Divided Infringement

1. Divided Infringement Patent Law 10.30.2012

2. Agenda • Overview of infringement law • Divided infringement cases • BMC v. Paymentech • Akamai v. Limelight

3. [W]hoever without authority makes, uses, offers to sell, or sells any patented invention within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. -- 35 U.S.C. § 271(a)

4. 271 • Whoever • Makes, uses, sells, offers to sell, or imports • Any patented [claimed] invention • Infringes

5. 271 • Whoever – singular; what if more than one person/entity involved? • Makes, uses, sells, offers to sell, or imports – what are the limits of these categories? • Any patented [claimed] invention – what if only PART OF claimed invention? • Infringes

7. Claim 1: A chair comprising (1), (2), (3) . . .

10. What if the accused infringer “outsources” one step in the infringement? For a party to be liable for direct patent infringement, that party must commit all the acts necessary to infringe the patent, either personally or vicariously.

11. “Indirect Infringement” (b) Whoever actively induces infringement of a patent shall be liable as an infringer. (c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition . . .

13. Vicarious: direction and control Put the leg on.

14. Direct Infringement: No Intent Required • Patent infringement is an “absolute liability” or “strict liability” legal issue • Innocence, negligence, lack of knowledge – NOT a defense • You are liable whether or not you know about a patent and/or that you are infringing it

15. Contributory Infringement

16. Inducement Here is how you build this type of chair. You start with . . . Are you listening to me?

17. Traditionally, a Direct Infringer is Always Required

18. Caveat! • In one special circumstance, in a case just decided this term, liability was found without a single direct infringer: Akamai v Limelight • Case now pending a Cert petition

19. What If There Is No Single Direct Infringer?

20. BMC v. Paymentech • Invention/Claims • Infringement issue • Federal Circuit analysis • Post-Paymentech developments

23. 1. A method of paying bills using a telephone connectable to at least one remote payment card network via a payee's agent's system, wherein [1] a caller places a call using said telephone to initiate a spontaneous payment transaction that does not require pre-registration, [2] to a payee, the method comprising the steps of: prompting the caller to enter an account number using the telephone, the account number identifying an account of a payor with the payee in connection with the payment transaction;

24. responsive to entry of an account number, determining whether the entered account number is valid; prompting the caller to enter a payment number using the telephone, the payment number being selected at the discretion of the caller from any one of a number of credit or debit forms of payment; responsive to entry of the payment, determining whether the entered payment number is valid; prompting the caller to enter a payment amount for the payment transaction using the telephone;

25. Accessing [3] a remote payment network associated with the entered payment number, the accessed remote payment network determining, during the call, the account associated with the entered payment number to complete the payment transaction; accessing a remote payment network associated with the entered payment number, the accessed remote payment network determining, during the call, whether sufficient available credit or funds exist in an account associated with the entered payment number to complete the payment transaction;

26. Trial court holding Paymentech argued that it did not perform the steps under the patent either by itself, or in conjunction with others. The District Court found no evidence of direct infringement, and granted Paymentech’s motion for summary judgment.

27. Direct infringement requires a party to perform or use each and every step or element of a claimed method or product. For process patent or method patent claims, infringement occurs when a party performs all of the steps of the process.

28. Paymentech, Supp. at 106 When a defendant participates in or encourages infringement but does not directly infringe a patent, the normal recourse under the law is for the court to apply the standards for liability under indirect infringement. Indirect infringement requires, as a predicate, a finding that some party amongst the accused actors has committed the entire act of direct infringement.

29. Relationship to indirect infringement [T]he law imposes vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party. In the context of patent infringement, a defendant cannot thus avoid liability for direct infringement by having someone else carry out one or more of the claimed steps on its behalf . . . . At 106

30. [W]hoever without authority makes, uses, offers to sell, or sells any patented invention within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. -- 35 U.S.C. § 271(a)

31. “Indirect Infringement” (b) Whoever actively induces infringement of a patent shall be liable as an infringer. (c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition . . .

