"Patent law is a creature of statute," but what about induced infringement?
In the suit brought by patentee MCKESSON TECHNOLOGIES, Epic Systems prevailed.
The Court of Appeals for the Federal Circuit noted:
Patent law is a creature
of statute and “expanding the rules governing direct
infringement to reach independent conduct of multiple
actors would subvert the statutory scheme infringement.”
BMC Res., 498 F.3d at 1381.
AND
The notion
of indirect patent infringement, encompassing contribu-
tory and induced infringement, already addresses the
joint tortfeasor problem. See 35 U.S.C. §§ 271(b), (c).
Indeed, an indirect infringer is a type of joint tortfeasor
because, while his actions alone do not harm the patentee,
his actions along with another cause a single harm to the
plaintiff. See Aro Mfg. Co. v. Convertible Top Replacement
Co., 377 U.S. 476, 500 (1964). That “single harm,” how-
ever, is direct patent infringement, a strict-liability of-
fense limited to those who practice each and every
element of the claimed invention. BMC Res., 498 F.3d at
1381; Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570 n.2 (Fed.
Cir. 1996). Absent direct infringement, the patentee has
not suffered a compensable harm. BMC Res., 498 F.3d at
1379; cf. Grokster, 545 U.S. at 930 (stating “[o]ne infringes
contributorily by intentionally inducing or encouraging
direct infringement and infringes vicariously by profiting
from direct infringement while declining to exercise a
right to stop or limit it.” (citations omitted) (emphases
added)). Finally, in patent law, unlike in other areas of
tort law, the patentee specifically defines the boundaries
of his or her exclusive rights and provides notice to the
public to permit avoidance of infringement. This stands
in sharp contrast to the circumstances surrounding a joint
tort where the victim has no ability to define the injurious
conduct upfront and where, absent joint liability, the victim
would stand uncompensated as a consequence.
Of prior regional circuit decisions:
McKesson also relies upon Peerless Equipment Co. v.
W.H. Miner, Inc., 93 F.2d 98 (7th Cir. 1937), in arguing
that the regional courts of appeals have affirmed liability
where one party performed most of the patented method
and simply handed it over to another party to complete
the method. Id. at 105 (finding liability where a seller of
gears knowingly left it to customers to flatten the gears’
crown, thereby “completing the final step of the [patented]
process.”).The Peerless opinion is neither binding nor
persuasive.
Bottom line, the CAFC affirms the district court:
For the foregoing reasons, this court affirms the dis-
trict court’s grant of Epic’s renewed motion for summary
judgment of noninfringement of the ’898 patent.
However, Judge Bryson's concurring opinion, which was the tipping point,
stated:
I agree that the decision in this case is correct in light
of this court’s decisions in BMC Resources, Muniauction,
and Akamai Technologies. Whether those decisions are
correct is another question, one that is close enough and
important enough that it may warrant review by the en
banc court in an appropriate case.
Judge Newman, in dissent, presented the issue:
The question is whether there can be infringement of a
patented method, when a step of the method is performed
by an entity that is not “controlled or directed” by the same
entity that performs the other steps. Interactive methods
have been enabled by advances in computer-based technol-
ogy. In the McKesson method, a patient initiates inquiry
into various kinds of information relating to the patient and
maintained by the patient’s physician; the panel majority
holds that even if every step of the claimed method is per-
formed there can be no infringement, on the theory that
there is no direct infringement and thus no indirect in-
fringement. Some recent panel holdings are of similar vein,
holding that neither collaboration nor joint action nor facili-
tation nor authorization nor invitation can overcome the
immutable barrier to infringement when all of the partici-
pating entities are not under the “control or direction” of a
mastermind infringer.
The nub of the issue, as identified by Judge Newman:
other panels of this
court, and the Supreme Court, have held that there can be
infringement liability when steps of the claimed method are
performed by different entities.
AND
The court then holds that
without direct infringement there cannot be indirect in-
fringement, such as induced or contributory infringement,
as a matter of law. Thus the court concludes that the claims
can never be infringed, although the patent meets every
requirement of patentability and every step of the claimed
method is practiced. These rulings and conclusion are
contrary to statute and precedent.
Judge Newman identified the problematic cases:
The
district court referred to BMC Resources, Inc. v. Paymen-
tech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), Muniauction, Inc.
v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2007), and
Global Patent Holdings, LLC v. Panthers BRHC LLC, 586 F.
Supp. 2d 1331 (S.D. Fla. 2008), aff’d, 318 F. App’x 908 (Fed.
Cir. 2009) (Table), and stated that these cases “compel” its flawed decision.
