Supreme Court Rejects Expanded Inducement Doctrine

By Dennis Crouch

Limelight Networks v. Akamai Tech. (Supreme Court 2014)

In an 11-page unanimous opinion, the Supreme Court has rejected the Federal Circuit’s expansion of the inducement doctrine – holding instead that inducement must be tied to underlying direct infringement. The Patent Act provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

[O]ur case law leaves no doubt that inducement liability may arise”if, but only if, [there is] . . . direct infringement.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S 336, 341 (1961) (emphasis deleted).

One might think that this simple truth is enough to dispose of this appeal. But the Federal Circuit reasoned that a defendant can be liable for inducing infringement under §271(b) even if no one has committed direct infringement within the terms of §271(a) (or any other provision of the patent laws), because direct infringement can exist independently of a violation of these statutory provisions.

The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. “Each element contained in a patent claim is deemed material to defining the scope of the patented invention,” Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.

The opinion is harsh toward the Federal Circuit, but somewhat poorly written. In particular, the Supreme Court seems to have misunderstood that the Federal Circuit holding actually does require all steps of the method to be carried out in order for a finding for inducement. The Court questions:

What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent.

Of course, the Federal Circuit’s decision in this case would not allow infringement in this scenario either.

The Supreme Court recognized and concurred with the policy goal behind the Federal Circuit’s doctrine as serving to help prevent “a would-be infringer” from evading liability “by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls.” However, the Supreme Court concurred with other commentators that a primary cause of this concern stems from the Federal Circuit’s unduly strict “single actor” rule for determining direct infringement. Muniauction. The Court writes:

Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction. A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability that the text and structure of the Patent Act clearly require—an alteration that would result in its own serious and problematic consequences, namely, creating for §271(b) purposes some free-floating concept of “infringement” both untethered to the statutory text and difficult for the lower courts to apply consistently.

On remand, there is a good chance that the Federal Circuit will reconsider (and expand) the single-actor rule for direct infringement to more fully account for common law traditions of respondeat superior liability.

63 thoughts on “Supreme Court Rejects Expanded Inducement Doctrine

  1. A frustrating decision, but given the definition of direct infringement of method patents, it was the right decision. The requirement that a single actor perform all the steps of a method patent for their to be direct infringement should be reconsidered on remand, and I think it will. So long as every step is committed in the method patent, a patentee’s property rights are infringed.

    The key question is limiting damages on certain “innocent” actors. See, as an example, Kennedy’s and Waxman’s exchange about customers being sued for completing the last step in the method patent.

    1. J: So long as every step is committed in the method patent, a patentee’s property rights are infringed.

      Absolutely false. Did you read the Supreme Court decision? Method claims don’t give the patentee the right to prevent the steps in a method from being carried out anywhere, at any time, by any number of unrelated individuals acting independently.

      For example, you have a patent on a five-step method and different people independently carry out each of the steps without any coordination between them, nobody is liable for infringement or inducement.

      If that bothers you, invent something better and write a better claim.

      1. Absolutely false. Did you read the Supreme Court decision?

        LOL – did you? The key part of the SC decision was the notion that inducement could be held when there was no underlying infringement.

        Pay attention.

        1. Anon: The key part of the SC decision was the notion that inducement could be held when there was no underlying infringement.

          Right. And what I’m saying, MM, is that the definition of underlying infringement in method claims, as articulated inMiniauction, should be reconsidered.

          1. J what I’m saying, MM, is that the definition of underlying infringement in method claims, as articulated Muniauction, should be reconsidered.

            I get that. Right now 271(a) covers the situation where “single actors” (which includes multiple actors being controlled or directed by a single entity) perform all the steps. That’s pretty close to where it needs to be, I think.

            But patent liability is not going to extend to the situation plainly encompassed by what you wrote (“So long as every step is committed in the method patent, a patentee’s property rights are infringed. “). A patentee’s “property rights”, as expressed in a method claim, do not extend as far as your statement suggests. They can’t extend that far because we’d end up with liability scenarios at least as absurd as that discussed by Justice Alito.

