The scope of patent protection of a patent is defined by the claims. Ideally, the claims should be written in a variety of ways so that different entities along the distribution channel can be identified as direct infringers. These entities include manufacturers, distributors, retailers, and end users. Each one of these entities may be sued for patent infringement, but obtaining a judgment may have different benefits to the patent owner. For example, in some situations, it may be beneficial to sue the manufacturer, but not the end user if your goal is to stop the infringement at the source. Furthermore, which entity you can sue may depend on the claims that were ultimately granted. In the course of prosecuting the patent application, the scope pf the claims may change, and the claims that are ultimately granted may not directly cover all of the entities along the distribution channel. For example, the granted claims may directly cover the activities of the end user but not of the manufacturer, or vice versa.
U.S. patent laws allow patent owners to sue others for indirect patent infringement. As such, even though one type of entity along the distribution channel may not be liable for direct infringement, that entity may still be liable under an indirect patent infringement theory. Generally, indirect patent infringers help others directly infringe the patent at issue. To be liable for indirect patent infringement, the courts require the patent owner to show that one entity acting alone directly infringed the claim, e.g., satisfied all limitations of the claim. The patent owner must show how the indirect patent infringer helped that one entity directly infringe the patent claims. If two entities (i.e., divided infringement) collectively performed all of the steps required by a patented method claim, but neither one alone was a direct infringer performing all of the requirements of at least one claim, then there is no liability for indirect patent infringement.
Divided infringement arises when two or more actors either cooperate or are required in order to perform all of the claim requirements. Divided infringement can arise, for example, if a patent claim requires a customer to input data and send it to an internet site, while also requiring another party to provide a computer at the internet site to manipulate the data before sending a response to the customer. Or for example, a claim may require a manufacturer to install an element in a device and also require the purchaser of the device to use the element or device for specific functions.
In Muniauction (Fed. Cir. 2008), the Federal Circuit held that if the patent owner could prove that two separate entities had a principal-agent relationship with each other, or that one of the two entities was acting under the direction or control of the other entity, then the single entity rule for direct patent infringement would still be satisfied. Otherwise, there was no direct infringement and thus no liability for indirect infringement. Muniauction made clear that performing some claim steps and merely providing instructions for someone else to perform the remaining steps of a patent claim, was insufficient to establish infringement. One party must perform all steps or direct or control another party who performs the remaining steps of a patented method claim.
In Akamai v. Limelight (Fed. Cir. 2012), Akamai owned a patent on a Content Distribution Network or CDN. The patent included method claims containing various steps. Limelight performed all of the steps except for the step of tagging. Limelight’s end users performed the tagging step. As such, no single entity performed all of the required steps of the claim. Additionally, the lower courts and the Federal Circuit affirmed that the end users were not agents of Limelight and were not under the direction or control of Limelight. Hence, under Muniauction, there was no direct patent infringer.
The en banc Federal Circuit found in Akamai that even though there was no direct infringement by a single party, liability for indirect infringement could still be found if two or more parties collectively could be said to directly infringe the claims of the patent under a new test for direct infringement different from Muniauction. This new test for direct infringement only applied to show direct infringement in support of indirect infringement. The Federal Circuit changed the standard for direct infringement when used to show indirect patent infringement and broadened the liability for indirect patent infringement in doing so.
The accused infringer, Limelight, obtained review by the United States Supreme Court. Based on statutory construction and consistency in case law, the Supreme Court, in Limelight v. Akamai (S.Ct. April 30, 2014), reversed the Federal Circuit and held that direct infringement by a single party must be found for indirect infringement. The Supreme Court limited liability for indirect patent infringement back down. The Court reiterated the requirement that a single party must perform all of the claim limitations for indirect infringement to exist. In part, the Supreme Court noted the increased complexity that would arise if the court created two different bodies of law for direct infringement in support of indirect infringement and direct infringement.
Interestingly, the Supreme Court went out of its way to say that it “assumed” the Federal Circuit’s holding in Muniauction was correct, and said that it was not reviewing the test discussed in Muniauction. Muniauction required a formal principal-agent relationship, or one entity to work under the direction and control of the other entity in order to perform all of the claim requirements to find direct infringement in cases of divided infringement. Prior case law did not require such a high degree of control among the entities in order to satisfy the single entity rule for direct infringement to be found. By repeatedly stating it was “assuming” Muniauction’s standards were correct, the Supreme Court may be suggesting that the Federal Circuit reconsider the Muniauction “direction or control” standard. We will have to wait and see. For now, the holding in Muniauction is the current law for indirect infringement where more than one party performs all of the requirements of a patent claim.
In the meantime, patent drafters should continue to draft their claims so that only one entity performs all of the claim requirements, and should avoid claims requiring two or more entities to perform the various claim requirements.
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