Patent owners can sue anyone up and down the chain of distribution for patent infringement of the patent. Manufacturers, distributors, and end users are all possible litigants. For example, the end user can be sued for using the patented invention. The distributor can be sued for selling the patented invention. The manufacturer can be sued for making and selling the patented invention. Not only can the manufacturer and distributor be sued for direct patent infringement, as discussed above, but they can also be sued for indirect patent infringement if they induce another (e.g., end-user) to infringe or contribute to the infringement of another by providing a key part of a larger, patented invention.
With this in mind, should the key goal of patent litigation be to stop the infringement or to make money? If the end goal is to stop the infringement, then it would make sense to sue the person as high up the distribution chain. Stop the infringement at the source. If the end goal is to make money, then the patent owner should study the landscape and strategize how to extract as much money as possible from the infringing entities up and down the supply chain, while spending as little money as possible to do so. The patent owner may also first select the weaker entities should the ultimate goal be to extract money. It appears that this is one of the underlying issues that need to be resolved in determining if the patent owner in the following case needs to be criticized or not by suing the end customers instead of the software provider.
In Microsoft v. Datatern (Fed. Cir. 2014), the patent owner sued the end users of a software product and not the software providers even though the software providers could have easily been sued. The providers were Microsoft and SAP. If the software providers were sued then the infringement would have stopped immediately since the source of the infringement would have been enjoined. Also, there would not be any feelings of unfairness or at least such feelings would have been mitigated since the patent owners are merely trying to stop the infringement of their patent. In this case, the software providers (Microsoft and SAP) wanted to be involved in the litigation so that they could resolve the issues of patent infringement (or invalidity) in lieu of their customers or the end users. They wanted the court to declare whether or not their software was actually infringing on Datatern’s patent.
After Datatern sued more than 100 customers of Microsoft and SAP, Microsoft and SAP filed a declaratory judgment action in a different venue and asked the court to determine whether their software infringes Datatern’s patent. However, courts will not maintain a declaratory judgment action if there is no actual case or controversy between the parties, or if Microsoft and SAP do not have standing to participate in the lawsuit. Since Datatern never sued Microsoft or SAP and indicated that they had no intentions of suing them, it would appear that there was no real dispute, no real case or controversy with Microsoft and SAP.
The court reiterated that merely accusing a customer of infringement does not necessarily give the supplier standing for a declaratory judgment action. However, standing for a declaratory judgment action could be established if Microsoft and SAP had an obligation to indemnify their customers or there was sufficient evidence to establish a reasonable potential that a claim of indirect infringement (e.g., inducement or contributory infringement) could be brought. Here there were no obligations to indemnify. As such, the question is whether there was a reasonable potential that a claim against Microsoft and SAP could be made.
The court held that there was standing for the DJ action in most of the claims except for one. The court reasoned that there was a reasonable potential for a claim of indirect infringement against Microsoft and SAP for those claims in which Datatern had used SAP-provided user guides and Microsoft-provided online documentation to show infringement by the end users. However, there was one claim in which Datatern did not use any documentation provided by Microsoft or SAP to establish infringement in the suits against customers. They used solely third-party documents to show that the end-user was infringing on their patent. For those claims that Datatern used SAP-provided user guides and Microsoft-provided online documentation to show infringement, the court held that Microsoft and SAP had standing for the DJ action. For the claim in which Datatern had exclusively used third-party material to show infringement, the court held that no standing existed.
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