32. BMC “Courts faced with a divided infringement theory have also generally refused to find liability where one party did not control or direct each step of the patented process.”

33. Direct vs. indirect infringement [E]xpanding the rules governing direct infringement to reach independent conduct of multiple actors would subvert the statutory scheme for indirect infringement. Direct infringement is a strict-liability offense, but it is limited to those who practice each and every element of the claimed invention. By contrast, indirect liability requires evidence of “specific intent” to induce infringement. Another form of indirect infringement, contributory infringement under § 271(c), also requires a mens rea (knowledge) . . . .

34. Solving the problem by drafting BMC could have drafted its claims to focus on one entity. The steps of the claim might have featured references to a single party’s supplying or receiving each element of the claimed process. However, BMC chose instead to have four different parties perform different acts within one claim.

35. 1. A method of paying bills using a telephone connectable to at least one remote payment card network via a payee's agent's system, wherein [1] a caller places a call [a user call is received] using said telephone to initiate a spontaneous payment transaction that does not require pre-registration, [2] to a payee [supplying a payment to a payee], the method comprising the steps of: prompting the caller to enter an account number using the telephone, the account number identifying an account of a payor with the payee in connection with the payment transaction;

36. Updating Paymentech Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329-1330 (Fed. Cir. 2008): finding no infringement where there was no proof that the alleged infringer directed another party to perform the steps of the claims

37. In an electronic auction system including an issuer's computer having a display and at least one bidder's computer having an input device and a display, said bidder's computer being located remotely from said issuer's computer, said computers being coupled to at least one electronic network for communicating data messages between said computers, an electronic auctioning process for auctioning fixed income financial instruments comprising:

38. inputting data associated with at least one bid for at least one fixed income financial instrument into said bidder's computer via said input device; . . . submitting said bid by transmitting at least some of said inputted data from said bidder's computer over said at least one electronic network; and communicating at least one message associated with said submitted bid to said issuer's computer over said at least one electronic network and displaying, on said issuer's computer display, information associated with said bid including said computed interest cost value …

39. See SIRF Technology, Inc. v. ITC, 601 F.3d 1319 (Fed. Cir. 2009): steps of “communicating” and “transmitting” to a user-device were interpreted as steps that did not require end-user action even though the actual process involves end-user devices downloading the transmitted data; therefore, the claims avoid the problem of divided infringement and are infringed by a single party, the defendant

40. Inducement case Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060 (May 31, 2011) Level of knowledge required for inducement liability: “willful blindness” can be the equivalent of actual knowledge for inducing infringement

41. Akamai v. Limelight

45. Terminology & business model • Akamai: web optimization services – optimized web “domains” • Clients or customers: “content providers”

46. 19. A content delivery service, comprising: replicating a set of page objects across a wide area network of content servers managed by a domain other than a content provider domain; for a given page normally served from the content provider domain, tagging the embedded objects of the page so that requests for the page objects resolve to the domain instead of the content provider domain . . . .

47. Limelight does not itself perform every step of the asserted claims. Limelight provides the information necessary for its customers, the content providers, to modify their web pages or Internet address routing information to use the Limelight service. However, the content providers perform the actual tagging step (emphasized above) themselves.

48. Akamai v Limelight – en banc The per curiam majority opinion is on behalf of six of the eleven members of the Court (Rader, C.J., Lourie, Bryson, Moore, Reyna, Wallach, JJ.). Five members of the Court dissented; four disagreed over the issue of inducement (Linn, J., dissenting, joined by Dyk, Prost, O’Malley, JJ.); Newman dissent

49. 692 F.3d 1301 (Fed. Cir. 2012) • Held: A defendant may be held liable for induced infringement of a method patent if the defendant has performed some of the steps of a claimed method and has induced other parties to commit the remaining steps, or if the defendant has induced other parties to collectively perform all the steps of the claimed method, EVEN IF no single party has performed all of the steps itself.

50. Inducement • Unlike direct patent infringement, induced infringement is not a strict liability tort; it requires that the accused inducer act with knowledge that the induced acts constitute patent infringement