the defendant’s acts were “purposefully, knowingly and intentionally done”; indeed the defendant had
agreed to indemnify two newspapers which had refused to run the insert until they obtained indemnity.
Id, at *36-37. Engate has presented no evidence to suggest that the defendants behaved in an
underhanded way to achieve infringement of Engate’s patents. In fact, there is no evidence that the
court reporting agencies even knew about Engate’s patents; on the contrary, Sheila Atkinson-Baker,
the president of Atkinson-Baker, Inc., testified that she did not know about Engate’s patents until
Engate filed this lawsuit. Supplemental Affidavit of Sheila Atkinson-Baker, 5. Nor is there any
evidence to show that the defendants directed or required the court reporters to use the patented
inventions; on the contrary, the evidence shows that the court reporters selected and bought their own
equipment. See Affidavit of Sheila Atkinson-Baker, 49; Declaration of Carole Hughes, 47, Declaration
of Alan N. Vinick, §7.

In Lineguard, Inc. v. Linetec, Inc., No. 87 C 2368, 1987 WL 11832, at *1 (N.D. Ill. June 1,
1987), another case on which Engate relies, the court held that “one may infringe a patent if he has
infringing products made for him.”! But again, that case involved a defendant who specifically directed
another party to commit acts that could have amounted to patent infringement. There is no evidence
that any of the defendants ever directed the reporters to commit such acts. To the contrary, the

evidence shows that the court reporting agencies had nothing to do with the decision to use the

‘Ralston Purina Co. v. Far-Mar-Co., Inc., 586 F.Supp. 1176 (D, Kan. 1984), another case
cited by Engate, also holds that “a party cannot avoid infringement merely by having a third party
practice one or more of the required steps.” But it is unclear what role that rule of law played in the
court’s decision.


Conclusion

For the reasons explained above, the Court finds that the defendants are not vicariously liable
for any use of patented inventions by their independent contractor court reporters. Insofar as Engate’s
claims of patent infringement are based on the “use” of patented inventions, the Court therefore grants
Esquire’s motion for partial summary judgment [Docket Number 89-1], Wordwave’s motion for partial
summary judgment [Docket Number 88-1] and Atkinson-Baker’s motion for summary judgment
(Docket Number 92-1]; Wordwave’s other motion for summary judgment [Docket Number 87-1],
which joins Atkinson-Baker’s motion, is granted as to its independent contractors but denied as to its
employees. Atkinson-Baker’s motion for judicial notice [Docket Number 95-1], which was both

unnecessary and unopposed, is granted.

Dated: December 2, 2002

A WAV EUWUNEA,

MATTHEW F. KENNEI/LY
United States District Judge



1003 (9"" Cir. 1944), and the rule of law that a defendant may be vicariously liable for patent
infringement. In Crowell, the Ninth Circuit held “[iJt is obvious that one may infringe a patent if he
employ an agent for that purpose or have the offending articles manufactured for him by an independent
contractor.” Jd. at 1004. But Engate’s arguments notwithstanding, the question is not whether the
actions of an independent contractor can give rise to vicarious liability - under Crowell and the other
cases cited by Engate, the answer is clearly yes — but under what circumstances such vicarious liability
should be imposed.

In Free Standing Stuffer, Inc. v. Holly Development Co., No. 72 C 1070, 1974 U.S. Dist.
LEXIS 11420 (N.D. Ill. Dec. 24, 1974), a case on which Engate relies, the court held that
“(i]nfringement is not avoided by contracting with others to carry out the method of a patent” and that
“(i]nterposing an agent or independent contractor between the principal and the infringing acts does not
absolve the principal from liability.” Id. at *44, But the facts of Free Standing Stuffer differ from
those presented here in at least one material way. In that case the holder of a patent involving the
insertion of direct response advertising in newspapers sued a development company for infringement.
Among other things, the defendant argued that it could not be liable for infringement because “the
printing and folding were done by the printer, the inserting was done by the newspaper, and the orders
were placed by the advertising agency...” Jd. at *34-35. The court rejected the argument and found
the defendant liable for the actions of those who carried out the specific steps of the patent method. In
doing so, the court noted that “the defendant knew of the patent, knew what was involved in it, and set
forth in its specifications to the printer the very insert which is described in the patent...” Jd. at *35-