            1. Respectfully, I think you are misreading the opinion, or I am misreading what you are saying. Remember the one and only question the court is seeking to answer: can there be liability under 271(b) when there is no direct infringement per 271(a). The answer is no.

              I agree that, at least currently, 271(a) covers the situation where “single actors” perform all the steps IN METHOD CLAIMS. Only in method claims is this required, but not structural claims. In infringement of structure claims, so long as the assembly is eventually finished, even by an independent third party, then there has been an infringement of the patentee’s rights.

              In that situation, who is the direct infringer? Possibly the consumer. (271(a) (“Whoever…”)). Who is liable? Inducers are jointly and severally liable as well as the direct infringer. Are consumers sued? No, because that doesn’t make any business sense- exactly Seth Waxman’s point in oral argument to Justice Kennedy.

              I don’t think Justice Alito’s liability scenarios had to do with what I am talking about here. In fact, the opinion says that it assumes Miniauction is right without deciding. I think the Court is signaling that it is skeptical here.

            2. “In infringement of structure claims, so long as the assembly is eventually finished, even by an independent third party, then there has been an infringement of the patentee’s rights.”

              Well due because he made used or sold x product comprising abc. In the same fashion, someone who makes uses or sells a y method comprising jkl steps infringes. There is nothing “special” between the two.

            3. J In infringement of structure claims, so long as the assembly is eventually finished, even by an independent third party, then there has been an infringement of the patentee’s rights.

              Your original statement referred to a “method patent” and all I was doing was pointing out that your statement was wrong. And it’s still wrong.

              Composition claims are a completely different animal from method claims because composition claims are infringed when the claimed composition is made, regardless of how it is made (note that I’m talking about bona fide composition claims, not some jnxky pseudo-method claim in pseudo-composition format that the Supreme Court hasn’t sanctioned and probably never will).

              Are consumers sued? No, because that doesn’t make any business sense- exactly Seth Waxman’s point

              First, Seth Waxman is completely full of it. What makes “business sense” is whatever puts money in your pocket, directly or indirectly. ” Consumers” are an incredibly broad class of entities, which includes everyone on earth, including both businesses and individuals who have money that each can be forced to turn over to the patentee. Of course “consumers” have been sued. If they haven’t been sued already according to some narrower definition that Waxman had in mind, rest assured that they will be shortly if “patent monetization” trends continue to “innovate” at their present rate.

            4. MM:

              I walked away from the thread and came back and realized the misunderstanding. When I said, “so long as every step in the method claim is committed, a patentee’s patent right is infringed,” I only meant that as a proposed rule. We are in agreement that, currently, it is not the rule.

              I don’t want to misrepresent Waxman’s argument. I refer you to page 31 and 32 of the transcript for the full context, where he talked about the different type of consumers.

              But in a sense you are right, and I admit that this is the biggest concern for my proposed rule: how do you prevent innocent infringers from being sued- especially because method claims do not have to be marked. I’m not ready to present a good answer on that, at least not yet. (There are also other considerations, things for another post, perhaps…)

              6:

              Its actually quite different than structural claims. If there are elements A, B, and C, and I sell AB knowing that any consumer can add C to complete the assembly, then I induced infringement and I am liable for induced infringement under 271(b) because the consumer was the direct infringer under 271(a). See Deepsouth case.

              But in method claims, a direct infringer must do ABC. In Limelight, we have AB and letting the consumer doing C, as above. But there is no direct infringer under 271(a). So the Court ruled today, there is no induced infringement under 271(b).

              So, in your example, if a person sells y method with steps jkl, there is only infringement if the method comprises only jkl and nothing more.

            5. I don’t recall the deepsouth case but if that is what was held, specificallly as you say, the cafc done fed upagain. Last I checked I actually have to induce infringement to be liable of inducing infringement. Its kind of in the name. “Inducing” infringement.

