The Uncertain Future of Divided Patent Infringement

The law of patent infringement is governed by 35 U.S.C. § 271. In particular, § 271(a) describes what constitutes infringement:

Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. § 271(a).

On the other hand, § 271(b) governs liability when an entity induces another to infringe a patent:

Whoever actively induces infringement of a patent shall be liable as an infringer. § 271(b).

According to the current joint infringement rule under BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), courts construe the term “whoever” in § 271(a) as encompassing multiple entities, but only when one of them exerts “direction or control” over the others, so they can be viewed as one collective single entity. This is the so-called “single-entity rule.”

However, this rule poses a problem for innovative technologies, such as cloud computing and personalized medicine, which necessarily require collaborative effort by multiple parties for their implementation. For example, a personalized diagnostic technique may require a biotech company that performs the analysis, a pharmaceutical company that manufactures the drug, and a physician that collects data and provides treatment. Under such circumstances, it is often necessary to include all these steps performed by multiple parties in a patent claim to make it patentable. However, under the single-entity rule, a patent holder may be left remediless when multiple entities collusively perform all the steps in a claim, but no single entity performs all of the steps or exerts direction or control over the other entities.

In the en banc opinion of Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012), the Federal Circuit was supposed to address the propriety of the single-entity rule, but instead created a new judicial doctrine under § 271(b) to find liability when multiple entities collectively perform a method claim, leaving the single-entity rule under § 271(a) unscathed. Under this new, so-called “inducement-only” rule, an entity can be liable for patent infringement when it induces one or more entities to perform all the steps in a method claim, regardless of whether the inducer performs some of the steps itself or whether there is control or direction between the inducer and the induced entities or between the induced entities themselves.

To support this new rule, the majority reviewed the legislative history of the 1952 Patent Act. The majority stated that the Act provided strong support for interpreting inducement liability under § 271(b) as not requiring the single-entity rule under § 271(a). The majority also drew support for its conclusion through criminal and tort law, reasoning that “a principal’s liability for acts committed not only through an agent but also by an innocent intermediary who was induced by the principal is not an idiosyncrasy of patent law,” so that an inducer can still be liable for inducement under § 271(b) even if the induced entities are not liable under § 271(a) as direct infringers. The majority also looked at other parts of § 271 and reasoned that the text of § 271 does not necessarily equate the term “infringement” in § 271(b) to “infringement under § 271(a).” In other words, an inducer can be liable for inducing a type of “infringement” that is not infringement under the single-entity rule under § 271(a). Moreover, by looking to its own precedent and that of the Supreme Court, the majority declared that the requirement of the single-entity rule for purposes of finding inducement liability was unwarranted. For example, the majority cited Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263 (Fed. Cir. 2004), which predated BMC Resources, and explained that although Dynacore required infringement for inducement of infringement, it did not require that a single induced party commit this infringement as specified in BMC Resources.

Although this new inducement-only rule is a clever solution for capturing the mastermind behind divided infringement while sparing the innocent actor who is induced (for example, an Internet user who has no idea that a patent is being infringed when he or she browses a website), this rule is heavily criticized as lacking in legal basis. Five of the eleven members of the court dissented from the majority opinion. Judge Newman, writing for herself, criticized the majority’s holding while denouncing the single-entity rule. The other four members, led by Judge Linn, argued for upholding the single-entity rule. With such a significant divide within the Federal Circuit on this issue, it is probable that the Supreme Court will review the single-entity rule and the inducement-only rule, and it remains yet to be seen how the laws of divided patent infringement will play out.

Cite as: Michael Liu Su, The Uncertain Future of Divided Patent Infringement, Berkeley Tech. L.J. Bolt (November 1, 2012), http://btlj.org/?p=1927.
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