By
Kevin E. Noonan —

Last
Friday, the Federal Circuit reconsidered en
banc the Court's decisions in Akamai
Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp.  Long awaited, the
decision was handed down "per curiam," with a majority consisting of
Chief Judge Rader joined by Judges Lourie, Bryson, Moore, Reyna, and Wallach.  Judge Newman wrote her own dissent and Judge Linn authored another, being
joined by Judges Dyk, Prost, and O'Malley.

The
facts of the cases are as follows.  In Akamai, the asserted patent claimed
methods for delivering web content by placing content on a number of "replication
servers" and having web browsers access the content by being directed to
those server pages.  Accordingly there
is no direct modification of content providers' web pages; the defendant merely
instructs users how to do so.  In McKesson, the patent claims were
directed toward electronic communication between patients and healthcare
providers, whereby portions of defendant's software permitted patients to
access their healthcare records directly from physicians.  Defendant's software did not perform any of the steps of the method; rather,
performance of the steps of the patented method was divided between the
patients and healthcare providers.  Below, both defendants prevailed, on the
grounds that there was no single, direct (literal) infringer, based on Muniauction,
Inc. v. Thomson Corp., 532 F.3d
1318 (Fed. Cir. 2008).

The
majority opinion characterizes its decision as being directed to induced
infringement, where direct infringement (§ 271(a))
requires that "a single actor commits all the elements of infringement"
and induced infringement (§ 271(b)) occurs when "a single actor induces another actor to
commit all the elements of infringement.  Neither is the case here, and "when the
acts necessary to give rise to liability for direct infringement are shared
between two or more actors, doctrinal problems arise" according to the
majority.  The opinion contrasts two
generic scenarios that illustrate the issues before the Court:  an actor
performs some of the steps of a claimed method and induces others to commit the
remaining steps (the fact pattern in Akamai)
versus an actor inducing multiple
parties to "collectively perform" all the steps of a claimed method,
i.e., no single party has performed all of the steps (the fact pattern in McKesson).

The
problem (according to the majority):  "[r]ecent precedents of this court
have interpreted section 271(b) to mean that unless the accused infringer
directs or controls the actions of the party or parties that are performing the
claimed steps, the patentee has no remedy, even though the patentee's rights
are plainly being violated by the actors' joint conduct."  This is the wrong approach, according to the
opinion, but only a bare majority of the Court decided not to decide the
question of whether there can be direct infringement when no single actor
performs all the method steps, stating that induced infringement can be used to
decide the questions in both cases.

The
majority expressly overruled BMC Resources, Inc. v. Paymentech, L.P.,
498 F.3d 1373 (Fed. Cir. 2007), which held that there must be a single actor
(or a second actor acting under the control of another) for infringement to
lie.  All the steps of the claimed method
still need to be performed, according to the majority opinion, but it is not
necessary to prove a "single entity" performed them.

Going
back to its own case law, the majority states that "for a party to be
liable for direct patent infringement under 35 U.S.C. § 271(a), that party must
commit all the acts necessary to infringe the patent, either personally or
vicariously," citing Cross Med. Prods., Inc. v. Medtronic Sofamor
Danek, Inc., 424 F.3d 1293, 1311 (Fed. Cir. 2005), and Fromson v. Advance
Offset Plate, Inc., 720 F.2d 1565, 1568 (Fed. Cir. 1983).  The legal grounds for this position is that
patent infringement is a "strict liability tort" and being able to
sue "actors who did not themselves commit all the acts necessary to
constitute infringement and who had no way of knowing that others were acting
in a way that rendered their collective conduct infringing" would be
unfair, citing In re Seagate Tech.,
497 F.3d 1360, 1368 (Fed. Cir. 2007) (en banc).  While agency principles were used in the past
to find infringement when a second actor was acting as the accused infringer's
agent, absent such a relationship infringement liability was not created by the
acts of independent actors, according to the opinion (citing Cross Med.
Prods., Inc.).

The opinion does not address the correctness of
these precepts in its opinion, because it bases its judgment that defendants in
the cases at bar are liable for infringement on its interpretation of the
requirements for induced infringement (a portion of the statute that as written
requires more than one tortfeasor).  This
leads the majority into a disquisition on the grounds and bases for induced
infringement liability under the 1952 Patent Act.  These grounds are expressly that the accused
party is "a party who advises, encourages, or otherwise induces others to
engage in infringing conduct."  In a
footnote, the majority hints at why their result is not tainted by the
considerations of unfairness that were thought to attach to innocent parties in
the prior jurisprudence:

Because liability for inducement,
unlike liability for direct infringement, requires specific intent to cause
infringement, using inducement to reach joint infringement does not present the
risk of extending liability to persons who may be unaware of the existence of a
patent or even unaware that others are practicing some of the steps claimed in
the patent.

