Opinion ID: 2800400
Heading Depth: 2
Heading Rank: 2

Heading: Divided Infringement Case Law

Text: Under the language of § 271(a), this court’s “divided infringement” case law is rooted in traditional principles of vicarious liability. Under the principles of vicarious liability, direct infringement does not occur unless all 16 AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. steps of a method claim are performed by or attributable to a single entity. This is the single entity rule. BMC confirmed that where the actions of one party can be legally imputed to another, such that a single entity can be said to have performed each and every element of the claim, that single entity is liable as a direct infringer. 498 F.3d at 1380–81. Before BMC, the judiciary and the patent law community recognized that multiple actors could together infringe a patent only if one controlled the other(s). See Mobil Oil Corp. v. Filtrol Corp., 501 F.2d 282, 291–92 (9th Cir. 1974) (“Mobil contends that Filtrol and Texaco split between them the performance of the four steps of the claim . . . . We question whether a method claim can be infringed when two separate entities perform different operations and neither has control of the other’s activities. No case in point has been cited.” (emphasis added)); BMC Res., Inc. v. Paymentech, L.P., No. 3:03-cv-1927, 2006 WL 1450480, at  (N.D. Tex. May 24, 2006); Lemley, 6 Sedona Conf. J. at 118 (“[C]ourts have imposed liability for direct infringement where another person acts as an agent of the alleged infringer.” (emphasis added)). Applying traditional principles of vicarious liability to direct infringement under § 271(a) protects patentees from a situation where a party attempts to “avoid infringement . . . simply by contracting out steps of a patented process to another entity . . . . It would be unfair indeed for the mastermind in such situations to escape liability.” BMC, 498 F.3d at 1381. In addition, in patent law, unlike in other areas of tort law—where the victim has no ability to define the injurious conduct upfront—the patentee specifically defines the boundaries of his or her exclusive rights in the claims appended to the patent and provides notice thereby to the public so that it can avoid infringement. As this court correctly recognized in BMC, “[t]he concerns over a party avoiding infringement by arms-length cooperation can usually be offset by proper AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. 17 claim drafting. A patentee can usually structure a claim to capture infringement by a single party.” 498 F.3d at 1381. Further, many amici have pointed out that the claim drafter is the least cost avoider of the problem of unenforceable patents due to joint infringement. It would thus be unwise to overrule decades of precedent in an attempt to enforce poorly-drafted patents. The dissent asserts that a handful of pre-1952 cases conflict with the single entity rule. But all of these cases do not involve method claims, see York & Md. Line R.R. Co. v. Winans, 58 U.S. (17 How.) 30 (1854); ThomsonHouston Elec. Co. v. Ohio Brass Co., 80 F. 712 (6th Cir. 1897); Wallace v. Holmes, 29 F. Cas. 74, 80 (C.C.D. Conn. 1871); Jackson v. Nagle, 47 F. 703, 703 (C.C.N.D. Cal. 1891); N.J. Patent Co. v. Schaeffer, 159 F. 171, 173 (C.C.E.D. Pa. 1908) 3), and/or concern contributory (as opposed to direct) infringement. See Peerless, 93 F.2d at 105; Solva, 251 F. at 73; Thomson-Houston, 80 F. at 721; Wallace, 29 F. Cas. 74. 4 Cases discussing apparatus (as opposed to method) claims are not helpful because whoever combines the last element of an apparatus necessarily, 3 Jackson related to a claim for infringement of claims 1, 4, and 5 of U.S. Patent No. 263,412 (the “’412 patent”), claims 1 and 2 of U.S. Patent No. 269,863 (the “’863 patent”), and claims 2 and 3 of U.S. Patent No. 302,338 (the “’338 patent”). 47 F. at 703. Schaeffer related to a claim for infringement of U.S. Patent No. 782,375 (the “’375 patent”). 159 F. at 172. None of these are method claims. See ’412, ’863, ’338 and ’375 patents. 4 Though Wallace does not explicitly use the term, it is a recognized example of contributory infringement. See Dawson, 448 U.S. at 187–88; Aro II, 377 U.S. at 500; Henry v. A.B. Dick Co., 224 U.S. 1, 34 (1912) (all describing Wallace as an example of contributory infringement). 