In September 2012 I wrote a post titled Why Can’t We All Get Along? CAFC Fractures Over Divided Infringement. The post discussed an August 31, 2012 Court of Appeals for the Federal Circuit (“CAFC”) en banc decision in two cases consolidated on appeal, Akamai v. Limelight and McKesson v. Epic Systems (link). As I described in that post, the 11 judges on the CAFC, were unable to agree on whether patent infringement occurs when separate entities perform the steps of a patented method.
Six of the CAFC judges — a bare majority — formulated a new doctrine of “induced infringement”: a party can be liable for inducing infringement if it either (1) induces several parties to jointly carry out the steps necessary for infringement, or (2) performs some of the steps of the claimed method itself and induces a third party to perform the remaining steps claimed. In other words, the CAFC held that all the steps of a claimed method must be performed in order to find induced infringement, but all the steps need not have been performed by a single entity.
The losing parties before the CAFC appealed to the U.S. Supreme Court, which accepted review of the case, and which had no trouble holding (unanimously) to the contrary. A defendant cannot be held liable for inducing infringement of a patent method claim when no single entity has directly infringed the claim, and direct infringement is not established unless all steps of the claim are performed by a single entity (subject to the “control or direction” exception discussed briefly below). The Court noted that the Federal Circuit’s approach would “deprive [the inducement statute, 35 U.S.C] §271(b) of ascertainable standards,” and would have led to “two parallel bodies of infringement law: one for liability for direct infringement, and one for liability for inducement.” The Court was not persuaded otherwise by the argument that its holding would permit “a would-be infringer to evade liability by dividing performance with another.”
The Supreme Court’s decision was based, in large part, on the CAFC’s 2008 decision in Muniauction, Inc. v. Thomson Corp., where the CAFC held that where different steps of a method claim are performed by different entities, direct infringement requires a defendant to exercise “control or direction” over the steps the defendant itself does not perform. As the Supreme Court pointed out, the CAFC is free to revisit Miniauction in the future, but the Court declined to review it in the current appeal.* Until the CAFC revisits (and reverses or modifies) Miniauction, direct infringement will continue to require that every step of a claimed method be attributable to one actor (or satisfy the “control/direction” test), and no inducement can be found when no direct infringement has been committed. Until then, “divided infringement” will remain a defense to a claim of patent infringement, as well as a potential “design around” strategy for companies that can avoid a single actor performing, directing or controlling all of the steps of a method patent.
*[Note:] In its discussion of Muniauction the Court suggested the “possibility that the Federal Circuit erred by too narrowly circumscribing the scope of [direct infringement under] § 271(a).”