36. The court found it appropriate to hold the defendants responsible for the actions of others because



allegedly infringing systems; according to the evidence, the attorneys who requested reporting services,
not the agencies, dictated whether real time systems would be used. See Hughes Declaration, 7;
Atkinson-Baker Affidavit, 10; Vinick Declaration, 7. And, as explained above, the reporters, and
perhaps the attorneys, decided which system would be used. See Hughes Declaration, {{7; Atkinson-
Baker Affidavit, ]10; Vinick Declaration, (7.

Based on the relevant case law, if the defendants had directed their court reporters to use
infringing real time systems and software or hired the reporters for the purpose of using those systems
or software, they could not escape liability — that is true whether the reporters are called employees or
independent contractors. But given the absence of any evidence suggesting that this was the case, the
court reporters’ actions cannot give rise to liability on the part of the defendants. Engate’s arguments
notwithstanding, the Court does not read Crowell, Free Standing Stuffer and Lineguard to hold that
a defendant is always vicariously liable for any patent infringement committed by the defendant’s
independent contractors, That reading is too broad. The cases in which vicarious liability has been
imposed all involved something more than exists here. Under the circumstances of this case, the
defendants are not liable for the use of any patented invention by the court reporters who work for

them as independent contractors.

?Both Esquire and Wordwave admit that they keep several court reporters on staff; these
reporters are considered employees, rather than independent contractors. It is not clear how this
distinction affects the defendants’ tendency to control or direct the use of infringing software and
systems. But the defendants have not asked for summary judgment with respect to these employees’
use of the allegedly infringing software or systems and in any event, they have not offered any evidence
to suggest that summary judgment would be appropriate as to these employees. Thus, our ruling today
is limited to the non-employee court reporters.



Minuts. Osder Form (06/97)

von

y

‘a 2 cy
United St. \ District Court, Northern Distric. ,f Hinois

cTM

Name of Assigned Judge Sitting Judge if Other
or Magistrate Judge Matthew F. Kennelly than Assigned Judge
CASE NUMBER 01 C 6204 DATE 12/2/2002
CASE Engate vs. Esquire Deposition Services
TITLE
{In the following box (a) indicate the patty filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
(eo) o Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due __
(3) a Answer brief to motion due . Reply to answer brief due.
(4) Oo Ruling/Hearing on set for at
(5) Oo Status hearing[held/continued to] [set for/re-set for] on set for __at
(6) a Pretrial conference{held/continued to] [set for/re-set for] on set for at .
(7) oO Trial[set for/re-set for] on at
(8) o (Bench/Jury trial] [Hearing] held/continued to at
(9) Oo This case is dismissed (with/without] prejudice and without costs[by/agreement/pursuant to]
CIFRCP4(m) CiLocal Rule 41.1 COFRCP41(a)(1) OC FRCP41(a)(2).
ao) [Other docket entry] For the reasons set forth on the attached order, the Court grants Esquire’s
motion for partial summary judgment (89-1), Wordwave’s motion for partial summary judgment (88-1)
and Atkinson-Baker’s motion for summary judgment (92-1); Wordwave’s other motion for summary
judgment (87-1), which joins Atkinson-Baker’s motion, is granted as to its independent contractors but
denies as to its employees. Atkinson-Baker’s motion for judicial notice (95-1), which was both
unnecessary and unopposed, is granted.
aly | (For further detail see order attached to the original minute order.]
No notices required, advised in open court. Document
No notices required. somber feces Number
Notices mailed by judge’s staff. Lec 09 2002
Notified counsel by telephone. div dockeled
oY | Docketing to mail notices.
Mail AO 450 form. .
_ \0
Copy to judge/magistrate judge. yynes jomuisie
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courtroom au - 71g 20
oR deputy's os ai ia g- 330
initials