18 AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. individually, “makes” the invention. Thus, in the case of an apparatus claim, there is always a single entity directly infringing the patent. By contrast, because “a process is nothing more than the sequence of actions of which it is comprised, the use of a process necessarily involves doing or performing each of the steps recited.” NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1318 (Fed. Cir. 2005). As such, only method claims can raise an issue of divided infringement. The contributory infringement cases are, by their terms, not discussing direct infringement. The dissent acknowledges this, see Dissent at 20 (“some of the[se] pre1952 principles and cases . . . are more akin to what we today consider to be indirect infringement than direct infringement under § 271(a)”), but suggests that the 1952 Act changed the contours of direct infringement, categorizing certain behaviors that formerly were described as contributory infringement as direct infringement. This is wrong. The enactment of § 271(a) “left intact the entire body of case law on direct infringement.” Warner- Jenkinson, 520 U.S. at 26–27 (quoting Aro I, 365 U.S. at 342). Today, just as in 1952, where a single entity does not perform each and every claim limitation, that entity may not be characterized or held liable as a direct infringer. See Aro I, 365 U.S. at 340; Fromson, 720 F.2d at 1567–68. Contributory actions—such as the performance of some, but not all, steps of a method claim—do not meet the all elements test, and thus must be analyzed exclusively under the rules of indirect infringement. BMC, 498 F.3d at 1381 (“[E]xpanding the rules governing direct infringement to reach independent conduct of multiple actors would subvert the statutory scheme for indirect infringement.”). Therefore, the principles of vicarious liability govern § 271(a). Turning to the scope of vicarious liability, the vicarious liability test includes, for example, principal-agent relationships, contractual arrangements, and joint enter- AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. 19 prises. In a principal-agent relationship, the actions of the agent are attributed to the principal. Similarly, when a contract mandates the performance of all steps of a claimed method, each party to the contract is responsible for the method steps for which it bargained. However, this type of contractual arrangement will typically not be present in an arms-length seller-customer relationship. Finally, in a joint enterprise, the acts of each participant are, by definition, imputed to every member. All members of a joint venture may be jointly and severally liable to third persons for wrongful acts committed in furtherance of the joint enterprise or venture. Thus, the negligence of one participant in the enterprise or venture, while acting within the scope of agency created by the enterprise, may be imputed to another participant so as to render the latter liable for the injuries sustained by third persons as a result of the negligence. 48A C.J.S. Joint Ventures § 62 (footnotes omitted); see also Restatement (Second) of Torts § 491 (1965) (“Any one of several persons engaged in a joint enterprise, such as to make each member of the group responsible for physical harm to other persons caused by the negligence of any member, is barred from recovery against such other persons by the negligence of any member of the group.”). A joint enterprise exists for the purposes of imposing vicarious liability when there is: (1) an agreement, express or implied, among the members of the group; (2) a common purpose to be carried out by the group; (3) a community of pecu- niary interest in that purpose, among the mem- bers; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control. 20 AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. Restatement (Second) of Torts § 491, cmt. c.; see also 57B Am. Jur. 2d Negligence § 1138 (2015). C. Errors in Importing Joint Tortfeasor Liability into § 271(a) The majority and dissent agree that liability exists under traditional principles of vicarious liability, such as where a mastermind directs or controls another to perform all steps of a claimed method. But the dissent’s rule is far broader—Akamai and the dissent insist that they can thrust common law joint tortfeasor liability into § 271(a). The dissent would extend liability to “include[] parties who act in concert to collectively perform the claimed process pursuant to a common plan, design, or purpose.” Dissent at 16. The error of this approach is that it attempts to fit a square peg in a round hole: joint tortfeasor law and § 271 are fundamentally incompatible. To import joint tortfeasor law into § 271(a), Akamai and the dissent depart from three indispensable common law limits on joint tortfeasor liability. First, the Restatement is clear that joint tortfeasor liability “includes only situations in which the defendant has been personally guilty of tortious conduct.” Restatement (Second) of Torts § 875, cmt. a (1979). Yet personal guilt of direct infringement of a method claim under § 271(a) requires performance by the accused of all steps recited in the claim. The Restatement (Second) of Torts § 876, cmt. c (1979) explains that “[o]ne who innocently, rightfully and carefully does an act that has the effect of furthering the tortious conduct or cooperating in the tortious design of another is not for that reason subject to liability.” Thus, contrary to Akamai’s and the dissent’s positions, actors whose innocent actions coordinate to cause harm generally are not subject to liability at common law. Second, the dissent purports to adopt the Restatement’s rule of action in concert. But, according to the AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. 