Sunday, September 2, 2012

Federal Circuit Decides Joint Liability Issue -- By Deciding Something Else

On Friday August 31, the Federal Circuit Court of Appeals released its opinion in Akamai Tech., Inc. v. Limelight Networks, Inc., and McKesson Tech. Inc. v. Epic Sys. Corp. (the court released a combined opinion in both cases).  This was a 6-5 en banc decision, meaning that all 11 active judges participated.  I had previously blogged about the court's decision to hear the Akamai case en banc, and about EFF's amicus briefs filed in Akamai and McKesson.

 The cases dealt with the issue of when a method claim is directly infringed by the combined actions of multiple parties.  In previous cases, the court had held, for example, that "where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises "control or direction" over the entire process such that every step is attributable to the controlling party, i.e., the "mastermind."  Because the rules on direct infringement for joint (or divided) liability were causing confusion, the Federal Circuit decided to hear the issue en banc.  In the Akamai case, the question involved was:

If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?

In McKesson, an additional question was:

Does the nature of the relationship between the relevant actors—e.g., service provider/user; doctor/patient—affect the question of direct or indirect infringement liability?
The Federal Circuit's decision didn't answer the first question, and instead focused at most on the second question.   The majority opinion stated:
In the two cases before us, we address the question whether a defendant may be held liable for induced infringement if the defendant has performed some of the steps of a claimed method and has induced other parties to commit the remaining steps (as in the Akamai case), or if the defendant has induced other parties to collectively perform all the steps of the claimed method, but no single party has performed all of the steps itself (as in the McKesson case).
The 6-member majority opinion overruled its prior precedent (BMC v. Paymentech), but did not resolve the issue of joint or divided direct infringement.  Instead, it held that a party could be liable for actively inducing infringement of a method claim as long as the party induced one or more other parties to perform all the steps: "we hold 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."

As Dennis Crouch's blog post on the case points out, inducement requires a high level of intent, which direct infringement does not.  As I emailed Dennis on Friday (see his post), the majority merely holds that an active inducer will be held liable so long as one or more parties are induced to practice all the steps of a claimed method.  Therefore, it appears that innocent actors who were "induced" by someone else will not be individually liable (unless, of course, they perform all the steps of the method claim themselves and thus are direct infringers).  That was one point of EFF's amicus briefs, so from that standpoint, the decision was not all bad.  Our briefs urged that innocent third parties (those with no level of intent) not be held strictly liable for direct infringement.  It appears that is the law. 
However, the court didn't decide the underlying issue on which it agreed to hear both cases en banc, that is, when there is joint (or divided) direct infringement.
Judge Newman's dissent would have answered the question by imposing essentially unlimited liability for direct infringement:  
The court should simply acknowledge that a broad, all-purpose single-entity requirement is flawed, and restore infringement to its status as occurring when all of the claimed steps are performed, whether by a single entity or more than one entity, whether by direction or control, or jointly, or in collaboration or interaction. . . . When the several steps of a process claim are performed by more than one entity, whether the entities operate under common direction or control, or jointly or independently or interactively, remedy for infringement is appropriately allocated based on established criteria of culpability, benefit, and the like.
Thankfully, no other judge agreed with this rule, which would have potentially imposed liability on scores of innocent third parties.  (Unlike inducement, direct infringement doesn't require any intent to infringe.)  Judge Linn, joined by three other judges, would have kept a strict rule on joint liability (his dissent also criticized Judge Newman's theories).

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