Fn. 1.  In addition, induced (like contributory)
infringement requires intent (or, at minimum, "willful blindness"
according to the Supreme Court; see Global-Tech Appliances, Inc. v. SEB
S.A., 131 S. Ct. 2060, 2068 (2011)) and thus is not a strict
liability tort according to the majority, citing DSU Med. Corp. v. JMS Co.,
471 F.3d 1293, 1306 (Fed. Cir. 2006) (en banc).  The utility of induced infringement doctrines
in this case arises because there is no requirement for any type of agency
relationship between infringers, so long as the infringing acts are performed.  (The opinion cites Nat'l Presto Indus.,
Inc. v. West Bend Co., 76 F.3d 1185, 1196 (Fed. Cir. 1996), for the analogy
that induced infringement is akin to "aiding and abetting" in the
criminal context.)  The decision does not
alter the "well-settled" law that direct infringement must occur for
there to be indirect infringement, according to the majority.  But the BMC decision "extended
that principle in an important respect that warrants reconsideration"; specifically,
by requiring direct infringement in support of induced infringement to be
performed by a single actor.  Although
the individual prongs of the analysis was supported by precedent, the majority
say here that "the conclusion that the [BMC] court drew from them
was not."  As stated in the opinion (emphasis in original):

Requiring proof that there has been direct
infringement as a predicate for induced infringement is not the same as
requiring proof that a single party would be liable as a direct
infringer.  If a party has knowingly induced others to commit the acts necessary
to infringe the plaintiff's patent and those others commit those acts, there is
no reason to immunize the inducer from liability for indirect infringement
simply because the parties have structured their conduct so that no single
defendant has committed all the acts necessary to give rise to liability for
direct infringement.

The majority opinion relies on the intent
requirement to justify extension of infringement liability further than the BMC
precedent would permit.  In the majority's
view, a party who induces several other parties to infringe collectively "has
had precisely the same impact on the patentee as a party who induces the same
infringement by a single direct infringer" and there is no reason to
differentiate between the two types of inducing infringers.  Nor is there any reason, according to the
majority, to treat someone differently who only performs certain steps of a
claimed method, and has one or more other parties complete infringement by
performing other steps.  Both scenarios
are set forth with relation to the harm to the patentee; indeed, the majority
believes that, if anything, an inducing party that performs some of the steps
may be even more culpable.

The en banc majority reads 35 U.S.C. § 271(b) as being "entirely consistent"
with how they apply it to the two cases under their consideration here.  Perhaps in the face of the strong dissent,
the majority also sets forth their exegesis of § 271(b) and its historical and legislative history
predicates.  The opinion notes that,
prior to the 1952 Act, indirect infringement comprising induced and
contributory infringement were joined in the same section of the patent law.  Citing the
legislative history, P.J. Federico (Commentary on the New Patent Act reprinted
in 75 J. Pat. & Trademark Off. Soc'y 161, 214 (1993)), and Judge (then Mr.) G.S.
Rich, the "principal architect" of the 1952 Act, the majority contends
that Congress intended to give induced infringement a broad scope, whereas
contributory infringement (§ 271(c))
was drafted more narrowly, reflecting a compromise directed at addressing some
of the more egregious anti-patent decisions from the Supreme Court at that time
(as examples, the opinion cites Mercoid Corp. v. Mid-Continent Investment
Co., 320 U.S. 661 (1944), and Mercoid Corp. v. Minneapolis-Honeywell
Regulator Co., 320 U.S. 680 (1944)).  The majority finds that the content of the legislative history evinces a
legislative intent for § 271(b)
that was "significant" for its analysis here, insofar as it was
intended to "reach cases of divided infringement, even when no single
entity would be liable for direct infringement."  According to that legislative history, § 271(b) having a broad scope was necessary to
protect inventions, inter alia, in the radio and television
communication arts, which almost by definition encompassed "both
transmitting and receiving" embodiments (i.e., where both a
transmitter and a receiver needed to be changed in parallel in order to
function).  The revised statute was
needed, according to Judge Rich, because "recent decisions of the Supreme
Court [the cases targeted by the statutory changes] appear to make it
impossible to enforce such patents in the usual case where a radio transmitter
and a radio receiver are owned and operated by different persons, for, while
there is obvious infringement of the patent, there is no direct infringer of
the patent but only two contributory infringers," citing Contributory
Infringement of Patents: Hearings Before the Subcomm. on Patents, Trademarks,
and Copyrights of the H. Comm. on the Judiciary, 80th Cong. 5 (1948) ("1948
Hearing") (emphasis in original).  The majority thus invoked Judge Rich's considerable authority for their
proposition that there should be infringement liability under an inducement
theory even in cases where there was no direct patent infringer.

