Joint Infringement: Federal Circuit Changes the Law of Inducement

by Dennis Crouch

Akamai Tech. v. Limelight Networks (Fed. Cir. 2012) (En Banc)
Mckesson Tech. v. Epic Systems (Fed. Cir. 2012) (En Banc) 

In a 6–5 en banc decision, the Federal Circuit has loosened the rules for proving liability under the doctrine of inducing infringement.  In particular, the court here rejects the prior rule that inducement requires proof of a single actor directly infringing the patent.  Rather, the court now holds that the underlying direct “infringement” of a process claim can still lead to inducement liability so long as all of the steps of the method were actually performed. “[I]t is no longer necessary to prove that all the steps were committed by a single entity.”

Inducement is defined by 35 U.S.C. 271(b).  That one sentence provision states in its entirety that “whoever actively induces infringement of a patent shall be liable as an infringer.”  Before this case, the Federal Circuit had repeatedly held that inducement requires both (1) the act of knowing inducement to infringe (with knowledge of the patent) and (2) actual direct infringement of the patent as defined by Section 271(a).  The patentees in this case had a problem with this structure because the accused infringer had allegedly knowingly encouraged different parties to perform different steps of the patented method.  Since direct infringement under 271(a) traditionally requires proof that a single-actor performed all of the claimed steps, the patentee was unable to satisfy the second prong of the inducement test.  Now, under the new rule, inducement liability exists where the accused infringer (1) knew of the patent; (2) induced performance of the steps of the method; and (3) those steps were actually performed.  It follows also that the accused infringer will also be liable if it performs some of the steps of the method and then actively induces performance of the other steps. 

In my view, this decision is important because it closes a major loophole that has allowed some entities to knowingly and intentionally take advantage of a patented invention while avoiding the need to take a license. 

The decision is important, but fairly narrow because inducement still requires that the accused infringer have knowingly induced the infringement — that is with knowledge that the steps it is encouraging are covered by the patent.  The greatest fear of the case is that it might have created liability for parties who innocently performed one or more of the steps of the claimed invention.  That fear has not been realized.  Michael Barclay who assisted EFF with its brief noted as much in an e-mail this morning:

It’s not as bad as I thought when I saw that they overruled BMC v. Paymentech.  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.  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 brief, so from that standpoint, the decision was not all bad.  Our brief 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. 

Barclay has a good point here (in my view) and the decision does a fairly good job of balancing the competing themes of protecting patentees from intentional infringement and also protecting innocent parties who are only one cog in the machine.  One issue going forward will be the scope of knowledge required for inducement and how the changes in willful infringement standards will impact inducement.  Judge Newman’s dissent raises a host of additional complications. In her view, the decision opens a can of worms that will continue to squirm for years to come.

The majority opinion is limited to allegations of induced infringement under 35 U.S.C. 271(b) and the court expressly refuses in this case to decide the question joint direct infringement under 271(a). In my reading of the case, however, there are insufficient votes on the court to further expand the law of infringement to include joint direct infringement.  The majority also limited its opinion to infringement of method claims.

The majority opinion (36 pages) was filed PER CURIAM and signed by Chief Judge Rader and Judges Lourie, Bryson, Moore, Reyna, and Wallach.  Judge Linn’s dissent (29 pages) was joined by Judges Dyk, Prost, and O’Malley. Judge Newman separately dissented (38 pages).

Moving forward, this case obviously adds value to method claims. It also adds value to “bigger” methods that achieve value through the interaction of multiple individuals in perhaps asynchronous fashion.

Judge Linn writes a powerful dissent:

The majority opinion is rooted in its conception of what Congress ought to have done rather than what it did. It is also an abdication of this court’s obligation to interpret Congressional policy rather than alter it. When this court convenes en banc, it frees itself of the obligation to follow its own prior precedential decisions. But it is beyond our power to rewrite Congress’s laws. Similarly, we are obliged to follow the pronouncements of the Supreme Court concerning the proper interpretation of those acts.

The losing parties here will certainly take Judge Linn’s words to the Supreme Court in search of a new pronouncement.

105 thoughts on “Joint Infringement: Federal Circuit Changes the Law of Inducement

  1. anon, OK, let's not digress into irrelevancies.  If a person in United States performs the last step of finishing the lenses on lens blanks regardless of where those lens blanks were made, and those lens blanks embody the result of practicing the other steps, does the person performing the last step infringe the patent under any theory?

  2. The manufacture and sale outside the US of lens blanks does not infringe a US patent.

    Fine, No one said otherwise. But now if you try to import that blank, well, you might have a problem.

    I have a view alright. My view is that you are not grasping all of the key essential facts of the case, nor of our conversation – on this and on other threads. The point of any activity outside of the US is completely immaterial, so the point I first made stands regardless. On the facts of this case there was no commodity market for the lens. The interaction of interest is in the states, thus, patent law protection is in play here.

    If you want to draw a hypothetical that is completely outside of the US and outside of the domain of paten law, what exactly would be the point?

