Divided Federal Circuit Sidesteps “Divided Infringement” Issue: Induced Infringement Does Not Require Direct Infringement By Single Actor

One issue that has vexed courts and commentators for several years is whether a method claim may be infringed when all the required steps are performed, but by more than one entity. In an earlier case, BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), a panel of the U.S. Court of Appeals for the Federal Circuit held that a single defendant was liable for direct infringement, even if it did not itself perform all the required steps, when the acts were committed by the defendant’s agent or a party acting pursuant to defendant’s direction or control. See Mark Lemley, et al., “Divided Infringement Claims,” 33 AIPLAQJ 255 (2005). To consider conflicting views on the issue, the Federal Circuit recently granted en banc review in two consolidated cases.

On August 28, the court issued a sharply divided en banc decision in the cases. Akamai Techs, Inc. v. Limelight Networks, Inc., Case Nos. 2009-1372, -1380, -1416, and -1417 (Fed. Cir. Aug. 28, 2012). In a 6-5 decision, the court ruled that issues of divided infringement are better handled as induced infringement under 35 U.S.C. § 271(b), rather than direct infringement under § 271(a). In order to permit that approach to work, the court rejected its prior authority holding that induced infringement only exists when a single third party has committed direct infringement. Instead the court majority held that the induced conduct itself could constitute the required direct infringement, even if the required method steps were performed by two or more entities (or even in part by the defendant). Thus, even though a defendant did not direct or control others in performing the various steps, it could be liable as an infringer under §271(b) if (1) it knew of the patent, (2) it performed or induced third parties to perform the steps of the claimed method, and (4) the steps were all in fact performed. (Note that under the Supreme Court’s decision in Global–Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060 (2011), a patentee proving active inducement also must show that the defendant acted with actual intent to cause infringement (or, alternatively, with “willful blindness”).

Five judges dissented. Judge Newman accused the majority of ignoring the issue for which en banc review was granted (and the only issue briefed and argued), namely, the proper standard for direct infringement in divided infringement cases. Judge Linn, joined by three other judges, argued that the majority’s decision usurped the policy-making function of Congress by retooling § 271 in a manner inconsistent with a long line of prior authority. The opinions (all 100-plus pages worth) are available here.

Is proof of knowledge necessary in induced infringement claims?

Stephen Richer (Washington Legal Foundation) has emailed with an item for PatLit -- this analysis was published last Friday by Washington Legal Foundation.  Titled "Supreme Court To Address Standard For Induced Patent Infringement – An examination of Global-Tech Appliances Inc. v. SEB, S.A." and written by Brian Pandya (Wiley Rein LLP), this not explains that the issue at stake is whether 35 U.S.C. sec. 271(b) carries a scienter requirement (i.e.that it must be necessary to prove that an alleged infringer has actual knowledge of the patent before he can be liable for inducing patent infringement. The note adds:

"...  the issue of induced infringement is significant to the business community, particularly technology companies that have faced lawsuits alleging that they are inducing patent infringement".

The US Supreme Court hears arguments next week, on 23 February.