21 Restatement, “[p]arties are acting in concert when they act in accordance with an agreement to cooperate in a particular line of conduct or to accomplish a particular result.” Restatement (Second) of Torts § 876, cmt. a. This definition stresses that there must be mutual agreement between the parties. Thus, the Restatement describes “acting in concert” as a form of “mutual agency.” Id. This is consistent with the early patent law treatises that limited joint infringement to parties “acting in complicity with others,” 3 William C. Robinson, The Law of Patents for Useful Inventions § 946 (1890), or parties “cooperat[ing]” in infringement, Albert H. Walker, Textbook of the Patent Laws of the United States of America § 406 (4th ed. 1904). There is no mutual agency or cooperation when parties act independently for their own benefit, such as in arms-length seller-customer relationships. The dissent, meanwhile, would extend liability even to arms-length agreements, so long as one party “know[s] of th[e] [other] party’s actions.” Dissent at 27. This position contravenes both patent law and tort law. The Supreme Court in Global-Tech held that “a direct infringer’s knowledge or intent is irrelevant,” 131 S. Ct. at 2065 n.2, yet the dissent imposes a knowledge require- ment. And common tort law requires both parties to know the others’ actions to act in concert. See Restatement (Second) of Torts § 876(a) (“a tortious act in concert with the other or pursuant to a common design with him” (emphases added)). One party is “not acting in concert with the other” if it “innocently, and carefully, does an act which happens to further the tortious purpose of [the] []other.” W. Page Keeton et al., Prosser & Keeton on Torts § 46 (1984). Further, as Prosser and Keeton make clear, even more is required. “There are even occasional statements that mere knowledge by each party of what the other is doing is sufficient ‘concert’ to make each liable for the acts of the other; but this seems clearly wrong.” Id. (emphasis added). Here, there is no evidence that Lime- 22 AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. light’s customers knew what steps Limelight was taking, much less evidence that they coordinated further. Thus, there was no concert of action. Contrast Dissent at 25 (stating that Limelight and its customers acted “in concert”); id. at 29 (same). Third, the Restatement describes yet another re- quirement for concerted action: knowledge of harm. The common law sources cited in Akamai’s briefs acknowledge that, for joint liability, a defendant needs knowledge of damage done or harm caused. See Akamai’s Letter Br. at 5 (quoting Prosser, § 47, which requires knowing that the conduct will “cause damage”); Br. for Resp’ts at 26, Akamai, 134 S. Ct. 2111 (available at 2014 WL 1260422) (“Akamai’s Supreme Court Br.”) (quoting Warren v. Parkhurst, 92 N.Y.S. 725, 727 (N.Y. Sup. Ct. 1904), which requires “knowing that the contributions by himself and the others . . . w[ould] result necessarily in the destruction of the plaintiff’s property” (emphasis and alterations in Akamai’s Supreme Court Br.)); id. at 27 (quoting Folsom v. Apple River Log-Driving Co., 41 Wis. 602, 610 (1877), which found liability for flooding where defendant “had notice beforehand of such obstruction, and of the fact that its effect, together with the company’s use of the water beyond its natural flow, would be to flo[od] the plaintiff’s land” (alterations in Akamai’s Supreme Court Br.)); id. at 28–29 (quoting Wallace, 29 F. Cas. at 80, which imposed joint liability where parties “engaged in a common purpose to infringe the patent”). Indeed, this common law requirement was statutorily enacted into 35 U.S.C. § 271(b) and (c). See Global-Tech, 131 S. Ct. at 2068 (holding that both subsections (b) and (c) “require[] knowledge [or willful blindness] of the existence of the patent that is infringed”). This is consistent with the description in Prosser & Keeton requiring “a common plan or design to commit a tortious act,” Prosser & Keeton on Torts § 46. To apply a “knowledge of the harm” principle to § 271(a), however, AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. 23 would require knowledge of the patent, knowledge of the steps recited in the claims, and knowledge of the risk of infringement presented by performance of those steps. Adopting such a requirement for liability under § 271(a) would be contrary to centuries of settled Supreme Court precedent that “a direct infringer’s knowledge or intent is irrelevant.” Global-Tech, 131 S. Ct. at 2065 n.2; see also Hogg v. Emerson, 52 U.S. 587, 607 (1850). The dissent’s reasoning for eliminating these three common law limits on joint tortfeasor liability is that “not all joint tortfeasor scenarios are permissible under the language of § 271(a).” Dissent at 28. But this simple response is wholly insufficient—it does not explain why patent law should allow for more expansive