Infringement

1. Infringement May 18, 2009Alicia Griffin Mills

2. Patent Infringement • Statutory • Direct Infringement §271(a) • Indirect Infringement • Active Inducement §271(b) • Contributory Infringement §271(c) • Judge-made • Divided infringement

3. Direct Infringement - §271(a) • Section 271(a) defines infringement: • Making, using, offering to sell, selling, or importing • Any patented invention • Within the United States • During the term of the patent

4. Direct Infringement - §271(a) • A party directly infringes when they themselves “perform or use each and every step or element of a claimed method or product.” • Werner-Jenkinson Corp. v. Hilton Davis Corp., 520 U.S. 17 (1997)

5. Analysis • Two step analysis to determine infringement • Claim interpretation • Compare construed claims to accused product or process • Infringement requires every claim element to be included in the accused product or process

6. Example • A manufacturer of a medical implant does not directly infringe if final assembly of parts is actually performed by surgeon just prior to surgery • Can only sue surgeon for direct infringement • Note that §287(c) does not allow an injunction or or damages against infringing medical practitioners in these kinds of situations

7. Indirect Infringement • Enables lawsuit against party who helped or caused a third party to infringe • Need mens rea: some kind of specific intent • Two kinds: • (1) Active inducement • (2) Contributory infringement

8. (1) Active Inducement -- 271(b) • Inducing Infringement • “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” • Elements to prove inducing infringement: • Direct infringement • Actively or knowingly aided or abetted another’s direct infringement of the patent

9. (1) Active Inducement -- 271(b) • Can sue medical device manufacturer if: • (1) Third party (the surgeon) directly infringed • “each and every step or element” • (2) Mens rea: the first party actively induces infringement – “sells device parts with instructions”

10. (2) Contributory Infringement • Contributory Infringement • “Whoever sells a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.” 271(c)

11. (2) Contributory Infringement • Contributory Infringement Requires: • Direct infringement • Providing a non-staple article, which is used by a third party to directly infringe a claim

12. (2) Contributory Infringement • 271(c) - Can sue first party if: • They sell or offer to sell to a third party a material component of invention • Especially made or adapted for use in infringing the patent • Not a staple article or capable of non-infringing use • Mens rea: • Knowing it is specially made or adapted for infringing use

13. “Divided Infringement” • BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) • Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008)

14. “Divided Infringement” • Each of direct infringement, active inducement of infringement, and contributory infringement require a single-party infringer. • Both statutory direct and indirect infringement require at least one party to direclty infringe. • For statutory infringement, each party can perform only a part of the invention and thus escape liability for infringement. • Divided Infringement seeks to close this loophole.

15. “Divided Infringement” • Neither first party or third party directly infringe each and every step or element themselves • Activity as a whole directly infringes

16. Divided Infringement = Direct Infringement? • Can you combine activity of both parties to hold one party liable for direct infringement? How about both parties? • Yes. Only one party. Only Sometimes. • “Divided infringement” – a judge-made doctrine to avoid an unfair result • When can you apply it?

17. BMC Resources v. Paymentech • 498 F.3d 1373 (Fed. Cir. 2007) • Leading case • Defines current standard for a finding of divided infringement • Followed in Muniauction v. Thompson, 532 F.3d 1318 (Fed. Cir. 2008)

18. BMC’s Method Patent • BMC alleged Paymentech infringed two patents for a method of paying bills by telephone using a debit card • Claim 7 (dep. from cl. 6) of ‘456 patent • Claim 2 (dep. from cl. 7) of ‘298 patent

19. Claim 7 (dependent from claim 6) • Claim 6. A method of paying bills using a telecommunications network line connectable to at least one remote payment card network via a payee's agent's system wherein a caller begins session using a telecommunications network line to initiate a spontaneous payment transaction to payee, the method comprising the steps of: • prompting the caller to enter a payment number from one or more choices of credit or debit forms of payment; • prompting the caller to enter a payment amount for the payment transaction; • accessing a remote payment network associated with the entered payment number, • the accessed remote payment network determining, during the session, whether sufficient available credit or funds exist in an account associated with the payment number to complete the payment transaction, • and upon a determination that sufficient available credit or funds exist in the associated account, • charging the entered payment amount against the account with the entered payment number, • adding the entered payment amount to an account associated with the entered account number, and • storing the account number, payment number and payment amount in a transaction file of the system. • 7. The method of claim 6 wherein said payment is a PIN-less credit or debit card number.