  3. Anon, what are you talking about?  The manufacture and sale outside the US of lens blanks does not infringe a US patent.  Secondly, the issue here is whether person who performs the last steps on blanks made outside the US directly infringes under 271(a).  There is no issue concerning contributory infringement.

    Direct infringement, that is the question.  

    Do you have a view?

  4. Why not?

    Because there was no commodity market for the blanks and the only use was for someone to do that last step and infringe.

    Ned, this is almost too obvious to explain.

  5. and sells them as a commodity.

    I suggest that you think about this statement and my previous post concerning the Univis case.

    (on the facts of that case, your hypo fails exactly because Japan could not sell them “as a commodity”)

  6. I still cannot believe there has been no discussion of why Newman must be right.

    Consider Univis Lens. Method patents. Steps 1-4 produce lens blanks that embody the invention. Step 5 is a conventional step that is actually necessary to finish the lens into something useful.

    Now consider a company in Japan that produces lens blanks, and sells them as a commodity. One purchaser is a wholesaler located in the Netherlands. A US optician buys the blanks from the wholesaler and finishes them according to a patient’s prescription.

    Clearly there can be no inducement under this fact pattern. The optician infringes or he does not infringe as a direct infringer.

    I say he infringes.

  7. Zolteh involved a process patent, one step in Japan, another in the US. Infringement.

    Univis involved 8 process patents. The SC deemed the finishing to be a trivial, old and conventional, but also a necessary step to render the lenses useful. The last step was an infringement. The sale of the partially completed blanks was deemed to be a contributory infringement.

    Quanta involved process patents. The apparatus sold embodied machines that executed some of the steps. The buyer finished the apparatus such that the entire machine executed every step. However, Quanta is important for its discussion of Univis Lens.

    In a system, the party performing the last step in the patented process infringes. There can be no inducement by others here.

    Regardless of BMC to the contrary, the SC has clearly held that party performing the last step in a process infringes a patent, even if it is immaterial and old, and others who cooperate by providing the other steps contributorily infringe.

  8. Plain as mud, Ned.

    I think you should go back and answer the questions I asked at 4:59 pm. Be clear about who the patentee is, who the infringer is, and what exactly the infringer is doing and if it all possible avoid the introduction of extra-territorial activities because it’s unnecessarily confusing.

    The thesis which I’m challenging is this: “There is direct infringement by one who completes the last step of a process in a system.”

    Feel free to correct or retract it. Is the phrase “in a system” important to your thesis? What exactly is a “system” in your view, and how does it differ from a “method claim” (they both seem to include “steps”).

    If you want to rely on Zoltek to fill in the missing link, there must be a better paragraph than the one you quoted in your 7:24 pm post. All that paragraph says about Quanta (by implication) is that the Quanta method was practiced entirely in the United States. That’s good. It simplifies things.

  9. BMC Resources was decided in 2007. Quanta in 2008. It is quite apparent that Quanta is materially inconsistent with BMC. I think there is a good argument that Quanta overruled BMC.

    1. BMC held that divided infringement was not direct infringement under 271(a).

    2. Quanta held the partial practice of method patents by a seller of products embodying the essential features exhausted the patent. They observed that the method patents could involve a trivial step, such a placing a microprocessor on a board. That would not avoid exhaustion, they opined. In analyzing Univis, they agreed that the finishing step of the method patents there involved was trivial and conventional and that the novel steps were embodied in the lens blanks.

    3. As a general matter, there can be no exhaustion of a patent without infringement. It therefore was clear that the method patents involved in Univis Lens were “infringed” when the finishers finished the lenses. However, they were not infringers in fact because they had licenses. Correspondingly, the sale of the blanks was also an infringement (contributory) if they were not made under license.

    4. Other than supplying the lens blanks to the finishers the patentee had no relationship with the finishers. They were independent parties.

    5. What all of this seems to suggest is that the finishing of the lenses by the finishers by performing the last step of the patented method on lens blanks partially finished by others was infringement.

    6. If the finisher infringe, their infringement cannot be inducement or contributory infringement. But they infringe. Their infringement must be direct.

    7. This makes eminent sense because completing the last step in a process to create a product is “making” the product.

    8. Logically, therefore, the finishers infringe under 271(a) when the perform the last step. At that time, the makers of the lens blanks also become liable under 271(c).

    9. Therefor, 271(a) cannot be limited to single actors in the case of a method. It certainly includes a party performing the last step of a method where the other steps have previously been performed on an article. This should also apply in the case of a system where cooperation of different actors takes place.

  10. Anon, you are accusing me of your common practice.  Not once did you comment on the many quotes from Pennock other than to say I am wrong.  Now you are doing it again with Univis Lens and Quanta?

  11. Anon, how many time must I quote you something from an opininion of a court until you read the quote:
     
    From Univis:  The relevant patents:
     
    "Each of the remaining eight patents relates to the shape, size, composition and disposition of the pieces of glass of different refractive power in the blanks into which they are fused."
     