joint tortfeasor liability than other areas of law. The common law has carefully crafted these limits on tort liability over centuries, in light of fairness and justice. We may not blithely toss these limits aside. The dissent’s rule also leads to several extraordinary results. For example, a customer who performs a single step of a patented method by merely using a product as intended would be jointly and severally liable for direct infringement under § 271(a). See Dissent at 10 (“‘whoever . . . uses’ a process for the purposes of infringement covers multiple parties who act in concert”). It is nothing short of remarkable that while Congress and state legislators express their concern about the vulnerability of innocent customers to charges of patent infringement, Akamai and the dissent labor to create an unprecedented interpretation of existing law to make customers significantly more vulnerable to such charges. This is especially troubling given that the customer can be liable even without knowing of the patent. Moreover, the dissent’s “knowledge of the others’ actions” requirement is an illusory protection for customers and other unsuspecting parties. Institution of a patent infringement lawsuit informs accused infringers of third parties’ actions, so, at 24 AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. most, requiring knowledge of the others’ actions limits the patentee’s recovery to post-suit damages. The drastic expansion of predatory customer suits is not a theoretical concern. Several amici, the White House, and other commentators identify numerous instances where patentees have sent demand letters to or sued dozens, hundreds, or, in some cases, even thousands of unsophisticated downstream users. 5 If the law were expanded to impose joint and several liability on users of a single prior art method step, it would subject swathes of innocent actors across diverse industries to these practices. 6 Using real patents as examples, amici warn that individuals could be liable for patent infringement for so little as initiating communication with a doctor or swiping 5 Br. of Amicus Curiae Elec. Frontier Found. in Supp. of Def. at 6–8, Akamai, 692 F.3d 1301 (Fed. Cir. Aug. 9, 2011) (available at 2011 WL 3796789) (“EFF Br.”); Corrected Br. of Amici Curiae Cisco Sys., Inc. et al. in Supp. of Def.-Cross-Appellant at 4–5, Akamai, 692 F.3d 1301 (Fed. Cir. Aug. 15, 2011) (available at 2011 WL 4438649) (“Cisco Br.”); Executive Office of the President, Patent Assertion and U.S. Innovation, at 10–12 (June 2013); Gaia Bernstein, The Rise of the End User in Patent Litigation, 55 B.C. L. Rev. 1443, 1443–46 (2014); Brian Love & James Yoon, Expanding Patent Law’s Customer Suit Exception, 93 B.U. L. Rev. 1605, 1610–11 (2013). 6 See, e.g., Br. of Amici Curiae Newegg and L.L. Bean in Supp. of Pet’r at 18–22, Limelight, 134 S. Ct. 2111 (Feb. 28, 2014) (available at 2014 WL 880929); Br. of Amici Curiae Cargill, Inc. et al. in Supp. of Pet’r Limelight Networks, Inc. at 8–10, Limelight, 134 S. Ct. 2111 (Mar. 3, 2014) (available at 2014 WL 880935); Cisco Br. at 4–7. AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC. 25 a debit card. 7 Another amici explains that “the hundreds if not thousands of contracts in a technology company’s supply chain could expose each actor in that supply chain to potential patent infringement liability . . . .” Cisco Br. at 5. Based on this fact, a patentee could draft “dependent claims whose sole purpose is to add prior art steps precisely to increase the patent applicant’s litigation and licensing options post-issuance.” Id. at 4. Finally, the dissent’s position leads to another perverse result: the addition of a claim limitation can actually serve to make more parties liable for infringement. Consider a hypothetical in which independent claim 1 recites a “replicating” step and claim 2, dependent therefrom, adds the limitation of a “tagging” step. The dissent’s rule, which requires only concerted action and does not require attribution of the acts of one party to the other, would result in a party that performs the tagging step but not the replicating step being liable for directly infringing dependent claim 2 while not being liable for infringing the broader claim from which it depends. This conflicts with the “long . . . established” rule that a dependent claim cannot be infringed unless the independent claim from which it depends is also infringed. Teledyne McCormick Selph v. United States, 558 F.2d 1000, 1004 (Ct. Cl. 1977); accord Ferring B.V. v. Watson Labs., Inc.- Fla., 764 F.3d 1401, 1411 (Fed. Cir. 2014) (“Because we hold that the asserted independent claims of Ferring’s patents are not infringed, the asserted dependent claims are likewise not infringed.” (citing cases)). 7 EFF Br. at 5; Br. of Amicus Curiae The Financial Services Roundtable in Supp. of Limelight Networks, Inc. and Affirmance at 27, Akamai, 692 F.3d 1301 (Fed. Cir. Aug. 15, 2011) (available at 2011 WL 7730148). 26 AKAMAI TECHNOLOGIES, INC. v. LIMELIGHT NETWORKS, INC.