As to the problem on the facts of this case:
This court’s error is the pronouncement of the “single-
entity rule” as an absolute rule of law—for the multiple
independent entities required to carry out the claimed
method in BMC Resources could have led to a fact-based
decision of non-liability on application of the ordinary rules
of tort liability. Instead, the “control or direction” require-
ment is announced as extending to all interactive situations,
whatever the relationship of the participants and whatever
their participation. Here, for example, the “uncontrolled”
entity, the patient, initiates the process by accessing the
physician’s system using the access code provided by the
physician; the physician’s office then performs the other
steps of the method. The court today holds that such a
claim cannot be infringed, whether on a theory of joint or
collaborative or induced infringement. However, no rule of
law, no precedent, prohibits patenting and enforcing a
method that is performed by interacting entities. The cases
from which the court created this theory do not require
otherwise.
The issue is, can there be induced infringement when more than one
party is responsible for the direct infringement?
The complainant here is not attempting to sue all pa-
tients and physicians who use the patented system, but is
seeking to enforce the patent against the purveyor of the
system, on a theory of inducement to infringe. The pat-
entee’s position is that the patent is directly infringed
jointly, and that the purveyor of the claimed method thereby
induces direct infringement. The common-law concept of
joint tortfeasor has long been established in the patent
arena and in its application the cases have turned on their
particular facts, not on some indefeasible “single entity” bar
created as a new rule of law. Questions of joint liability
turned on participation, collaboration, or other relevant
facts, as courts applied the experience of the common law in
a variety of factual situations.
The problem is seemingly inconsistent judicial interpretations of the
patent statute, not with the statute itself, so by a 2-1 vote we seem to have
the conclusion that patent law is a creature of judicial decision.
Judge Newman noted:
However, if this change of law is to be “a
matter of Federal Circuit law,” conflicting holdings must be
overturned en banc, not by a three-judge panel. In confus-
ing contrast, in Centillion Data Systems, LLC v. Qwest
Communications International, Inc., 631 F.3d 1279 (Fed.
Cir. 2011), a panel of this court, citing NTP, Inc. v. Research
in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005), held that,
unlike a claim to an interactive “method,” direct infringe-
ment of a claim to an interactive “system,” wherein ele-
ments of the system are physically controlled by different
entities such as an independent “user,” is not subject to a
“single-entity rule”: (...)
The Court of Appeals for the Federal Circuit noted:
Patent law is a creature
of statute and “expanding the rules governing direct
infringement to reach independent conduct of multiple
actors would subvert the statutory scheme infringement.”
BMC Res., 498 F.3d at 1381.
AND
The notion
of indirect patent infringement, encompassing contribu-
tory and induced infringement, already addresses the
joint tortfeasor problem. See 35 U.S.C. §§ 271(b), (c).
Indeed, an indirect infringer is a type of joint tortfeasor
because, while his actions alone do not harm the patentee,
his actions along with another cause a single harm to the
plaintiff. See Aro Mfg. Co. v. Convertible Top Replacement
Co., 377 U.S. 476, 500 (1964). That “single harm,” how-
ever, is direct patent infringement, a strict-liability of-
fense limited to those who practice each and every
element of the claimed invention. BMC Res., 498 F.3d at
1381; Jurgens v. CBK, Ltd., 80 F.3d 1566, 1570 n.2 (Fed.
Cir. 1996). Absent direct infringement, the patentee has
not suffered a compensable harm. BMC Res., 498 F.3d at
1379; cf. Grokster, 545 U.S. at 930 (stating “[o]ne infringes
contributorily by intentionally inducing or encouraging
direct infringement and infringes vicariously by profiting
from direct infringement while declining to exercise a
right to stop or limit it.” (citations omitted) (emphases
added)). Finally, in patent law, unlike in other areas of
tort law, the patentee specifically defines the boundaries
of his or her exclusive rights and provides notice to the
public to permit avoidance of infringement. This stands
in sharp contrast to the circumstances surrounding a joint
tort where the victim has no ability to define the injurious
conduct upfront and where, absent joint liability, the victim
would stand uncompensated as a consequence.
Of prior regional circuit decisions:
McKesson also relies upon Peerless Equipment Co. v.
W.H. Miner, Inc., 93 F.2d 98 (7th Cir. 1937), in arguing
that the regional courts of appeals have affirmed liability
where one party performed most of the patented method
and simply handed it over to another party to complete
the method. Id. at 105 (finding liability where a seller of
gears knowingly left it to customers to flatten the gears’
crown, thereby “completing the final step of the [patented]
process.”).The Peerless opinion is neither binding nor
persuasive.