     
    "The Government …insists that the novel features of the invention do not include more than the combination of shape, size and arrangement of the described pieces of glass when they are fused into the blank; that the grinding and polishing of the blank involve no practice and add no feature not common to the finishing and "fitting" of other types of multifocal lenses which are not covered by the patents; and that their scope cannot be lawfully extended to a procedure not in itself novel merely because it is applied to an article which embodies the only novel features of the alleged invention, and has by the sale become a lawful subject of commerce.'
     

     
    "…[E]ach blank, as appellees insist, embodies essential features of the patented device …

  12. Now you complain that I do what you do all the time and run to daddy to protect your a**.

    I am trying to abide by Prof. Crouch’s request.

    Accusing others of what you do is a twisted trick you picked up from MM. It is abundantly clear in black and white on this thread that it is you that is playing games and not attempting to advance the discussion. Why not just directly answer the point I made in pointing out your error in the quote in Univis that you provided? Unless you cannot and the only thing you can do is revert to the game playing that we all are trying to put a stop to.

    As far as appealing to the good professor, I had thought that this wasn’t going to be tolerated.

    Was I incorrect in that thought?

  13. . The court held all the novel features were in the lens blanks.

    Need I say more?

    Another prisoner bites the dust.

  14. Anon, there you go again. You do not respond to the points I raise. You ignore them in fact except to say that I am wrong without explanation. Now you complain that I do what you do all the time and run to daddy to protect your a**.

  15. Malcolm, an article produced by a patented process already infringes. 271(g). The SC certainly was not talking about a situation such as where all the steps are practiced. They were talking about a situation where the critical steps are practiced to produce an article, and then the article is sold and the method completed on the partially finished article.

    Univis Lens was just such a case: the critical steps were performed on lens blanks, the blanks sold, and finishers completed the last step. The court held all the novel features were in the lens blanks. That was contributory infringement. This implies that the completion of the lenses using the last step was direct infringement.

    There can be no other reading of Univis Lens and Quanta.

    Zoltek, the recent en banc case, discussed Quanta and said, in part,

    “Although the process itself was partially practiced outside the United States in this case, the product resulting from the practice, which embodies the patented process, was imported into, or used in, the United States. Therefore the process has been “used” without a license or lawful right. A contrary result would similarly avoid infringement by the United States.”

    Clearly what was going on was that the critical steps were performed outside the US on a product, which was imported and completed by the government contractor. This was infringement, and was so held in Zoltek just a very few months ago by an en banc court.

  16. Ned,

    1) You were wrong about Pennock.

    2) You are wrong about Univis.

    3) I have not discussed Quanta, so you saying I am twisting Quanta is plainly wrong.

    Prof. Crouch,

    I would be sincerely interested in your ideas on how to move a discussion (such as this) forward when Mr. Heller point blank refuses to understand the full reading of the law including a quote that he himself provided. Rather than actually discuss the point and explain his own quote, he introduces additional case law, unasked for and not on the precise point of the case law already under discussion.

    The prisoners are dying.

  17. Quanta held that the partial practice of a method to create an article that is sold and which will be used by other to complete the process exhausts the patent. That means that the sale itself infringes.

    The holding says only that an “authorized sale” of a composition that “substantially embodies” a method patent will exhaust the patented method. Nothing more. How do you get to “the sale itself infringes”? What “sale” are you referring to? You appear to be certain that exhaustion and infringement are two sides of the same coin, like infringement and anticipation. I wouldn’t be so sure (which is to say I’m not so sure).

  18. MM, what it shows, Malcolm, is that BMC resources is dramatically in conflict with the Supreme Court.

    Quanta held that the partial practice of a method to create an article that is sold and which will be used by other to complete the process exhausts the patent.  That means that the sale itself infringes.  It also means that the completion of the process infringes.  Directly infringes.

    That was the holding of the en banc court not that long ago in Zoltek.

    What I find amazing, Malcolm, is that the Federal Circuit did not cite Quanta or Univis Lens or Zoltek.  Zoltek did cite those cases.

    What Akamai represents is a delusional attempt by Rader to have his cake and eat it too.  He recognized he made a huge mistake in BMC, but will not admit it.  He now seeks to partially undo the mess he created and has, in that process, created an even bigger mess.

    Hopefully, the SC will take this case and smack the dear Judge Rader around just a bit more.  He needs it.

  19. anon, "essential features," material part, includes, but may not be limited to, the novel steps.  I urge you to read Quanta on that point.  Also read, for example, Leeds & Catlin Co. v. Victor Talking Machine Co. (No. 2), 213 U.S. 325 that was "overruled" in Mercoid, a case that itself was overruled by Congress.  In Leeds, the record player had novel features on both the record and the cooperating player.  That was critical to the holding in that case the sale of records for use in the players was an infringement.  

    Also Quanta went out of its way to include method claims.  What does that mean when the seller practices part of the claimed steps as in Univis Lens?  It means that that is an infringement, otherwise the would be no basis for holding exhaustion.  If the sale and the performance never infringed the method claim, there could be no exhaustion.  But the SC held to the contrary.

     

  20. With all due respect, Ned, I don’t see how a case concerning patent exhaustion affects my answers to your hypotheticals in any way, nor does anything in that case you quoted repair the defect in your earlier general proclamation (i.e., “There is direct infringement by one who completes the last step of a process in a system”).