            6. 6:

              Honestly, I don’t know how the Federal Circuit screwed this up. Sometimes they are overturned 9-0 and I think, well, its because the Fed Cir. just views the world in their patent box and they are not thinking about the law generally- like Nautilus. But sometimes, as in Limelight and Medtronic, I am shocked they could get it so wrong.

              Anon:
              The Federal Circuit has used the words “innocent infringer” to denote those who would not infringe if they would have known of the patent, as in “innocent bystanders.”

              I have to say that it is an important consideration here on who we want to be sued for infringement and those who we don’t want to be sued. It may or may not be a customer. So let’s say that AT&T is the cell phone provider, sell iPhone apps for both companies A and B. A and B are direct competitors, A sues B for infringement of its method patent, for which AT&T completed some of the steps. Currently, there is no infringement because a single actor has to complete all the steps of the method patent. If that were to change, as I am advocating, ideally the rule would be constructed in such a way that AT&T is not sued because AT&T is just a bystander here.

              I see you like to be picky with words, and that’s fine by me. However, I’d appreciate a more generous reading of this post- can you tell me why it bothered you that I wrote “innocent infringer.”

              I still welcome corrections, but as the Court said yesterday in Nautilus, there are limitations to language and it is impossible to express exactly what you mean.

            7. J,

              Do you seriously post as to how the CAFC can miss a point so badly and then turn around and miss a point so badly yourself?

              I repeat this (because it is black letter law): there is no such thing as an innocent infringer – you infringe or you do not.

            8. The concept of “innocent infringer” is a ploy to obfuscate the exclusive nature of the patent right and to make infringement more into the disregardable contract sense of only a “small harm” of efficient breach – a ploy that serves one and only one constituency (Big Corp) while seemingly playing to the falsehood of serving “Joe Consumer.”

            9. Got it. You are echoing Yoda. Infringe or infringe not. There is no innocent.

              You and I might infringe patents everyday using any number of different technologies, but we are not sued. We are only considered infringers under 271(a) to serve a particular purpose- so patentees can hammer those who induce us to infringe under 271(b).

              “Innocent” doesn’t mean we are not liable, or that the harm is not great (if we didn’t illegally use the patent technology, there would be no harm to the patentee.) Innocent means that it would be unjust, no matter what the law says, for us to lose our homes because bought and drove a Toyota truck that infringed a GM patent.

              In fact, we have codified this sentiment in 271(b)… providers of staple articles of commodity are not considered to have induced infringement.

            10. Being sued – or not – is not, nor has ever been the question.

              Please keep your eye on the actual issue.

              Your sense of “just” or “unjust” simply has no play in an infringement analysis, as infringement is a strict liability type of offense. Again – you are not keeping your eye on the actual issue (and show signs of having already drunk the koolaid)

            11. I see and understand the issue just plainly… and I see the subtext of our disagreement. I’m not sure you see the philosophical difference. You probably think patents comes from Lockeian notion of property rights, while I see a patent as a type of industrial prize created by the government. Patent rights come from the government, not natural law (as other property right). So patentees get to sue whomever we as a society decide patentees get to sue.

              For example, patentees cannot sue, as shown in 271(c) (not b, as I said earlier), are providers of staple items of commodities. Why? As such, if we are to expand the idea of who are infringers of method claims, we need to create safe harbors like for providers of staple items of commodities.

              If you choose to respond, I would like for you to explain why we would carve out exceptions for infringers that provide staple items of commodities if “just” and “unjust” have no play in infringement analysis. Why do we have notice requirements before the “damage clock” starts to run?

              Just and unjust always has a role in the law, because judges won’t interpret statutes to give absurd results.

            12. I’m not sure you see the philosophical difference.

              LOL – really? You want to bring a knife to a gun fight..?