Bottom line, the CAFC affirms the district court:
For the foregoing reasons, this court affirms the dis-
trict court’s grant of Epic’s renewed motion for summary
judgment of noninfringement of the ’898 patent.
However, Judge Bryson's concurring opinion, which was the tipping point,
stated:
I agree that the decision in this case is correct in light
of this court’s decisions in BMC Resources, Muniauction,
and Akamai Technologies. Whether those decisions are
correct is another question, one that is close enough and
important enough that it may warrant review by the en
banc court in an appropriate case.
Judge Newman, in dissent, presented the issue:
The question is whether there can be infringement of a
patented method, when a step of the method is performed
by an entity that is not “controlled or directed” by the same
entity that performs the other steps. Interactive methods
have been enabled by advances in computer-based technol-
ogy. In the McKesson method, a patient initiates inquiry
into various kinds of information relating to the patient and
maintained by the patient’s physician; the panel majority
holds that even if every step of the claimed method is per-
formed there can be no infringement, on the theory that
there is no direct infringement and thus no indirect in-
fringement. Some recent panel holdings are of similar vein,
holding that neither collaboration nor joint action nor facili-
tation nor authorization nor invitation can overcome the
immutable barrier to infringement when all of the partici-
pating entities are not under the “control or direction” of a
mastermind infringer.
The nub of the issue, as identified by Judge Newman:
other panels of this
court, and the Supreme Court, have held that there can be
infringement liability when steps of the claimed method are
performed by different entities.
AND
The court then holds that
without direct infringement there cannot be indirect in-
fringement, such as induced or contributory infringement,
as a matter of law. Thus the court concludes that the claims
can never be infringed, although the patent meets every
requirement of patentability and every step of the claimed
method is practiced. These rulings and conclusion are
contrary to statute and precedent.
Judge Newman identified the problematic cases:
The
district court referred to BMC Resources, Inc. v. Paymen-
tech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), Muniauction, Inc.
v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2007), and
Global Patent Holdings, LLC v. Panthers BRHC LLC, 586 F.
Supp. 2d 1331 (S.D. Fla. 2008), aff’d, 318 F. App’x 908 (Fed.
Cir. 2009) (Table), and stated that these cases “compel” its flawed decision.
As to the problem on the facts of this case:
This court’s error is the pronouncement of the “single-
entity rule” as an absolute rule of law—for the multiple
independent entities required to carry out the claimed
method in BMC Resources could have led to a fact-based
decision of non-liability on application of the ordinary rules
of tort liability. Instead, the “control or direction” require-
ment is announced as extending to all interactive situations,
whatever the relationship of the participants and whatever
their participation. Here, for example, the “uncontrolled”
entity, the patient, initiates the process by accessing the
physician’s system using the access code provided by the
physician; the physician’s office then performs the other
steps of the method. The court today holds that such a
claim cannot be infringed, whether on a theory of joint or
collaborative or induced infringement. However, no rule of
law, no precedent, prohibits patenting and enforcing a
method that is performed by interacting entities. The cases
from which the court created this theory do not require
otherwise.
The issue is, can there be induced infringement when more than one
party is responsible for the direct infringement?
The complainant here is not attempting to sue all pa-
tients and physicians who use the patented system, but is
seeking to enforce the patent against the purveyor of the
system, on a theory of inducement to infringe. The pat-
entee’s position is that the patent is directly infringed
jointly, and that the purveyor of the claimed method thereby
induces direct infringement. The common-law concept of
joint tortfeasor has long been established in the patent
arena and in its application the cases have turned on their
particular facts, not on some indefeasible “single entity” bar
created as a new rule of law. Questions of joint liability
turned on participation, collaboration, or other relevant
facts, as courts applied the experience of the common law in
a variety of factual situations.
The problem is seemingly inconsistent judicial interpretations of the
patent statute, not with the statute itself, so by a 2-1 vote we seem to have
the conclusion that patent law is a creature of judicial decision.
Judge Newman noted:
However, if this change of law is to be “a
matter of Federal Circuit law,” conflicting holdings must be
overturned en banc, not by a three-judge panel. In confus-
ing contrast, in Centillion Data Systems, LLC v. Qwest
Communications International, Inc., 631 F.3d 1279 (Fed.
Cir. 2011), a panel of this court, citing NTP, Inc. v. Research
in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005), held that,
unlike a claim to an interactive “method,” direct infringe-
ment of a claim to an interactive “system,” wherein ele-
ments of the system are physically controlled by different
entities such as an independent “user,” is not subject to a
“single-entity rule”: (...)
posted by Lawrence B. Ebert at 10:26 AM
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