The majority then went far afield into other areas
of tort law, to show (presumably) the reasonableness of their decision and for
the principle that "courts look to the common law principles of joint
tortfeasance (Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d
1464, 1469 (Fed. Cir. 1990); see also Aro Mfg. Co. v. Convertible Top
Replacement Co., 377 U.S. 476, 500 (1964)).  These include the First and Second Restatements of Torts, §§ 876 &
877(a)(1979) and the Federal Criminal Code (relating to "aiding and
abetting" criminal activity; 18 U.S.C. § 2(a)).  The Restatements provide the majority with a
basis and rationale for their opinion, wherein the common law requires that "the
rule imposing liability for inducement of a tort applies even if the person
being induced is unaware that his act is injurious and is not liable for that
reason" (circumstances that exist in the cases under review).  The majority draw from these sources the
conclusion that:

The implication of that principle, as applied
in the divided infringement context, is that a party may be liable for inducing
infringement even if none of the individuals whose conduct constituted
infringement would be liable, as direct infringers, for the act of infringement
that was induced.

Turning to their review of the decisions at hand,
the majority reversed the district court in both cases and remand for
reconsideration.

Judge Newman wrote her own dissent, noting that the
question presented has "split [the Court] into two factions" and acknowledging
that a "scant majority" recognizes what she terms "a new theory
of patent infringement, based on criminal law" (something that could also
be said about the Supreme Court's decision in the Global-Tech
case).  She characterizes these as "dramatic
changes" to infringement law, which she states could have been avoided by
simply applying existing law.  And she characterizes
the dissent as addressing an issue not raised by the majority ("[a]lthough
review of the singe-entity rule was the sole reason for this rehearing en
banc, and the sole question briefed by the parties and the amici curiae").  Neither side of the Court "provides a
reasonable answer" to the question before them in her view, the majority's
opinion "impos[ing]
disruption, uncertainty, and disincentive upon the innovation communities."

For Judge Newman the task is
straightforward:  the Court should have
addressed the question posed and briefed, by the parties as well as several amici, relating to whether infringement
liability can lie under the circumstances in the Akamai or McKesson cases
below.  She is not persuaded that the
majority actually overrules the BMC
Resources case, saying that what was ultimately addressed by the majority
(and overruled) was but a single sentence in the earlier decision, specifically:  "Indirect infringement requires, as a predicate, a finding that some party
amongst the accused actors has committed the entire act of direct infringement."  While she acknowledges that "this [the
Federal Circuit's] jurisprudence is in need of correction, clarification, and
consistency, for neither the single-entity rule nor the majority's newly minted
inducement-only rule is in accord with the infringement statute, or with any
reasonable infringement policy," the majority decision is not such a
solution (it is, she says, "a spontaneous judicial creation.  And it is
wrong.").  She further acknowledges
that while "[q]uestions of divided infringement are not new," the "single
entity rule" espoused in Judge Linn's dissent (representing the status
quo) "is plainly inadequate" for the task because it "leaves the
meritorious patentee without redress," citing the McKesson decision below.  She
identifies the rule, not the statute, as the problem, because in her reading
the statute is not ambiguous:

§271(a) Except as otherwise provided in this title, whoever 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.

The crux of her argument is that the "whoever"
in the statute can be singular or plural, citing statutes and case law from
other areas of the law as well as other portions of the Patent Act.  This interpretation of the statute makes the
problem posed in these cases disappear:  no matter how many actors are required,
if all the steps in a method claim are performed direct infringement has been
established.  In this part of her
argument, Judge Newman relies on Mowry v. Whitney, 81 U.S. 620, 652
(1871), Aro Manufacturing Co. v. Convertible Top Replacement Co., 365
U.S. 336, 342 (1961), and the linkage she perceives between § 154 (defining the
right to exclude) and § 271 (defining what constitutes infringement), supporting
this linkage by language from the Supreme Court in Deepsouth Packing Co. v.
Laitram Corp., 406 U.S. 518, 522 (1972), and comments from Judge Rich ("We
got along without [a separate infringement provision] for 162 years and we
could again").