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mauling deputy initials



In the last paragraph of its motion, Engate argues that even if summary judgment is appropriate
with respect to the defendants’ “use” of the patented inventions, it is not appropriate with respect to the
defendants’ “offers to sell” the patented inventions. Engate’s claim in this regard is based on the
defendants’ websites, which advertise the use of real time services that use allegedly infringing software.
Atkinson-Baker responded to this argument with half a page, arguing that Engate has waived any claim
for violation of the “offers to sell” part of §271(a) by failing to raise it initially and by failing to develop it.
The Court disagrees on the waiver issue; Engate’s complaint is broad enough to include an infringement
claim based on alleged offers to sell infringing products. See Amended Complaint, 417. But neither
side has developed the summary judgment arguments on this claim, and the Court is therefore ill-
equipped to rule on the issue at this time. Our decision today pertains only to the defendants’ alleged
use of patented inventions and does not address whether the defendants may be liable for patent

infringement based on their alleged offers to sell patented inventions.



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
ENGATE, INC. )
)
Plaintiff, )
)
vs. ) Case No. 01 C 6204
)
ESQUIRE DEPOSITION SERVICES, LLC,
ATKINSON-BAKER, INC, and ) De ; TEA
WORDWAVE, INC., ) “ms
) DEC 9 9 2002
Defendants. )

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

Engate holds rights in various patents covering certain “specific feature functionalities that are
employed by attorneys and court reporters [to] make real time transcription more useful to both.”
Plaintiff's statement of facts, 2. It has sued several court reporting agencies alleging infringement of
those patents. The parties agree that any actual acts of infringement are done, not by the defendants
themselves, but by the court reporters who work for the defendants and by the attorneys who use the
court reporters’ services, Based on this concession, the defendants have filed separate motions for
summary judgment, which is appropriate in a patent case, as in any other case, when there is no genuine
issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(c); Avia Group International, Inc. v. L.A. Gear California, Inc., 853 F.2d 1557, 1561
(Fed. Cir. 1988). In determining whether there is a genuine issue of fact, we view the evidence and

draw all reasonable inferences in favor of the party opposing the motion. Stimsonite Corp. v.

C8


Nightline Markers, Inc., 33 F. Supp. 2d 703, 705 (N.D. Ill. 1999).

Engate alleges that the defendants violate 35 U.S.C. §271(a), which provides that “whoever
without authority makes, uses, offers to sell, or sells any patented invention within the United States ...
infringes the patent.” For the most part, Engate has focused on the “uses” part of the statute, alleging
that the defendants use one or more of its patented inventions. Atkinson-Baker argues that it is entitled
to summary judgment because it does not itself use any patented invention and because it cannot be
held liable for the actions of those who do. On the latter point, Atkinson-Baker argues that the court
reporters who allegedly use the patented inventions are independent contractors, not employees, and
therefore as a matter of law cannot subject Atkinson-Baker to liability. Esquire, which claims an
independent contractor relationship with all but six of the court reporters who work for it, has filed a
motion for partial summary judgment along the same lines (its motion does not cover liability based on
the acts of the six employee court reporters). And Wordwave, which claims an independent contractor
relationship with all but three of its court reporters, has joined both Atkinson-Baker’s motion and
Esquire’s motion.

To support their motions, the defendants rely heavily — indeed, almost exclusively — on
Stenosyne, Inc. v. Pat Barkley Court Reporters, No. C-00-1786 VRW (N.D. Cal. July 10, 2001),
an unpublished decision from the Northern District of California. Much of the Stenosync opinion deals
with whether the court reporters who work for the defendant should be classified as independent
contractors or employees, a question with which we need not wrestle because Engate has conceded
that the court reporters included in the defendants’ motions are independent contractors. But the

decision is important for where its analysis begins: with Crowell v. Baker Oil Tools, Inc., 143 F.2d

2