  21. anon, when I quote you the words of the Supreme Court and you deny their plain and ordinary meaning, I would suggest to you that you are the one that is not understanding the case properly.

    I quoted you, many, many times the words of the Supreme Court in Pennock regarding "retard the progress in the useful Arts." Not once, ever, did you address or even acknowledge those words or what they meant.  Not once.

    And now we are off an tangent regard Univis Lens and Quanta?  You are deliberately trying to distort the words of the Supreme Court, in my view, anon.

  22. I think you are wrong, and let me quote the Supreme Court:

    “Quanta has the better of this argument. Nothing in this Court’s approach to patent exhaustion supports LGE’s argument that method patents cannot be exhausted. It is true that a patented method may not be sold in the same way as an article or device, but methods nonetheless may be “embodied” in a product, the sale of which exhausts patent rights. Our precedents do not differentiate transactions involving embodiments of patented methods or processes from those involving patented apparatuses or materials. To the contrary, this Court has repeatedly held that method patents were exhausted by the sale of an item that embodied the method. In Ethyl Gasoline Corp. v. United States, 309 U.S. 436, 446, 457, 60 S.Ct. 618, 84 L.Ed. 852 (1940), for example, the Court held that the sale of a motor fuel produced under one patent also exhausted the patent for a method of using the fuel in combustion motors.[4] Similarly, as previously described, Univis held that the sale of optical lens blanks that partially practiced a patent exhausted the method patents that were not completely practiced until the blanks were ground into lenses. 316 U.S., at 248-251, 62 S.Ct. 1088.

    These cases rest on solid footing. Eliminating exhaustion for method patents would seriously undermine the exhaustion doctrine. Patentees seeking to avoid patent exhaustion could simply draft their patent claims to describe a method rather than an apparatus.[5] Apparatus and method 2118*2118 claims “may approach each other so nearly that it will be difficult to distinguish the process from the function of the apparatus.” United States ex rel. Steinmetz v. Allen, 192 U.S. 543, 559, 24 S.Ct. 416, 48 L.Ed. 555 (1904). By characterizing their claims as method instead of apparatus claims, or including a method claim for the machine’s patented method of performing its task, a patent drafter could shield practically any patented item from exhaustion.”

    “The authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control postsale use of the article. Here, LGE licensed Intel to practice any of its patents and to sell products practicing those patents. Intel’s microprocessors and chipsets substantially embodied the LGE Patents because they had no reasonable noninfringing use and included all the inventive aspects of the patented methods. ”

  23. The novelty is in step A.

    Ned,

    One of the reasons you continue to struggle is that you don’t accept that novelty (in the proper patent sense) is to be regarded on “the claim as a whole” basis.

    Sure, elements and limitations within a claim can be “new.” But your entire “point of novelty” view is not in tune with what is patent law.

    This flaw shows up in many discussions, and your proper recognition would do wonders to move each of those discussions along nicely.

  24. Ned,

    With all due respect, what you call “reading strange” is just reading fully and not ignoring those portions which do damage to how I want the law to be.

    Also, rather than jumping to a different case (Quanta), why not explain the very quote you supplied in Univis?

    I thought the new Patently-O would discourage the game playing (which includes blatant goalpost moving like this).

  25. I know, which is the reason I think there is a problem with Akamai.

    Let me simplify this:

    There is direct infringement by one who completes the last step of a process in a system, or who performs the last step on an article pruduced using the other steps.

    Is this last paragraph a generic proclamation? I hope not. Absent any inducement or agency/control (required for contributory infringement), what you say in the last paragraph is incorrect.

    Let me simplify this: show me a process claim with multiple steps and I’ll happily carry out only the last step without fear of infringing that particular claim. I’m free to do that.

  26. I know, which is the reason I think there is a problem with Akamai.
     
    Let me simplify this:
     
    There is direct infringement by one who completes the last step of a process in a system, or who performs the last step on an article pruduced using the other steps.  This constitutes making a "product" embodying the invention, the using and selling of which is an infringement. 

    Knowledge of a patent is not required.

  27. Not sure about your points 1-5, except your use of “contributory infringement” when we are talking about inducement makes me cry.

    But I am pretty confident about my assessment of your hypotheticals in view of Akamai, anyway.

  28. anon, you read cases in a very, very, very, very strange way.  Given the holding of the Supreme Court in Quanta, which rested on Univis Lens, the sale of components embodying the invention is what counts.
     
    From Quanta:
     
    "The authorized sale of an article that substantially embodies a patent exhausts the patent holder's rights and prevents the patent holder from invoking patent law to control postsale use of the article.
     
     Here, LGE licensed Intel to practice any of its patents and to sell products practicing those patents. Intel's microprocessors and chipsets substantially embodied the LGE Patents because they had no reasonable noninfringing use and included all the inventive aspects of the patented methods."

  29. Dennis, see my posts below regarding Zoltek, which held in the case of a method claim there to be direct infringement when the most material element of the method (the court made this clear from the facts) was performed in Japan and the partially completed article was imported into the US and finished by the US company.