              (hint: if you have the law, pound the law – I gave you black letter law – appreciate that)

        2. The key part of the SC decision was the notion that inducement could be held when there was no underlying infringement.

          You really seem obsessed lately with “notions”. Is that a legal term?

          Show everybody exactly where this “notion” appears in the Supreme Court decision and then tell everyone what “key part” in the decision was played by this “notion”.

          Then explain how anything that I wrote in response to J’s erroneous statement is inconsistent with the Supreme Court decision.

          Thanks. We all know you’re a big ethical man who wears his bigboy pants proudly and writes English very well so this certainly won’t be a problem for you. Maybe for an extra challenge you can try writing using just words rather than relying on your typically hysterical font styles. Or not. Surprise everyone.

          1. In other words you want me to explain your error in understanding the decision…

            LOL – pass. I will take the better option if making fun of you and your errors.

            Don’t like it? Then learn the law – or at least try to post with more than just your ‘policy’/opinion wanna-be table poundings.

            1. Not at all.

              More likely is the fact that you will just shove your fingers more deeply into your ears, clench ever tighter your eyes and chant your lalalala ever louder.

              Once you realize that I pound the law because the law is on my side, and that I pound facts because facts are on my side, maybe you will realize that pounding the table is really not all that convincing.

  2. Regarding this passage from the Opinion, referred to by Dennis:

    What if a defendant pays another to perform just one step of a 12 step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent.

    … it does make sense in context. Alito’s point here is that the Federal Circuit’s interpretation of 271(b) is unmoored from its interpretation of 271(a) and thereby allows courts to find liability even where no single actor (or a single actor and parties under its direction) are performing all the method steps. When Alito says “no one performs the other steps” in this paragraph, I don’t think he means that “the other steps are not performed by anybody”. He means that the other steps are not performed by the defendant or by any other party under the direction of defendant (“any other party” other than the party payed to perform the step in his hypothetical, that is).

    In other words, he’s addressing the possibility of finding induced infringement liability for the performance of one “last step” (the “important step” — presumably doesn’t matter if it’s the first or last recited step in the claim) where all the other steps in the method were carried out completely independently by, say ten other parties.

    I think the Supreme Court got it right here. And I think Muniauction was also mostly right and just needs to be tweaked, as the Court (and Dennis) seem to recognize

    1. Poorly written:

      hereby allows courts to find liability even where… [a single actor and parties under its direction] are performing all the method steps.

      That remains the case even after this Supreme Court decision.

      1. What are you responding to? “Even after”? Are you correcting something I wrote?

        You left out the word “no” from the quote you reproduced. Why?

        1. You left out the word “no” from the quote you reproduced. Why?

          He’s suggesting that you should have had a “no” in the parenthetical, as well, i.e., “even where no single actor (or no single actor and parties under its direction) are performing I think your meaning came across pretty clearly, though, and I think your analysis is right.

          I thought the Court was sending weird signals about Muniauction, though. It looks like an invitation to extend direct infringement analysis to cover situations where some of the method steps are carried out by consumers. I’m not sure that I like where that’s headed – that seems to suggest that the consumers could be jointly and severally liable for direct patent infringement, for simply doing what a web site or cloud-based application suggests that they do.

          1. DanH – you are quick, as the doing what X suggests that they do does in fact sound in “directed to” that falls under (albeit loosely) the control or direction plank.

          2. Dobu: He’s suggesting that you should have had a “no” in the parenthetical, as well, i.e., “even where no single actor (or no single actor and parties under its direction)

            Got it. Yes, that would clear up any possible ambiguity. Thanks for translating.

            .It looks like an invitation to extend direct infringement analysis to cover situations where some of the method steps are carried out by consumers. I’m not sure that I like where that’s headed – that seems to suggest that the consumers could be jointly and severally liable for direct patent infringement, for simply doing what a web site or cloud-based application suggests that they do.

            There’s a lot of consumers out there. I don’t think they would like that. Perhaps the silver lining is that a sea change may be in the works.

