Appeals Court Says Companies Can Be Guilty Of Inducing Infringement... Even If There Is No Direct Infringement

from the going-off-the-reservation dept

Another day, another troubling ruling out of the Federal Circuit court (CAFC) which handles patent appeals. We wrote about this a little over a year ago. It actually involved CAFC reviewing two separate, but similar cases, concerning whether or not companies could be found liable for inducing infringement if no single party actually violates the patent, but a group of different parties, combined, serve to infringe on all the claims of the patent. This is tricky for a variety of reasons. In one case, involving Akamai suing Limelight, Limelight doesn't directly infringe on all of the claims of Akamai's patents, because some of the steps are completed by Limelight users, rather than by Limelight itself. Similarly, in the case of McKesson v. Epic Systems, Epic doesn't infringe on any of the claims of McKesson's patent -- but in combination, its users may do so, though none do so individually.

So here's where it gets tricky. The lower court had found that since no single party infringes on a patent, then there's no direct infringement. And if there's no direct infringement then there's no infringement that the defendants could "induce." This seems reasonable. The fear, with these cases, was that CAFC would say that multiple different parties, each doing different pieces that are covered by claims, could be lumped together into direct infringers, even if none of them fully infringes. That could create massive liability for purely innocent bystanders who do a minor link in a chain.

Thankfully, CAFC does not go that far in its ruling (though one dissenting judge felt it should). Instead, it just basically wipes out the concept that you can't have inducement without direct infringement, arguing that inducement is apparently something entirely separate from direct infringement. That's... troubling. You can see the reasoning (and it's worth reading the whole thing), in that they're saying if multiple parties, through their separate actions, combine to infringe -- and all those actions are directed by a third party -- then isn't it reasonable to assume that that party is still "inducing" infringement? But, as the dissenters note, that seems to be making up a wholly new interpretation of inducement, far from the one that Congress or the courts has allowed in the past. As one of the dissents notes:

The majority opinion is rooted in its conception of what Congress ought to have done rather than what it did. It is also an abdication of this court’s obligation to interpret Congressional policy rather than alter it. When this court convenes en banc, it frees itself of the obligation to follow its own prior precedential decisions. But it is beyond our power to rewrite Congress’s laws. Similarly, we are obliged to follow the pronouncements of the Su-preme Court concerning the proper interpretation of those acts.

In other words, CAFC's majority ruling here has gone off the reservation in a big way to fashion a ruling of how it thinks the world should work, but not in accordance with what the law actually says.

It also opens up a huge can of worms. Because even if no one party is actually infringing, suddenly third parties can be liable for inducing infringement. Infringement that... um... didn't occur. So that seems like a problem. Of course, it would have been even worse if they had gone with the plan that cobbled together direct infringement by all the separate players, even those who were doing very minor things (such as tagging content, in the Akamai case).

Either way, it seems likely that some of the parties here will ask the Supreme Court to weigh in, and hopefully they'll clarify that without someone infringing directly, there is no infringement to "induce."

Filed Under: cafc, direct infringement, indirect infringement, inducement, infringement, patents
Companies: akamai, epic systems, limelight, mckesson

Patent Holders Trying To Drag 3rd Parties Into Patent Disputes

from the troll-expansion dept

If you thought bogus patent lawsuits were crazy now, just wait and see what might happen if a court rules the way two companies are arguing they should. The EFF has filed an amicus brief in two cases in which patent holders are arguing that they can drag third parties into patent lawsuits if those third parties do one part of a claim, while someone else does the rest. If you think about this, and are aware of current patent lawsuits, this is a horrifying prospect. Think Lodsys on steroids, where individual consumers could be sued for patent infringement, merely for making use of what a service provider offers. For example, in one of the two cases, Akamai is claiming patent infringement, and the issue is one claim in the patent. All of the steps of that one claim are handled by a third party... except for "tagging," which is done by users. If Akamai's argument holds, then users of Limelight's services who do "tagging" could be liable for patent infringement without having any idea at all that they're at risk, and without them even violating the vast majority of what's claimed in the patent.

While the patent holders are claiming that without this the patents would be unenforceable, the EFF filing reasonably argues that the problem is that the patents were drafted poorly, and patents should make clear that when they list out a series of steps, those steps are performed by a single party. The arguments by the patent holders would put almost everyone at risk of being directly liable for patent infringement without them realizing it. We see broad patent claims asserted against various internet companies all the time. Imagine if every user of those services could suddenly be sued for infringement as well, just because clicking on a button, adding a tag or whatever, helped "infringe" on the patent in question in combination with the service provider?

As the filing notes, there is simply no social benefit to imposing liability on such third party users. They're hardly in a position to stop the infringement (let alone even know that it's going on). All they're doing is using a service that is offered to them.

Not surprisingly, one of the companies making this argument, McKesson, is using copyright law to back this fundamentally new interpretation of patent law. Specifically, McKesson cites the Supreme Court's terrible Grokster decision on third party liability, and is trying to extend it to patent law. Of course, McKesson does not even properly cite Grokster, falsely claiming that Grokster claims "a defendant's decision to profit from infringement 'while declining to exercise a right to stop or limit it'" makes one liable. That's simply not the Grokster rule at all. Grokster set out a specific set of criteria under which a third party would be liable, but "declining to exercise a right to stop or limit" is not nearly enough.

Filed Under: infringement, patents, third parties
Companies: akamai, limelight, mckesson