    We need discussion of Zoltek and how that case interfaces with this case. Has Zoltek been overruled, or is it the law already that in the case of articles, there is direct infringement under the facts of Zoltek where the accused performs the last step. (Performing the last step would seem to eliminate any possibility of inducement by itself.)

  30. OK, Malcolm.

    1. Novelty is part of contributory infringement — see Univis Lens and Quanta. The material part of the patented combination means the novel part of an old combinaton.

    2. I think the courts will read into the new inducement standard “materiality” per 271(c) when partially completed articles are sold to a finisher just like in Univis Lens.

    3. As support for 2, I cite Zoltek. However, in Zoltek, the en banc court held there to be direct infringement, not indirect, where the party accused of infringement performed the last step on an article partially finished by others in Japan and then sold to the US entity.

    4. Referencing Zoltek, how can there be “inducement” if the party accused is performing the last step. There has to be direct infringement.

    5. Items 3 and 4 convince me that Newman is right. Either that, or this court has overruled Zoltek.

  31. You’ll note, Ned, that in my answer below I’ve deleted the references to “novelty” as it is not part of the traditional infringement analysis.

    A method patent comprises steps A, B and C. …My client practices steps B and C, but purchases a partially completed article made pursuant to step A. Does my client infringe?

    More facts needed. One can carry out all the steps recited in a claim and not infringe the claim if, for example, the claim requires the steps to be carried out in a particular order.

    Does the practice of step A, and/or the selling of the article made by step A infringe?

    By itself, the practice of step A or the selling of an article made by step A does not infringe a claim reciting steps A, B, and C.

    A method patent comprises steps A and B. …Articles produced by step A can be used with other processes. Step B can be used with other articles produced by other methods.

    – A manufacturer purchases articles from commodity suppliers of the articles, some of which may be produced by step A. He then performs step B. Does this manufacturer infringe?

    Assuming no other facts, the answer is no.

    A producer of articles that may be produced by step A, or by steps X or Y, produces the articles by step A and sells them to the manufacturer knowing that the manufacturer will be using step B and knowing of the patent. Is the producer guilty of inducement infringement.

    Assuming just those facts: no. The mere sale of something to someone is not “active inducement” of a patented method.

    Add to the above that the producer has an opinion of counsel that because the articles produced by step A have substantial noninfringing uses that the producer has a right to use step A in articles sold to a manufacturer he knows is using step B because of §271(c

    Obviously doesn’t change anything.

    Intent is the key to inducement. Don’t lose sight of that. Someone has to be inducing the allegedly infringing party(ies) to perform the infringing acts. Just because I know you are going to perform “step Q” on my product doesn’t mean that I’m encouraging you to perform “step Q” on my product. If I honestly don’t care what you do with my product, there is no intent and there is no inducement.

  32. Ned,

    from your very own quote:

    and is without utility until it is ground and polished as the finished lens of the patent.”

    without utility

    Ned, at least try just a little. How is “without utility” going to play without the final step?

  33. Anon, I think the Supreme Court was relatively convinced that what the finishes were doing had nothing to do with the novelty the patent but was essentially prior art steps that are performed in finishing lenses.  The novelty was in the dual refractive indexes of the bifocal lenses.  These were produced by the manufacturer which could be a patentee or licensee.  The invention was embodied in the lens blanks that were sold.  That was the critical holding the case that because the invention was embodied in the lens blanks that were sold, the patent right have been exhausted.

    I don't understand your point at all about no other substantial noninfringing use.  I think that was irrelevant.

  34. A few scenarios based real cases that I have been involved in:

    A method patent comprises steps A, B and C. The novelty is in step A. My client practices steps B and C, but purchases a partially completed article made pursuant to step A.
    – Does my client infringe?
    – Does the practice of step A, and/or the selling of the article made by step A infringe?

    A method patent comprises steps A and B. Each of the steps is old, the only novelty is practicing step B on an article produced by step A. Articles produced by step A can be used with other processes. Step B can be used with other articles produced by other methods.
    – A manufacturer purchases articles from commodity suppliers of the articles, some of which may be produced by step A. He then performs step B. Does this manufacturer infringe?
    – A producer of articles that may be produced by step A, or by steps X or Y, produces the articles by step A and sells them to the manufacturer knowing that the manufacturer will be using step B and knowing of the patent. Is the producer guilty of inducement infringement.
    – Add to the above that the producer has an opinion of counsel that because the articles produced by step A have substantial noninfringing uses that the producer has a right to use step A in articles sold to a manufacturer he knows is using step B because of §271(c).

  35. In the recent en banc case involving 28 U.S.C. 1498, Zoltek Corp. v. US, 672 F. 3d 1309 – Court of Appeals, Federal Circuit 2012, the court seem to place great emphasis on §271(g) which reads in part,

    “Whoever without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented…”

    And on 154(a)(1):

    “Every patent shall …grant to the patentee, his heirs or assigns, of the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States, and, if the invention is a process, of the right to exclude others from using, offering for sale or selling throughout the United States, or importing into the United States, products made by that process, referring to the specification for the particulars thereof.”

