Method claims have just become more valuable. The reason is that the Federal Circuit has broadened its scope of protection.
Under prior patent law, infringement of a method claim could be found through either direct infringement or indirect infringement. Direct infringement of a method claim occurs when a single actor (i.e., person or entity) performs all of the steps in the method claim. (35 USC 271(a)). Indirect infringement, prior to the case discussed below, based on active inducement of infringement under 35 USC 271(b) was found only if a party induced a single entity to perform all of the steps in the method claim. This was made clear in BMC v. Paymentech, where the Federal Circuit held that infringement under active inducement of infringement (271(b)) is found only if a single entity is found to be liable for direct infringement (“single entity rule”).
To design around a method claim, the steps could be divided so that no single person performed all of the steps. One party could encourage two or more actors to perform all of the steps thereby avoiding infringement – as long as that party did not control the other actors, as in a principal-agent or parent-subsidiary relationship. Since no single entity performed all of the steps in the method claim, there is no direct or indirect infringement liability under 271(a) or (b).
Reversal of single entity rule
In Akamai v. Limelight, the Federal Circuit sitting en banc reversed the “single entity rule.” More particularly, the Federal Circuit has now made the standard for direct infringement under 271(a) different from the type of direct infringement that must exist to find indirect infringement liability under 271(b).
The Federal Circuit did not change the standard for direct infringement under 271(a). To be liable for direct infringement under 271(a), a single entity must still perform all of the steps of the method claim. However, to find indirect infringement under 271(b), the Federal Circuit stated that “To be clear, we hold that all the steps of a claimed method must be performed in order to find induced infringement, but that is not necessary to prove that all the steps were committed by a single entity.” The type of direct infringement that must exist to find indirect infringement liability under 271(b) is different from the type of direct infringement under 271(a). Under 271(b), indirect infringement liability can arise based on direct infringement by two or more parties that perform all of the method steps even though these parties would not be liable for direct infringement under 271(a).
Reasons for reversal
In reversing the single entity rule for inducement of infringement under 271(b), the Federal Circuit reviewed the legislative history of 271(b) and also compared the “single entity rule” with similar rules in tort law and criminal law. The legislative history indicated that Congress did not intend that inducement of patent infringement be predicated by a single actor performing all of the steps either directly or indirectly. Rather, Congress’s intent in enacting the 1952 Patent Act was to encompass the possibility of divided infringement or the situation where multiple actors perform all of the steps of the method claim, and the entity that induced the performance of the steps would be liable for active inducement of patent infringement. Additionally, the court compared inducement infringement liability to tort law and criminal law that does not require a single entity to be liable for the actual criminal or tortious act in order to impart liability or guilt on the inducer.
Akamai was joined with a second lawsuit which also dealt with method claims and active inducement of infringement. In both cases, the alleged inducer outsourced or off-loaded one or all of the steps in the patented method claims to a third party. However, the trial court found no inducement of infringement because no single entity performed all of the steps in the method claims. The Federal Circuit remanded with instructions that: if the alleged inducer knew of the patent, induced others to perform the steps in the method claim, and those steps were actually performed, then the alleged inducer would be liable for active inducement of patent infringement.
Claim drafting tip
Previously, method claims were more difficult to draft for system inventions such as inventions that have a receiver and transmitter each operated by different parties. One set of claims was drafted from the receiver’s point of view so that the entity responsible for receiving a signal would infringe the patent’s method claims. Another set of claims was drafted from the transmitter’s point of view so that the entity responsible for transmitting the signal would infringe the patent’s method claims. Under the holding in Akamai, combination receiver/transmitter method claims are now valuable since a single entity need not perform all of the steps in the method claim to find inducement infringement liability. Nonetheless, it is still advisable to include separate claims for receiver and transmitter situations.
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