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The Federal Circuit Closes Loophole for Infringers under Induced Infringement

November 2, 2012

Businesses that rely on method patents should consider the Federal Circuit's recent decision in Akamai Techs., Inc. et al. v. Limelight Networks, Inc. and McKesson Techs., Inc. v. Epic Systems Corp. This decision presents a substantial change in the law concerning joint patent infringement under the doctrine of induced infringement. Businesses involved with pharmaceuticals, biotechnology, manufacturing, IT and software, energy storage and production, wireless communication, medical diagnostics, and automotive technologies should pay special attention to the Akamai Techs., Inc.decision because these industries commonly rely on method patents to establish competitive advantage.

On August 31, 2012, the Court of Appeals for the Federal Circuit expanded the reach of induced infringement under 35 U.S.C. § 271(b) for patent owners with its en banc decision in Akamai Tech. Inc. v. Limelight Networks, Inc.

Induced infringement under 35 U.S.C. § 271(b) generally arises when a patent owner asserts its method patent against a person or entity who induced another person or entity to perform the patented method.

In 2007, the Federal Circuit elaborated on its interpretation of section 271(b) holding that liability for induced infringement requires a predicate finding of direct infringement by a single entity. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007). In BMC Resources, Inc., two method patents concerning electronic bill payment technology were asserted against an accused infringer who performed some of the steps of the patented methods while the remaining steps of the patented methods were performed independently by one or more third parties. Id. at 1378. The Court affirmed a finding of non-infringement for the accused infringer, because the patent owner failed to establish that the accused infringer performed or caused to be performed each of the steps of the methods patents. Id. at 1381. Consequently, the legal precedent established by BMC Resources, Inc. v. Paymentech, L.P. for induced infringement requires a showing of direct infringement by a single entity.

With the Federal Circuit's recent per curiam decision in the consolidated appeals, Akamai Techs., Inc. et al. v. Limelight Networks, Inc. and McKesson Techs., Inc. v. Epic Systems Corp., 692 F.3d 1301 (Fed. Cir. 2012) (en banc), the Court expressly overruled its holding in BMC Resources, Inc. and expanded liability for induced infringement. The Akamai Techs, Inc. decision concerns induced infringement in the context of two general scenarios where the acts of multiple parties can underpin a finding of induced infringement:

  1. Akamai Techs., Inc. - The accused infringer performs some of the steps of the method patent and induces others to perform the remaining steps; and
     
  2. McKesson Techs., Inc. - The accused infringer induces multiple parties to collectively perform all of the steps of the method patent, wherein no single party performs all of the steps of the method patent.

In each of these distinct sets of circumstances, the actions of one or more induced parties were tallied to establish that each step of the method patent was performed. Thus, an accused infringer can be held liable for induced infringement when the collective actions of multiple parties amount to a complete performance of the patented method. In this vein, the Akamai Techs., Inc. decision expands liability for induced infringement from requiring a direct infringement by a single entity to permitting the actions of multiple entities to account for direct infringement.

While the asserted patents in the Akamai Techs., Inc. decision concerned methods for delivering web content (Akamai) and methods for electronic communication between patients and healthcare providers (McKesson), the holding of this decision potentially implicates many technology sectors that substantially rely on method patents for competitive advantage and patent life cycle management.

We will continue to monitor this case for a future Supreme Court action or other action by the Federal Circuit.

If you have any questions regarding the information in this alert or have any other intellectual property concerns, please contact Jonathan O’Brien or Andrew Weber.