    In that case, part of the process of manufacture of the completed product was practiced in Japan. Yet the court held there was direct infringement.

    I thought that case was a harbinger of this case, and indeed it was, but of Newman’s dissent. (Zoltek was never discussed here on Patently O for some reason.) However, I find no mention of that case is the discussion of the majority opinion. I find this odd.

    From Zoltek,

    “Claims 1-22 and 33-38 relate to methods of manufacturing carbon fiber sheets with controlled surface electrical resistivity; claims 23-32 and 39-40 are product-by-process claims for the partially carbonized fiber sheets. Zoltek is presently asserting only the method claims, which generally contain two steps: partially carbonizing the fiber starting material and then processing those fibers into sheet products..”

    The holding appeared be that the completion of the process by the government contractor was a direct infringement of the process patent even where one step was practiced by others abroad.

    The case also held that government liability was EXCLUDED under 271(b).

    The present case appears to be in direct conflict with Zoltek.

    Thus in the very same year, we have two en banc cases on the same topic, one that appears to be overruling the other.

  36. Ned,

    If you want to advance the conversation, you need to do more than restate the point that I already made while ignoring a point that I also make.

    R-read my post of 8:39 PM, and please try to advance the conversation.

  37. anon, from Univis:
     
    "Each of the remaining eight patents relates to the shape, size, composition and disposition of the pieces of glass of different refractive power in the blanks into which they are fused.
     
    "…[E]ach blank, as appellees insist, embodies essential features of the patented device and is without utility until it is ground and polished as the finished lens of the patent."
     
    It is more than clear that the finishers did nothing that was new.

  38. I have a pending case where method inducement is alleged, an amended complaint will be filed next week (not just because of Akami), and an SJ motion for inducing is right behind. Liability would be, at best, from amended filing date?

  39. A fundamental principle of the decision is sound. “There’s infringement goin on up in here.” The notion of escaping liability by having one person perform one step is silly. I should have started a cottage industry as a “stepper”: will perform step for food.

  40. This may be a nuanced view, but “embodied the invention” is not the same as “performed the novel patent feature.”

    Clearly, the proposition of no other material uses was critical in the Univis case. To ignore the criticality and make the jump in supposition as you have is legal error in my view.

    INother words, yes, the blanks embodied the invention and no, the finishers were the ones performing the patented feature. Whether or not their specific actions were old in the art or not was not a factor in the case and thus, cannot be used for analogy here.

  41. anon, I think you are wrong in your assesment of Univis Lens.  The finishers were not doing anything new.  The blanks themselves embodied the invention.  That was critical to the holding in that case, and was critical to the holding in Quanta.

  42. Ned,

    You may want to refresh your reading of Univis Lens, in which the provider of the blanks was actually not performing the novel patnet feature and it was the finishers that were taking the unpatented blanks and putting the lens in a condition that violated the patents.

    Not sure how (or even if) this affects the arguments you making here.

  43. Anonymous, since the statute requires active inducement, knowing seems to me to be insufficient. This is one of my problems with the majority opinion. They seem to treat inducement like contributory infringement, which requires “knowing” of the infringement and selling a material part of the patented invention knowing it will be used in the infringement.

    For example, if I am doing what I have a right to do because it is an old step, it should not be an inducement to do that step even if I know that others are doing further steps that infringe. Thus if a patent requires two steps to finish an artcle, and the step I practice is old, and I give the half-finished artile to a second party knowing that what he is doing will complete the overall process, I hardly think I should be an active inducer. I am simply doing what I have a right to do.

    In Univis Lens, the partial grinders of lens blanks were performing the novel features of the patent. The finishers, the opticians, were only doing that which was old. In this circumstances, I think there might be active inducement by the seller of the partially completed lens blanks. But the opticians? Are they infringers at all?

    That is a good question. I agree with both Newman and Linn that it has to be to impose liability.

  44. Paul — Prior to this decision, my clients were already being sued by quite a few NPEs where the claims clearly are performed by multiple parties. Maybe they were just brazen though, and now many more will joint the party.

    The knowledge and intent requirements will limit damages though. I don’t often see any evidence of knowledge of the patent before the filing of the lawsuit (or receipt of a settlement letter).

    I need to research up on the knowingly inducing infringement limitation though. If you have a reasonable non-infringement argument (perhaps a good opinion) does that take away inducement? I guess if you win on that basis at trial (no intent but the jury found all steps performed) you would have potential liability going forward.

  45. I think claim drafting is business as usual – everyone already should have been centralizing claims since Muniauction

  46. Dennis, if by “keeping the sky from falling” you mean that most defendants that are innocent of “knowing” inducement would ultimately prevail if they pay for a very costly full blown discovery and jury trial defense, then yes. But that is not very relevant to patent litigation or economic reality. All but a very small percentage of sued defendents pay subtantial settlement amounts to get out of costly patent litigation. This decision has eliminated an important non-subjective prior defense that could be much more easily asserted before litigation or early in litigation.

  47. How does marking affect your view of “knowledge?”

    I think the same ability for past damages exists regardless of type of patent owner.

