Direct Infringement of Method Claims by Single Entity No Longer Necessary for Inducement Liability

On August 31, 2012, the Court of Appeals for the Federal Circuit issued an en banc decision that inducement to infringe a method claim no longer requires proof that a “single entity” is liable for direct infringement. This pronouncement by the Court in Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp. (“Akamai”) should make it easier to prove inducement of infringement when all the steps of a method claim are not performed by a single actor.

Both cases concerned the theory of divided infringement of method claims, in which the actions of different entities combine to perform various steps of a claimed process or method. The en banc opinion acknowledged that “when the acts necessary to give rise to liability for direct infringement [of a method claim] are shared between two or more actors, doctrinal problems arise.” Under the current law for direct infringement of a method claim, which remains unchanged by the Akamai ruling, a single entity must either perform all the steps of a method, or control and direct, in a manner sufficient to form an agency relationship, one or more additional entities whose acts are combined to perform the claimed method or process.

Prior to Akamai, inducement to infringe a method claim required proof that a “single entity” was liable for direct infringement. Eliminating the need to prove direct infringement liability of a single entity, Akamai instead held that inducement requires a showing that direct infringement occurred, i.e., that each step of a method claim was performed, and that the defendant induced one or more entities to perform all of the steps that the inducer did not perform. In this regard, the Court held that “all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.”

The claims at issue in the underlying Limelight action were methods for delivering information over the Internet, including some steps performed by the defendant’s “content delivery networks” and others performed by “content providers.” The prior Federal Circuit panel concluded, notwithstanding instructions provided by Limelight to its customers directing performance of the claimed steps, that Limelight’s relationship with its customer content providers did not demonstrate the requisite control and direction to support a finding of direct infringement.

The method claims in McKesson recited steps related to electronic communication between patients and healthcare providers. While some method steps were performed by patients and others by healthcare providers, the defendant provided software that facilitated the interaction between the patients and healthcare providers, but did not perform any of the method steps. The prior Federal Circuit panel declined to find liability for inducement because of the absence of an agency relationship.

Thus, in both actions, the defendants avoided direct and/or indirect liability for infringement because neither case identified a “single entity” liable for direct infringement, namely: 1) a single entity performing all the steps of the method claims; nor 2) an agency relationship between the multiple actors performing the steps. Either of these scenarios would have permitted liability under earlier precedent, including BMC Resources, Inc. v. Paymentech, L.P. and its progeny.

The en banc opinion in Akamai found inducement to infringe a method claim even in the absence of a single entity performing the claimed steps or an agency relationship or its equivalent among the actors performing the steps of the claim. In reaching this result, the Akamai Court expressly overruled BMC Resources, which held that inducement must be predicated upon a finding of direct infringement by a single entity. The Akamai opinion noted that “[r]equiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer” and further reasoned that where a party has “knowingly induced others to commit the acts necessary to infringe the plaintiff’s patent and those others commit those acts, there is no reason to immunize the inducer from liability for indirect infringement simply because the parties have structured their conduct so that no single defendant has committed all the acts necessary to give rise to liability for direct infringement.”

Beyond a showing that all the steps of the claimed method were performed, induced infringement requires the additional proof of a specific intent requiring knowledge that the induced acts constitute patent infringement which, as announced by the Supreme Court last year in Global-Tech Appliances, Inc. v. SEB S.A., can be met by “willful blindness.” This additional proof satisfied the Akamai Court that strict liability would not be unfairly extended to otherwise innocent actors “unaware of the existence of a patent or even unaware that others are practicing some of the steps claimed in the patent.” The Court did not address whether the actions of multiple actors could be combined to find direct infringement liability without an agency relationship.

The Akamai court also clarified the differences between the infringement of method claims and that of product or apparatus claims. The Court confirmed that “[w]hen claims are directed to a product or apparatus, direct infringement is always present, because the entity that installs the final part and thereby completes the claimed invention is a direct infringer.”

The Limelight and McKesson actions were remanded for determinations as to whether the defendants induced infringement under the new standard articulated by the Akamai decision. Because Akamai announces a significant change to the legal landscape concerning the inducement of method claims, Supreme Court review is a distinct possibility.

In sum, under the current state of the law, where the actions of multiple parties combine to perform the steps of a claim, parties can no longer shield themselves from infringement liability by arguing the absence of a single entity liable for direct infringement. Where these circumstances exist, the infringement inquiry may turn upon whether a party has the specific intent to induce infringement of the claimed method.