As technology has evolved, particularly with the advent of the Internet, patent law has had to take a critical look at the issue of divided infringement and how method claims are to be analyzed in litigation. Method claims, which are a collection of steps to be performed in a patented process, have become a problematic area for both attorneys and clients. In general, direct patent infringement requires a single actor to practice all elements of the patent claim. However, one question is what happens if two or more actors are needed to complete every element of the patent claim? Based on policy concerns, it is not wise to allow companies to engage in what appears to be an arms-length transaction merely to avoid any liability for infringement of a method claim – this is an example of the serious issue surrounding divided infringement.
Exploiting A Loophole
Until the recent decision in Akamai Technologies, Inc. v. Limelight Networks, another loophole for avoiding infringement was exploited by defendants to avoid liability. 692 F.3d 1301 (Fed. Cir. 2012). Defendants, knowing of patented processes, had been essentially leaving the last step of a process to be performed by a user of the process. This purportedly resulted in divided infringement and avoidance of liability, because no single person was performing all elements of the claim in an infringing act either personally or vicariously, because the entity claimed that it was not controlling or directing the actions of the second entity. Fortunately, the Federal Circuit recognized this loophole in the law, and has corrected the doctrine of induced infringement to avoid these scenarios.
Until Akamai Technologies, the Federal Circuit had been using the test announced in BMC Resources, Inc. v. Paymentech, L.P., which explained that induced infringement could only be found if direct infringement of a claim by a single actor was proven, as well as induced infringement by a single actor performing all of the steps of a method claim. This ruling effectively defeated induced infringement liability for method claims, because defendants would knowingly leave the last step of a method claim to its users, creating divided infringement – a bar to liability. This injustice has now been corrected.
The real crux of the matter centers around the definition of direct infringement. “Inducement gives rise to liability only if the inducement leads to actual infringement. That principle, that there can be no indirect infringement without direct infringement, is well settled.” Akamai Techologies, 692 F.3d at 1301. Thus, there is the appearance that if a single entity does not directly infringe by performing all of the steps of a method claim, then induced infringement cannot lie either. However, this reading narrows the scope of the Patent Act too far.
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Direct Infringement vs. Induced Infringement
As so many courts before it had done, the Federal Circuit reexamined the legislative history of the patent statutes in conjunction with the underlying policies of patent law, focusing on 35 U.S.C. §§ 271 (a) and (b), regarding direct infringement and induced infringement respectively, to properly define the scope of liability.
The Federal Circuit in Akamai recognized that a party is liable for direct infringement when that party commits all of the infringing steps, “either personally or vicariously.” Akamai Technologies, 692 F.3d at 1301, 1307. Inducement, on the other hand, “does not require that the induced party be an agent of the inducer or be acting under the inducer’s direction or control to such an extent that the act of the induced party can be attributed to the inducer as a direct infringer. Id. at 1308. Thus, parties can be liable for induced infringement by simply providing the tools necessary to perform the last step of a method claim and instructing a second individual to perform that last step, thereby inducing the action. The Federal Circuit found support for its conclusion in the House Report on the 1952 Act.
In 1952, the Patent Act was being revised with legislators outlining what would be considered direct infringement versus induced infringement. With respect to subsection (b), induced infringement was added to 35 U.S.C. § 271 to hold a person liable for infringement if that person aided and abetted infringement, and was thus contemplating that two entities could be responsible for infringement. This section was drafted based on the principle that infringement is in fact a tort, and inducement mirrors the tort law regarding joint tortfeasors. With respect to joint tortfeasors, “the First Restatement makes clear that the rule imposing liability for inducement of a tort applies even if the person being induced is unaware that his act is injurious and is not liable for that reason.” Akamai Technologies, 692 F.3d at 1313. Thus, “an inducer of infringement has a duty not to cause the acts that constitute infringement even if the parties who cause the direct injury are not liable.” Id. In layman’s terms, when two people commit a tort as joint tortfeasors, the inducing party can be held liable for negligence, even if the second party is found not liable, for the inducing party had caused the breach of duty. In the same manner, an innocent user performing the last step(s) of a method claim cannot be held liable and the party who induced the infringement is liable for breaching its duty of non-infringement by promoting the infringing use.
Closing The Loophole
In essence, direct infringement and induced infringement are two distinct theories of infringement. All that is required for a showing of direct infringement is that all of the steps of the method claim are performed, personally or vicariously (such as through agents), resulting in essentially one party performing all of the steps of a method claim. Induced infringement will arise when two actors, without a vicarious relationship, combine to commit direct infringement, meaning the performance of all of the steps of a method claim, as a separate liability. As the Court succinctly stated, “Congress did not intend to create a regime in which parties could knowingly sidestep infringement liability simply by arranging to divide the steps of a method claim between them.” Akamai Technologies, 692 F.3d at 1318. Thus, the Federal Circuit has now closed the loophole that was allowing several infringers to avoid liability.