For Judge Newman, the cases could be
resolved merely by resolving earlier conflicts in the Court's precedent.  After describing her understanding of this
precedent (BMC Resources and Muniauction, including the earlier panel
decisions in these cases), Judge Newman writes that many of the earlier
decisions were not mandated by the statute or binding precedent.  And she showed little patience for "the
Linn cadre's argument" that the single-entity rule could be avoided by "ingenious
patent claim drafting."  "I do
not discourage ingenuity," she writes, "but the presence or absence
of infringement should not depend on cleverness or luck to satisfy a malleable
single-entity rule."  Judge Newman
also finds "useful guidance" from copyright law, where she cites Metro–
Goldwyn–Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005), for
the proposition "that one 'infringes vicariously by profiting from direct
infringement while declining to exercise a right to stop or limit it,'"
citing Shapiro, Berstein & Co. v. H.L. Green Co., 316 F.2d 304, 307
(2d Cir. 1963).  Under these rubrics,
finding vicarious liability would settle the question before the Court in a way
that would address infringement as presented by the cases at bar while not
doing violence to the statutory scheme.  She states:

The court
should simply acknowledge that a broad, all-purpose single-entity requirement
is flawed, and restore infringement to its status as occurring when all of the
claimed steps are performed, whether by a single entity or more than one
entity, whether by direction or control, or jointly, or in collaboration or
interaction.

The majority, according to Judge
Newman, erred by "discard[ing] decades of precedent, refus[ing] our en
banc responsibility, and stat[ing] that 'we have no occasion at this time
to revisit any of those principles regarding the law of divided infringement as
it applies to liability for direct infringement'" as the basis for
enunciating their new "inducement only rule."  Judge Newman believes that the better way to
address the question is utilizing the same analysis used by the Court prior to BMC Resources, i.e., "application of the existing laws of infringement, whether
direct, induced, or contributory infringement."  This means that "liability for
inducement requires direct infringement," which for Judge Newman means
turning to precedent (common law as well as statutory) on contributory
infringement cases (including NTP, Inc. v. Research in Motion, Ltd., 418
F.3d 1282, 1318 (Fed. Cir. 2005); Everpure, Inc. v. Cuno, Inc., 875 F.2d
300, 302 (Fed. Cir. 1989); and National Presto Industries, Inc. v. West Bend
Co., 76 F.3d 1185 (Fed. Cir. 1996)), all of which required direct
infringement as a predicate for finding contributory infringement.  (She also
castigates her brethren in the majority for introducing negligence concepts ("duty,
breach and causation") into patent law (a strict liability tort).  And she disagrees with the majority's
selective citation of the legislative history and Judge Rich's contributions,
finding quotes contrary to the ones cited in the majority opinion to support
her position.

Judge Newman then performs her own bit
of judicial legerdemain by defining away the problem facing the Court.  She states that the problem does not require
a change in the law so much as a change in definition; she says that "[t]he
court misconstrues 'strict liability' as requiring that
every participant in an interactive or collaborative method is fully
responsible for the entire harm caused by the infringement" and that
recognizing that the "strict liability" standard is not the standard
for patent infringement is a legitimate way to permit the Court to find joint
tortfeasor liability.  Strict liability
is only required, according to Judge Newman, when there is "an absolute
duty to make something safe" such as arises with regard to "ultrahazardous
activities or in products-liability cases," citing Black's Law Dictionary
998 (9th ed. 2009).  Treating patent
infringement as a tort, and not requiring strict liability, would permit courts
to apply traditional remedies (including apportionment of remedies on the bases
of "relative contribution to the injury to the patentee, the economic
benefit received by the tortfeasor, and the knowledge and culpability of the
actor") against two or more tortfeasors required (in some cases) to
infringe a patent claim.  Thus, "[w]hen
the several steps of a process claim are performed by more than one entity,
whether the entities operate under common direction or control, or jointly or
independently or interactively, remedy for infringement is appropriately
allocated based on established criteria of culpability, benefit, and the like."

For Judge Newman, the best and most
simple course is to acknowledge that the "single entity rule" is
flawed, and to "restore direct infringement to its status as occurring
when all of the claimed steps are conducted, whether by a single entity or in
interaction or collaboration," allocating remedies for infringement
between the defendants "in accordance with statute and the experience of
precedent."

