Wednesday, 20 May 2015

Federal Circuit Again Addresses “Divided Infringement” Scenarios

On May 13, 2015, the U.S. Court of Appeals for the Federal Circuit again considered the circumstances in which a defendant may be liable for direct infringement under 35 U.S.C. § 271(a) when multiple actors carry out the required steps of a patented process. In a sharply divided panel decision, the court ruled that while principles of vicarious liability apply to direct infringement, liability is not available under joint tort concepts, such as “concert in action.” Akamai Technologies Inc. v. Limelight Networks, Inc., Case No. 2009-1372 (Fed. Cir. May 13, 2015). As a result, a defendant may be liable for direct infringement of a method claim only if: (a) the defendant performed every step of the patented method, or (b) if the defendant did not perform every step, the defendant was a “mastermind” that orchestrated the infringement and thus was responsible for the steps performed by others. In order to be a mastermind, a defendant must go beyond merely instructing or encouraging another actor to perform the steps that it did not perform -- a defendant is liable only if it is legally responsible for the missing steps due to a principal-agent relationship, a contractual arrangement, or a joint enterprise.

The latest Akamai decision essentially reaffirms the court’s earlier ruling in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (2008) that direct infringement liability requires a single entity to perform all the steps of a patented method. This interpretation could have far-reaching implications for patent claim drafting and infringement litigation.

In a 2 to 1 decision written by Circuit Judge Richard Linn, the court ruled that § 271(a) includes a “single entity rule:”

[D]irect infringement liability of a method claim under 35 U.S.C. § 271(a) exists when all of the steps of the claim are performed by or attributed to a single entity—as would be the case, for example, in a principal-agent relationship, in a contractual arrangement, or in a joint enterprise. Because this case involves neither agency nor contract nor joint enterprise, we find that Limelight is not liable for direct infringement.

Slip op. at 6-7. The court ruled that while § 271(a) covers situations in which a defendant is legally responsible for the acts of closely-related third parties (i.e., vicarious liability), direct infringement does not extend to common law tort theories in which multiple persons acting together are jointly liable.

In a vigorous dissent, Circuit Judge Kimberly A. Moore argued that the single entity rule has no basis in the statute or case law, and that limiting the scope of § 271(a) to vicarious liability situations creates a “gaping hole” in liability under the Patent Act, effectively rendering thousands of process claims uninfringeable. She argued that liability under § 271(a) also applies in cases where defendants would be considered jointly liable under some common law tort principles. Due to the pointed dissent, however, it is likely that the Federal Circuit will again review the issue en banc.

The Akamai decision underscores the need for patent applicants to claim their process inventions in a way that can be infringed by a single actor, either through actions by a single competitor or actions attributable to it through contractual relationship or agency principles. This is especially important because liability for active inducement or contributory infringement will not be available in many cases due to the high intent standard required in § 271(b) and (c). See Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011) (active inducement requires actual intent to cause infringement or willful blindness). 

A copy of the decision is available HERE.

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