Divided Over Infringement - Report from Oral Argument • 2011 11 19 DividedOverInfringementA quick update. On Friday the Federal Circuit heard arguments en banc in Akamai Technologies, Inc. v. Limelight Networks, 629 F. 3d 1311 (Fed. Cir. 2010) (vacated) and McKesson Technologies Inc. v. Epic Systems Corp., No. 2010-1291 (Fed. Cir. May 26, 2011) (vacated). The big issue is when can multiple actors directly infringe a method patent by performing all the steps of the method?

We’ve written about these cases before. The short version of both cases is that they both involve method claims where the accused infringer performed all but one of the steps, and someone else (a customer in Akamai and a patient in McKesson) performed the remaining step. Both panels held that to have direct infringement, you basically have to be able to treat the actions of all the parties as the actions of one of them. For example, if someone had a contract to perform one of the steps, that would be enough. But in Akamai and McKesson, there was no legal requirement for the customer or patient to perform their steps, so there was no direct infringement.

The courtroom was packed. There were 10 judges on the bench: Chief Judge Rader and Judges Newman, Lourie, Bryson, Linn, Dyk, Prost, Moore, O’Malley, and Reyna. Judge Wallach, who was sworn in today, was not there. Arguments went over 2 hours, and the judges are clearly struggling with how to draw the line.

Akamai proposed a pretty complicated 3-part test that the court had a lot of problems with. Under Akamai’s test, if two (or more) people know about the steps they’re all performing, that’s enough to find them both liable. Judge Prost asked Akamai’s counsel, Don Dunner, if someone who performed 1 out of 100 steps would be liable for direct infringement when someone else performed the other 99. Dunner said the person would be liable. Judge Bryson raised a hypothetical scenario, where there’s a method claim, the first step of which is to provide some component. Suppose a person goes to a Radio Shack to buy that component, and tells the salesperson about his plans to use it, which happen to be the other steps of the claim. Judge Bryson asked if Radio Shack would be liable for direct infringement because it performed the providing step. Akamai said that it would be. I don’t think that answer sat well, because even Judge Newman (who dissented in McKesson) was quite concerned that contributory infringement would be completely replaced by this broader definition of direct infringement.

Judges Linn, Dyk, and Prost were concerned about the effect on system claims. Judges Moore and Reyna were definitely having trouble understanding Akamai’s test as well. (I think Akamai simply overreached.)

Judge Newman was very worried about the lack of a remedy for valid patents where the steps of the method can be split up among actors. She went on at some length during Limelight’s turn, and even more during Epic’s argument. Judge Lourie focused on the idea that one party can set things up so that it performs all but one step, and knows that someone else will do that remaining step. He didn’t seem comfortable with letting that issue go.

Judges Dyk and Prost seemed to be strongly in favor of the single-actor rule. Judge Dyk even stepped in a couple of times to help out counsel for both Limelight and Epic.

Judge Bryson asked a number of hypotheticals to try and understand the rules that were being proposed. Judges Moore, O’Malley, and Reyna pressed all the parties to explain their proposed tests.

Chief Judge Rader didn’t ask a single question.

Akamai and (to a lesser extent) McKesson argued for a rule that could expose a lot of people to being joint infringers. For example, if a website does all but one step of a method, and a user does the remaining step (as happened in McKesson), that user is potentially liable for infringement. We’ve seen non-practicing entities be quite aggressive in going after individuals. I could see a “patent troll” going after users of a website, claiming that an individual performs one step of a method claim and is therefore a joint infringer. But for a mere $2,000, say, the user can have a license. I hope that whatever rule the court comes up with doesn’t open the door to that kind of abuse.

Another big problem is that to have induced or contributory infringement, you need direct infringement under 35 U.S.C. § 271(a), as the Supreme Court required in Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336 (1961). Well, if you have a rule like Limelight and Epic want, it’s possible for someone to perform some steps of a method and induce someone else to perform the rest of the method, but have no direct or indirect infringement! There’s no direct infringement under Section 271(a), because there’s no agency or contractual relationship. And there’s no indirect infringement, because there’s no direct infringement.

With about 10 minutes left in Epic’s argument, Judge Moore asked if it was possible for someone to perform some of the steps of a method and induce someone to perform the other steps and be liable for inducement. Epic’s counsel said yes. (Personally, I think that’s actually the correct answer; you wouldn’t have innocents getting caught up in infringement as in Akamai’s test because inducement requires knowledge of the patent, but you also wouldn’t have people getting away with subterfuge by deliberately dividing up the steps of a method.) The court went silent. If you ask me, he’d won at that point, if he’d just sat down, even though there were around 8 minutes left in his time. (My old appellate practice professor, Ken Bass, used to tell us that if the court has no more questions, you can only hurt yourself by talking, so just sit down.)

Epic’s counsel, however, kept going. He went on through the remaining points in his outline. With a few minutes left, he went back to indirect infringement and said that indirect infringement required direct infringement under Section 271(a), so if you didn’t meet the test for vicarious liability (that is, that one party is liable for another’s actions), there wouldn’t be indirect infringement either. Judge Bryson, followed by Judge Moore, picked up on the apparent contradiction from his earlier answer. Epic’s counsel was caught back in the trap—he was again arguing for a big hole in the law that allowed for deliberate trickery to get around a patent. It wouldn’t surprise me if the court does what Judge Moore suggested anyway, but it wasn’t pretty.

You can listen to the Akamai oral argument here, and you can listen to the McKesson oral argument here.