Judge Linn's dissent is based on his
belief, shared by a significant portion of the Court that the majority engaged
in judicial policymaking in developing its "inducement only"
test.  To the dissenting judges, the "plain
text" of the statute controls and (by implication) the "single entity"
test is both appropriate and required by the statute.  Citing a plethora of
Supreme Court cases as well as its own precedent, the dissenting judges argue
that direct infringement (and thus, a single, direct infringer) must exist in
order to apply induced or contributory infringement.  "Congress removed joint-actor patent
infringement liability from the discretion of the courts," according to
their opinion, "defining 'infringement' in § 271(a) and expressly defining
the only situations in which a party could be liable for something less
than an infringement in §§ 271(b) and (c) — clearing away the morass of
multi-actor infringement theories that were the unpredictable creature of
common law."  For Judge Linn, the Court should have "adopt[ed] en banc" the Court's earlier BMC Resources and Muniauction decisions requiring "all steps of a claimed method
be practiced, alone or vicariously, by a single entity or joint enterprise."  These dissenting judges agree with Judge
Newman that the majority avoided the question presented to the Court en banc.

Judge Linn's explication of the law
of infringement is directed to narrowly defining it.  Thus, the opinion speaks about what the
statute limits infringement to be, and that the statute defines in §§ 271(b)
and (c) as "the only ways in
which individuals not completing an infringing act under § 271(a) could nevertheless
be liable" and in doing so "reject[ed] myriad other possibilities
that existed in the common law at the time" (emphasis in original).  According
to Judge Linn and his colleagues in dissent, the statute requires that there be
direct infringement before a court could find liability for contributory
infringement or inducing infringement.  The majority errs in "redefining 'infringement' for the purposes of
establishing liability" for inducement (as well as for writing an opinion that
is directly contradictory to the Supreme Court's decision in Aro
Manufacturing Co. v. Convertible Top Replacement Co.),
according to the dissent.

The dissent also uses Congressional
approval of additional infringement provisions of the Patent Act enacted since
1952 (specifically, §§ 271(e), (f) and (g)) as evidence that Congress can, and
has, amended the patent statute to address policy goals such as the ones
identified by the majority.  Accordingly,
because these sections of the statute show that "Congress knows how to create
alternative forms of infringement" and it has not altered §§ 271(a) and (b),
the dissent believes that Congress has evinced no intention to change the
requirement that direct infringement must be shown before indirect infringement
(here, inducement) can be use to raise infringement liability.  Additionally, the dissent rejects the
majority's reliance on standards in criminal and tort law, stating that "the
majority overstates and improperly analogizes to fundamental principles of
criminal and tort law."  And the
dissent also disagrees with Judge Newman, believing that direct infringement is
a strict liability tort having all the requirements that prevent infringement
except by a single actor.

For the dissenting judges, "[t]he
well established doctrine of vicarious liability is the proper test for
establishing direct infringement liability in the multi-actor context"
because, inter alia, "[a]bsent
direct infringement, the patentee has not suffered a compensable harm."  Because a patentee establishes the conditions
under which it is harmed (by drafting patent claims that describe the patentee's right to
exclude), the patentee also bears the responsibility to properly draft claims that avoid
the joint-tortfeasor limitations incumbent upon § 271(a).  Thus, "[a] patentee
can usually structure a claim to capture infringement by single party,"
says the dissent, citing BMC Resources.

Turning to the cases at bar, Judge
Linn writes that, because they properly found that no one entity directly
infringed the claims there could be no indirect infringement, he would affirm.

The decision has implications for
biotechnology and pharma patent claims, even if (as seems likely) these
implications will prove ephemeral; it is unlikely that the Supreme Court will
deny certiorari in a case of statutory construction where the Federal Circuit
is so plainly fractured.  The majority
opinion, if upheld, would be a boon for biotechnology, if only because it would
provide another way for claim drafters to protect diagnostic method
claims.  These claims, under attack in Mayo v Prometheus and AMP v. USPTO, would be much more robust
if they could include (as the Prometheus
claims did not) a treatment step in a diagnostic method claim.  Until last Friday (and most likely someday in
the not distant future), such claims could not be enforced because the actors —
the diagnostician or testing lab and the treating physician) were not thought
to be under each other's control and thus there was no direct infringer who
practiced every step.  That requirement
is eliminated under the majority's views, and thus infringement could be found
under circumstances common in modern medicine — a physician orders an
infringing diagnostic test and then treats using the diagnostic results as her
guide.  This outcome will only occur
should the majority's views ultimately prevail, something that in all candor is
just not very likely.

Akamai Technologies, Inc.
v. Limelight Networks, Inc. and McKesson
Technologies, Inc. v. Epic Systems Corp. (Fed. Cir. 2012) (en banc)
Panel: Chief Judge Rader and Circuit
Judges Newman, Lourie, Bryson, Linn, Dyk, Prost, Moore, O’Malley, Reyna, and
Wallach
Opinion Per Curiam; dissenting opinion by Circuit Judge Newman; dissenting
opinion by Circuit Judge Linn, joined by Circuit Judges Dyk, Prost, and
O’Malley