing infringement or for contributory infringement?" and 2) "Does the nature of the relationship between the relevant actors - e.g., service provider/user; doctor/patient - affect the question of direct or indirect infringement liability?" McKesson Technologies Inc. v. Epic Systems Corp., Fed. Cir., No. 2010-1291 (May 26, 2011). [enhanced version available to lexis.com subscribers   /  unenhanced version available from lexisONE Free Case Law

Briefing in the en banc cases should be completed this summer, with oral argument likely in fall 2011. Decisions could be issued as early as late 2011 or early 2012. Until then, it will be unclear whether many claims that require multiple parties can be successfully asserted in litigation. It remains wise to draft claims in a manner such that a single entity performs all the steps.

Resolution of these issues will be important for numerous businesses and patent owners, especially those involving interactive online services.

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:

Courtenay C. Brinckerhoff
Vice Chair, Chemical, Biotechnology & Pharmaceutical Practice
Washington, D.C.
202.295.4094
cbrinckerhoff@foley.com

Jeanne M. Gills
Vice Chair, IP Department
Chicago, Illinois
312.832.4583
jmgills@foley.com  

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