In the combined decision of Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corporation, 2012 WL 3764695 (Fed. Cir. 2012), the Federal Circuit en banc changed the law on induced infringement. The court overruled its prior decision in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), and held that to prove direct infringement as a prong of induced infringement, a single party (or those under its direction or control) no longer needs to practice all of the steps in a method claim. Instead, for induced infringement, the direct infringement element may be satisfied by multiple parties practicing all of the steps in a method claim.
The patent statute, 35 U.S.C. § 271(b), states that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” For induced infringement, the alleged infringer must act with knowledge that the acts it induces constitute patent infringement. Specific intent is needed by alleged infringer to encourage another’s infringement. Further, the induced acts must constitute actual, direct infringement. No indirect infringement can occur without direct infringement.
According to the prior Federal Circuit decision in BMC Resources, the direct infringement element must have been committed by a single actor (or others under the direction and control of the single actor). In Akamai/McKesson, the Federal Circuit held that it is no longer necessary to prove that all the steps were committed by a single party, and that multiple induced actors could carry out various steps of the patent claim. The court explicitly overruled the BMC Resources decision.
In overruling its prior decision, the court noted that requiring proof of direct infringement is “not the same as requiring proof that a single party would be liable as a direct infringer.” The court further noted that the text of Section 271(b) does not limit infringement to a single party. Moreover, the court wanted to avoid the situation where a party does not directly infringe a patent, but assists others (without an agent relationship) to infringe some or all of the steps in a method claim.
Turning to the Akamai facts, Akamai owns a patent for the efficient delivery of web content. The patent included a method claim that recited steps for: (1) placing a portion of a content provider’s content elements on replicated servers; and (2) modifying the content provider’s web page so as to instruct web browsers to retrieve the content from the replicated servers. Limelight (i.e., the accused infringer) has a network of servers and allows for efficient delivery of web content by placing on its servers some content elements. Limelight, however, did not modify the content provider’s web pages. Instead, according to the Federal Circuit, Limelight instructed its customers on how to do the modifying.
Relying on the BMC Resources decision and Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, (Fed. Cir. 2008), the district court ruled in favor of Limelight and held that Limelight did not actively induce infringement. However, the Federal Circuit, based on its new ruling, remanded the case back to the district court to determine whether Limelight may be liable for induced infringement. In so doing, the Federal Circuit stated that on remand Limelight may be liable for induced infringement if: (1) Limelight knew of the Akamai patent; (2) Limelight performed every step but one of the method claim; (3) Limelight induced the content providers to perform the remaining step of the method claim; and (4) the content providers did, in fact, perform the remaining step.
In the McKesson case, McKesson owns a patent for “electronic communication between healthcare providers and their patients.” Epic (i.e., the accused infringer) licenses software to healthcare organizations. Epic’s software allows healthcare providers electronically to communicate with their patients, and Epic does not perform any of the steps in the method claim. Instead, the steps of method claim are allegedly performed by patients, who start the communication, and healthcare providers, who perform the remaining steps of the method claim.
Like the lower court in Akamai, relying on the BMC Resources and Muniauction decisions, the district court ruled in favor of Epic and held that Epic did not actively induce infringement. However, the Federal Circuit, based on its new ruling, remanded the case back to the district court to determine whether Epic may be liable for induced infringement. In so doing, the Federal Circuit stated that on remand Epic may be liable for induced infringement if: (1) Epic knew of the McKesson patent; (2) Epic induced the performance of the steps of the method claim; and (3) the steps of the method claim, in fact, were performed.
The Federal Circuit’s decision was not without controversy. The case was a split decision, 6–5, and was written per curiam. A first dissent by Judge Linn was joined by three judges and would not have overruled BMC Resources. A second dissent by Judge Newman sought to reevaluate direct infringement itself and determine that direct infringement occurs when all the steps of a method claim are performed, either by a single party or in interaction or collaboration.
The Federal Circuit decision will likely prove helpful to patent owners, as it relaxed the standard for establishing induced infringement. When asserting induced infringement of a method claim, a patentee now no longer needs to be concerned that multiple unrelated parties interact to perform the steps of the method. When defending against an assertion of induced infringement of a method claim, an alleged infringer now has one fewer defense to consider when multiple unrelated parties perform the method claim.
The decision may be especially relevant for network-based patents, such as those at issue in the BMC Resources, Muniauction, and Akamai/McKesson. Other industries also may be affected by the decision, such as the pharmaceutical industry and manufacturing supply chains. Patent applicants may also want to factor in the decision in drafting patent applications.