20. Claim 2 (dependent from claim 1) • 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 a caller places a call using said telephone to initiate a spontaneous payment transaction that does not require pre-registration, 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; • 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; • responsive to a determination that a payment amount has been entered and further responsive to a determination that the entered account number and payment number are valid, and during the call;

21. Claim 2 -- continued • accessing 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; • responsive to a determination that sufficient available credit or funds exist in the associated account, charging the entered payment amount against the account associated with the entered payment number, adding the entered payment amount to an account associated with the entered account number, informing the caller that the payment transaction has been authorized, and • storing the account number, payment number and payment amount in a transaction log file of the system during the call; and • responsive to determination that sufficient available credit or funds do not exist in the associated account, informing the caller during the call that the current payment transaction has been declined and terminating the current payment transaction. • 2. The method of claim 1 wherein said payment number is a debit card number.

22. Notes on claims • Claims themselves as written require the actions of another party: • “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”

23. Paymentech’s allegedly infringing process • Merchant collects billing, account information, sends to Paymentech • Paymentech sends to debit network (Cirrus, etc.) • Debit network contacts customer’s bank • If authorized, account debited, and all parties notified

24. Is Paymentech Liable For Divided Infringement? • Process was directly infringed • But four parties involved: merchant, Paymentech, debit network, customer’s bank • At least two parties necessary for infringing claims as written • Can Paymentech be liable for the direct infringement of BMC’s patent under “divided infringement”?

25. Traditional View • Traditionally, courts treated divided infringement as direct infringement only if “record showed that [the party being sued] directed or controlled the behavior of the third party” • Vicarious liability standard • E.g., contract between parties • Was party being sued the “mastermind” behind divided infringement?

26. Confusion in the Federal Circuit? • The Federal Circuit, in dicta, recently said it “discerned no flaw” in district court jury instructions giving a “looser standard.” On Demand Machine Corp. v Ingram Industries, 442 F.3d 1331 (Fed. Cir. 2006) • Case was decided on appeal via claim construction, not divided infringement • BMC argued that the Federal Circuit has created a new “participation and combined action” test. All you need is “some connection” between the partially infringing parties. • Very loose standard…

27. Traditional Approach Upheld • In BMC, Federal Circuit agreed with lower court holding that On Demand was dicta • Kept traditional standard • One party must “control or direct each step of the patented process”

28. No Direct Infringement if No Party Controls All Steps • Need a single “mastermind” • Court noted that it “may in some circumstances allow parties to enter into arms-length agreements to avoid infringement” • Open question as the whether there are “some circumstances” where two parties could be liable… • maybe collusion between two parties to control a third?

29. Findings • Some relationship between Paymentech and debit networks…but • Paymentech provides data but no instructions on what to do with it • No control of debit networks’ actions • No evidence of any contractual relationship • Paymentech not liable for infringement

30. Evidence of Divided Infringment? • Party needs to “control or direct” each step: needs to be a “mastermind,” such that every step is attributable to the controlling party • Contracting out the work is strong evidence of direct infringement…but some “arms-length agreements may be OK. • Is evidence of “instructions” key?

31. Muniauction v. Thomson • Muniauction’s claim 1 covered electronic municipal bond auction system by original issuers using a web browser

32. Claim 1 • 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: • 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; • automatically computing at least one interest cost value based at least in part on said inputted data, said automatically computed interest cost value specifying a rate representing borrowing cost associated with said at least one fixed income financial instrument; • 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, • wherein at least one of the inputting step, the automatically computing step, the submitting step, the communicating step and the displaying step is performed using a web browser.

33. Another multiple party claim • Claim requires at least two parties: issuer and bidder to “input data into bidder’s computer” • Thomson’s auctioning process similarly invovled multiple parties. • Could actions of issuer and bidder be combined to find direct infringement?

34. Need “direct control” • As in BMC, even if claims require two parties, one party needs to have direct control of the entire process. • “where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party, i.e., the ‘mastermind’”

35. Findings • “That Thomson controls access to its system and instructs bidders on its use is not sufficient to incur liability for direct infringement” • Need a “situation where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another”

36. Muniauction: • Although Thomson gave instructions for using the system to a bidders, and controlled access to its system • Perhaps unstated test is whether bidders inputted bids into their computers was under Thomson’s control • Need some kind of arrangement (contract?) that could impose vicarious liability on Thomson by the actions of its bidders

37. Muniauction standard for direct infringment: • “Thomson neither [1] performed every step of the claimed methods • [2] nor had another party perform steps on its behalf, and • [3] Muniauction has identified no legal theory under which Thomson might be vicariously liable for the actions of the bidders

38. How to Catch “Partial Infringers” • BMC Court noted that if you fear “divided infringement,” use “proper claim drafting” • Need to draft claim steps to cover steps performed by a single party, not multiple parties (multiple parties may never infringe if no “mastermind”) • Lemley et al., “Divided Infringement Claims” 33 AIPLA Q.J. 255 • Cited with approval in BMC