Akamai and McKesson Federal Circuit En Banc Opinion May Affect Certain Commercial and Technological Environments

By Foley & Lardner LLP

Sep 4, 2012

On August 31, 2012, the Court of Appeals for the Federal Circuit issued its en banc decision that provides guidance for analyzing certain types of patent infringement in such complex commercial and technological environments. The Court addressed two cases in a single opinion, Akamai Technologies, Inc. v. Limelight Networks, Inc. (Case Nos. 2009-1372, -1380, -1416, -1417) and McKesson Technologies, Inc. v. Epic Systems Corp. (Case No. 2010-1291) (Akamai herein), reversing the district court rulings in both cases and remanding them for further proceedings.

The en banc opinion holds that liability for inducement of “divided” patent infringement of claimed methods/processes applies whether or not the multiple actors conducting the act of infringement have an agency relationship. Technologies involving separate entities that perform discrete and distinct steps — prominently, but by no means exclusively, Internet-driven systems and processes that utilize multiple actors (such as database facilities, network providers, and end-users) — have created a number of thorny issues for businesses, inventors, courts, and patent lawyers.

At least for the present — as the prospect of Supreme Court review remains — Akamai brings significant clarity to the issue of “divided infringement,” where different entities perform different steps of a patented process or method. The Court held that a party may be liable for induced patent infringement (under 35 U.S.C. §271(b)), where the act of infringement is accomplished by a single actor, or through multiple actors having no agency or other relationship to the inducing party that would render the inducing party “vicariously” liable for direct patent infringement. The Court explicitly avoided any determination as to whether the separate actors might somehow be liable collectively for direct patent infringement (under 35 U.S.C. §271(a)).

The Akamai opinion marks a sharp turn in the Federal Circuit’s development on the subject of so-called “divided infringement.” For the past several years, the Federal Circuit had taken the view that, in order for there to be liability for inducing infringement of a method claim, one party must “control or direct” the performance of each of the steps required by the patent claim, as set forth in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007). Under BMC Resources and the cases that followed it, where the allegedly infringing acts were spread among multiple actors not bound by such an agency relationship, there could be no liability for the inducement of infringement — even where those separate actors, collectively, performed all the steps needed to infringe the patent.

For product and apparatus claims, the Federal Circuit somewhat narrowed these questions by ruling, in Centillion Data Sys., LLC v. Qwest Communications Int’l, Inc., 631 F.3d 1279 (Fed. Cir. 2011) that the “divided infringement” complications did not apply in the same way to the infringement of product or apparatus claims. However, significant questions as to method or process patents remained.

Under these previous cases, the question of “divided infringement” continued to create distinct uncertainties for patent owners and potential infringers. Activities seemed to potentially avoid infringement liability if they were dispersed among separate actors in a manner that did not meet the control and direction requirements under Federal Circuit case law.

Thus, in 2011, the Federal Circuit rejected McKesson Technologies’ argument that there could be liability for alleged inducement of infringement of a method patent that required electronic communications between a health care provider (the defendant, Epic Systems) and its customers because there was no agency relationship between the providers and their customers. McKesson Techs. Inc. v. Epic Sys. Corp., 98 U.S.P.Q.2d (BNA) 1281 (Fed. Cir. Apr. 12, 2011).

In the other case giving rise to en banc consideration, the Federal Circuit panel concluded that there was no liability for alleged direct infringement of a patent claiming a method for storing Web page content, where the alleged infringer provided explicit instructions and support to its customers, who perform some of the claimed steps and where the customers are required to perform such steps in order to use the service that they had purchased from the defendant (Limelight Networks, Inc.). According to the panel opinion, this arrangement lacked the necessary control and direction between the defendant Limelight Networks and its customers. Akamai Tech., Inc. v. Limelight Networks, Inc., 629 F.3d 1311 (Fed. Cir. 2010).

In reversing these two panel decisions, the Federal Circuit determined that there is no “control or direction” or agency requirement between the parties that perform the steps of a method claim for there to be induced infringement under §271(b). The Court held that liability for inducement of patent infringement is possible regardless of whether the acts constituting the alleged infringement are performed by a single entity:

At the end of the day, we are persuaded that 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. And we have found no evidence to suggest that Congress intended to create different rules for method claims than for other types of claims. … In these cases, we conclude that it is unlikely that Congress intended to endorse the “single entity rule,” at least for the purpose of induced infringement, advocated by [defendants] Epic and Limelight, which would permit ready evasion of valid method claims with no apparent countervailing benefits.

Consequently, the Federal Circuit remanded both the Akamai and McKesson cases for determinations of whether there was induced infringement.

In its decision, the Court did not extend these concepts to liability for direct infringement under §271(a). Instead, the Court acknowledged that, under the current law, there can be no direct infringement of method claims in cases in which several parties collectively have committed the acts that constitute direct infringement, but no single party (alone or together with its agents) has committed all the acts required by the patent claims. The Court expressly stated that this issue was not required for its present decision and, therefore, it was not considering whether that law of direct infringement should also be overruled. Liability for indirect infringement, such as inducement of infringement, turns on additional proof (specifically, an intent to cause patent infringement) that is not required for a showing of direct infringement liability and which also can have a significant impact on the associated damages analyses.

Akamai also reinforced the distinction drawn in the 2011 Centillion Data Systems opinion (referenced above), between situations involving method claims, as opposed to claims directed to a product or apparatus. Akamai acknowledged 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.”

Even though Akamai had not advanced a liability argument in its case based upon inducement of infringement, the Federal Circuit — in view of its en banc determination — remanded its case, so that liability might be determined under that theory.

As noted above, the possibility of Supreme Court review of Akamai remains. This is particularly so, where the majority opinion represented the views of only six of the 11 Federal Circuit judges participating in the ruling. As expressed in a dissenting opinion by Judge Linn, four of the judges would have held to the position developed in BMCResources and its progeny. Yet, Judge Newman would have taken a further step beyond the majority opinion. Her dissent urges that the analysis that the Akamai majority applied to inducement of infringement also should be applied to issues of direct patent infringement, such that entities engaged in activities that (albeit only collectively) satisfy all the limitations of a patent claim could be liable as direct infringers — i.e., that they might be subject to strict liability, without the intent requirement of indirect infringement.

The full opinion can be found at: Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp.

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