En Banc Court of Appeals for the Federal Circuit Expands Liability for Inducing Patent Infringement: “Single Entity” Rule Thrown Out

The en banc Court of Appeals for the Federal Circuit released today its highly anticipated opinion in AKAMAI TECHNOLOGIES, INC. V. LIMELIGHT NETWORKS, INC. At issue was whether a defendant could be held liable for inducing infringement of a patented method if no single entity was responsible for performing all the method steps. Previously, the Court had said no, inducing infringement requires that a single entity be liable for direct infringement. Today, in a 6-5 decision, the Court expressly overruled its prior opinion to the contrary, holding that a defendant can be found liable for inducing infringement even where no single party is liable for direct infringement, so long as the defendant induces others to act such that all of the steps of the method are performed. In reaching this conclusion, the Court expressly declined to revisit any of the principles regarding the law of divided or joint infringement as it applies to liability for direct infringement.

The Cases at Issue

Two separate cases were at issue on appeal: Akamai Technologies, Inc. v. Limelight Networks, Inc., and McKesson Technologies, Inc. v. Epic Systems Corp. In Akamai, the defendant Limelight performed all steps of Akamai’s patented method of efficient delivery of web content, except a step of modifying a content provider’s web page to reference particular servers. Limelight provided instructions on how to perform that step to its customers. Thus, all the steps of the method were performed, but not by a single entity. In McKesson, defendant Epic Systems sold software to healthcare providers which used the software to communicate electronically with their patients. Epic Systems did not perform any steps of McKesson’s patented method, but all of the steps were practiced by a combination of the healthcare providers and their patients when Epic’s product was used as intended. In both cases, the lower court found that no single entity was liable for direct infringement, and thus the defendants could not be liable for inducing infringement.

The Court’s Decision

The Federal Circuit expressly overruled the portion of its prior decision relied on by the lower courts, BMC Resources, 498 F.3d 1373 (Fed. Cir. 2007), which required that a single entity be liable for direct infringement in order for a party to be liable for inducing infringement. The Court held that while all the steps of a claimed method must be performed to find induced infringement, “it is not necessary to prove that all the steps were committed by a single entity.” The Court held that “[i]f 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 Court reasoned that a party that induces several actors to collectively practice the patented method should be treated the same as a party that induces a single actor to practice the patented method since the impact on the patentee is the same.

Several members of the Court dissented, arguing that the majority’s opinion accorded patentees rights which the patent statutes did not provide. The minority would have maintained existing law, requiring direct infringement by a single entity (or joint enterprise satisfying the “direction or control” test) as a prerequisite for finding induced infringement.

This unanticipated change in the law has the potential to significantly impact the rights of both patent holders and potential infringers. The decision provides an opportunity for patentees to draft and enforce patents even when no single entity performs all the claimed steps of the patent, something which was previously problematic. At the same time, the decision means that activity previously regarded as non-infringing may now give rise to liability for induced infringement. For further discussion of how this decision could impact you, please contact us.