    Further, the defense of “But I believed I wasn’t infringing” does not seem to be very availing (rather like accepting the assumption to be proved).

  48. One potential problem for NPEs and other is lack of past damages. Since there can be no inducement until there is knowledge of the patent, the NPEs for the most part will be limited to future damages. Moreover, up to now even if a party was aware of the patent, I would argue there could not be intent because the party in good faith believe there was no infringement. Thus this is just a going forward change with regard to damages. However, there still remains the nuisance problem of suits by NPEs.

  49. This is a good question Ned. I believe that there is a bit more state-of-mind wrapped up in the element of inducing the steps of the method.  However, the portion of the opinion that I quoted is unclear on that point.  

    I do not believe that the court intended for this decision to make any changes to the mens rea requirements for inducement. However, I have not studied the opinion in sufficient detail to fully justify my belief. 

  50. Dennis, isn’t mens rea all that is required of contributory infringement, i.e, the “knowing” part. Active inducement has always required more than “knowing.”

    I read the majority opinion to only require knowing. But, I might be wrong.

  51. Of course, the Federal Circuit did not tell us how to calculate damages for a defendant found liable for having induced others’ infringement when there are no acts of direct infringement. What’s the royalty base when you have zero direct infringements?

    So long, Georgia Pacific, hello uncharted waters…

    For once, I hope the Supreme Court grants cert.

  52. The rule that inducement requires proof of underlying direct infringement was not introduced with BMC or Muniauction.  See, for example, Met-Coil Sys. Corp. v. Korners Unlimited, Inc., 803 F.2d 684, 687 (Fed.Cir.1986).

  53. I don’t know about all this “new rule” and “change in the law” business (e.g., the headline for this post). BMC and Muniauction very recently created a new rule. The en banc court today merely corrected that error.

  54. Renee. I appreciate that you don't like this verdict, but extreme comments (such as calling the judges corrupt) don't carry much weight here without also providing some justification. 

  55. A claim covers a novel method of communicating between a cell phone and a base station. A party sells cell phones to the public that perform some of the steps. However the patentee does not notify the cell phone manufacturer of infringement. Rather they notify the Telephone Company of infringement stating that that the use of the old base station in cooperation with the new cell phone causes the infringement. Is the cell phone company liable?

    I would say that under the majority opinion the answer might be yes.

  56. The arrogance and corruption of these judges is simply breathtaking. What is even more astounding is that we actually let them get away with this.

  57. Dennis, thanks for the excellent point that “inducement still requires that the accused infringer have knowingly induced the infringement — that is with knowledge that the steps it is encouraging are covered by the patent.”

    However, there are very many internet related patents out there, including many owned by NPE’s. We have no idea how many more might not have been sued on [until now] because the claims clearly required unrelated parties to perform all the steps, so that there was no direct infringement by anyone. It could be quite a few patents. The “knowingly induced” requirement is too subjective and factually disputable to stop such suits from being brought, NOR likely to allow earlier and lower cost disposal by S.J., unlike the prior case law being overuled here. So the potential impact of this decision should not be taken lightly.

  58. I fully agree with Newman.

    There is nothing in §271(a) that requires a single actor. That gloss was put on to the statute by the Federal Circuit itself in BMC resources.

    Take the example of a radio transmitter in a radio receiver. The claims require cooperation at each element. I think it is reasonable to believe that when a transmitter and a receiver cooperate, that is direct infringement regardless that they are operated by different parties.

    Newman made the excellent point I believe that in cases of joint infringement, that damages should be apportioned according to fault. The problem historically was that since patent infringement was a strict liability problem that it would be unfair to heep 100% of the liability on a minor actor. However since the law on apportionment has evolved, that no longer is a policy concern.

    Then there is the issue of the majority’s views on inducement. Active inducement as always required something more than just an arms-length transaction. Thus how does the majority opinion apply in a situation where a party performs substantially all of the steps, and then sells a partially completed component to a third-party knowing that he will perform the last step? This is never been inducement as far as I know. Has the majority opinion substantially change the law an active inducement?

    I would hope the Supreme Court would take this case and adopt Judge Newman’s views.

  59. I wonder if now method claims where different steps were performed by different actors can now ANTICIPATE? Lulz.

    Do PTO Examiners typically get into such nuances when formulating rejections of Internet/system claims? i.e., will this opinion change the way such claims are examined?

    I kinda doubt it.

  60. I agree. Crappy example by me.

    Now switch to infringement: what you did yesterday didn’t infringe. Now, what you did yesterday does infringe.

  61. Imagine you have a non-infringeent opinion, based on the “old” interpretation. Can you now be liable for willful past infringement?

    I don’t see how the past acts could be willful if you were reasonbly following the law as it was previously understood prior to this case.

  62. That's right, I probably should have characterized the decision 1-5-4.  Judge Newman would have expanded the scope of direct infringement to go well beyond the lone infringer/mastermind.

  63. She was against it because it wasn’t pro-patentee enough. As I understand it, she would allow direct infringement in the absence of direction and control using some sort of joint strict liability.