            1. silver lining…

              Be careful of what you wish for, as patent infringement itself still applies to consumers (there is no “no-consumer” provision in the exclusion of “use” that is part of patent infringement).

  3. As predicted by all realists, and a continuation of the previous posed question: “how many unanimous Supreme Court reversals does it take to change a light bulb at the CAFC?

  4. Dennis: The opinion is harsh toward the Federal Circuit, but somewhat poorly written. In particular, the Supreme Court seems to have somewhat misunderstood the Federal Circuit’s holding required all steps of the method to be carried out in order for a finding for inducement.”

    The second sentence in this paragraph is also “somewhat poorly written”. ;)

  5. “The opinion is harsh toward the Federal Circuit, but somewhat poorly written. In particular, the Supreme Court seems to have somewhat misunderstood the Federal Circuit’s holding required all steps of the method to be carried out in order for a finding for inducement.”

    A poor opinion, based on a misunderstanding of law.

    This is whay patent law is as it is.

    Carry on.

  6. Good claim drafters already draft their claims from the perspective of a single actor (e.g., by receiving the results of a second actor’s actions), but there are enough bad claim drafters out there (see also today’s opinion in Nautilus) that I anticipate a lot of strange claim amendments appearing on my docket in the near future.

    1. Exactly what constitutes a “single actor” apparently still needs to be better defined.

      Ideally, this would be in Congress, but it appears that the Supreme’s simply don’t want to be the ones holding the bag for that decision (they indicate that either Congress or the CAFC should take responsibility for deciding that one)

  7. The statutory text and structure and our prior case law require that we answer this question in the negative.

    Sounds a lot like an invitation to Congress to write more clearly.

    1. Of course, Congress could. Ditto for how they’ve addressed similar “holes” in liability for infringement.

      I doubt, seriously, that Congress is going to want to close this one though. There’s no good policy reason to expand liability to include the otherwise non-infringing activities of third parties.

    2. …”But the possibility that the Federal Circuit erred by too narrowly circumscribing the scope of §271(a) is no reason for this Court to err a second time by misconstruing §271(b) to impose liability for inducing infringement where no infringement has occurred.”

      Bottom line: liability cannot attach if the steps individually can be taken for some other purpose than as might be required under the all-elements rule of reading a patent. – Exactly as I predicted in the equivalency of physical elements of one of the “hard goods” items having other non-infringing uses.

      We acknowledge this concern. Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction

      Supreme buck passing (note that the Supremes assumed without deciding that Muniauction was correct – the battle between the proxy of Congress (in the specialty court created by Congress) and the judiciary (as represented by the Court) continues….

      Reading between the lines, this appears to be an indicator that a Chamberlain style decision – that no one will like – will be forthcoming in the Alice decision.

      1. Also out is Nautiluswhich I also nailed.

        And the Chamberlain indicators are running rampant:

        This Court, as “a court of review, not of first view,” Cutter v. Wilkinson, 544 U. S. 709, 718, n. 7, follows its ordinary practice of remanding so that the Federal Circuit can reconsider, under the proper standard, whether the relevant claims in the ’753 patent are sufficiently definite, see, e.g., Johnson v. California, 543 U. S. 499, 515. Pp. 13–14.

        1. Also out is Nautilus – which I also nailed.

          Right, we can all vividly remember you clearly railing against the “insolubly ambiguous” standard and how it undermined the notice function of patents. You never stopped complaining about how it was just one more example of the Federal Circuit bending over backwards to coddle patentees.

          1. You can sit and ridicule him and tell him this all you want brosef, he’s OCPD. He has to have been right all along, simply by virtue of his personality disorder.

            1. There you go again with your projecting 6.

              There is a far simpler reason that my friend Occam has – see his razor (the simpler reason is that I am right).

            2. see his razor

              Do you see any “razor”, 6? I don’t.

              Maybe it’s in that same box with the protons that TB is always rambling on about.

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