  64. “That which infringes if later, anticipates if earlier.” Peters v. Active Mfg., 21 F. 319 (W.D.Ohio 1884) (affirmed and quoted in 129 U.S. 530 (1889))

  65. “Judge Rich’s statement makes clear that he saw no anomaly in finding liability for indirect infringement when there was “obvious infringement of the patent” even though there was “no direct infringer of the patent.””

    Still the patent system suffers from the sins of one man.

  66. Also, I wonder if now method claims where different steps were performed by different actors can now ANTICIPATE? Lulz.

  67. So stu pid. When even pro-patent Newman is against it you know that it is agin the law. Who thinks the supremes will reverse 9-0?

  68. Let me find my statutory interpretation book and give some cites to at least start reading….  Imagine you have a non-infringeent opinion, based on the "old" interpretation. Can you now be liable for willful past infringement?

  69. Yes – Clearly the court has changed the rule.  There is an important question as to folks who had organized their behavior so as to avoid infringement under the old rule will now be liable for past & future induced infringement.   

  70. OK, so starting today. But what does this mean?

    The holding applies only to lawsuits filed after the date of decision? – if so, fine, but then I don’t see much difference in “prospective” vs. “retroactive,” since the holding obviously can’t apply to infringement allegations that haven’t been made yet.

    The holding only applies to patent applications filed after today? That doesn’t seem to make much sense, especially since the patents in the case at hand have been around for a while.

    The holding only applies to acts of inducement occurring after today? I can see the policy argument here, I suppose, but the court here doesn’t seem to think that the intent prong requires an intent to indirectly infringe, as opposed to just an intent to cause all of the requisite actors to carry out the requisite steps.

  71. Judge Linn makes a fair point on the difference between what Congress did and what it ought to have done. Still, if the majority was more driven by policy considerations than a dispassionate interpretation of Title 35, it might have gotten the idea from a court a few miles east of it.

  72. David, I’m not quite sure what to do with your comment. The court here says that this new interpretation applies to two patent suits filed several years ago, involving patents that were filed years before that. How could this holding be “prospective” only? Prospective as of when?

  73. Isn’t a 5:4 or a 6:5 split a sign that patent law by now is so mature that there are no easy points still open, and that the only ones still to settle are ones on which reasonable minds can reasonably disagree.

    If so, isn’t that a reason to be proud of today’s patent law?

    I still think that one measures the “quality” of an appeal court decision by the degree to which it simplifies the legal landscape. Conversely, those that cover it with fog are the low quality ones (Bilski anybody?). Just because a decision is 6:5 does not mean it’s a foggy one. It might be real high quality, mightn’t it?

  74. I’m not one to recommend jumping the gun, but this is the law of the land as of today. This doesn’t affect every application, of course, but this new understanding of the law should definitely be considered when drafting new claims between now and the Supreme Court decision that you suggest is almost certainly forthcoming. It should probably also be considered when prosecuting existing applications, especially those that involve network-related technology.

  75. Anyone else notice that Judge Newman didn’t propose any solution or system in her dissent?

    Aside from that, I think Judge Linn’s opinion is definitely the more persuasive one. The opinion may “close a loophole” but that’s not the role of the court, it’s the role of Congress. I understand the policy reasons for wanting to allow infringement liability in situations like this, but I just do not see any principled way to do it within the current statute and the precedent. I think there’s a good chance that the Supreme Court takes a look at this, because the majority has taken a lot of liberties in its opinion.

  76. Leo–

    I think this is a good direction, but that it will be somewhat restrained if appealed.

    Grant of cert is an almost…a certainty.

    This “might” be big, I don’t think it’s worth considering right now unless you’re preparing the app for cert, or planning to file an amicus brief.

  77. Many of us were anxiously awaiting these decisions so the Federal Circuit, once and for all, could define the scope of joint infringement. Agency/Principal relationship? “Mastermind” requirement? Let’s just ignore all of that and focus on inducement instead.

  78. Whenever a court changes an interpretation of a statute, the question of whether the change is retroactive or prospective needs to be considered. Usually, a change in interpretation (as opposed to announcing for the first time what the statute “always” meant) is prospective, only….

  79. As a matter of fact, any specific claim drafting suggestions to take advantage of this decision would be appreciated.

  80. That's right. You are still best-off with a claim that can be directly infringed by a single actor.  We'll have to remember that the Supreme Court may well take-up this case. 
     

  81. I had those same thoughts. I was just telling a colleague that I’ve been coaching others to avoid multi-actor claims, and I’ve been making fun of some of those sloppy claims for years. But while a claim that can only be indirectly infringed is not as good as a claim that is directly infringed (preferably by a deep-pocketed actor), it is clearly better than no claim at all, for those scenarios where it’s really hard to locate the invention in a single node.

  82. The majority’s per curium opinion is playing completely in left field. Proclamations like 271(a) doesn’t define infringement, but rather constitutes things that could be infringement is a HUGE, I mean, HUGE loophole. “Oh, courts, never you mind that whoever makes, uses, sells language in 271(a), you can have all these other sorts of infringement.”

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