DIVIDED/JOINT INFRINGEMENT AFTER FEDERAL CIRCUIT’S EN BANC DECISION IN AKAMAI/MCKESSON CASES AIPLA Mid-Winter Institute IP Practice in Japan Committee Pre-Meeting Seminar January 29-30, 2013 Joseph A. Calvaruso Orrick, Herrington & Sutcliffe LLP 1 © AIPLA 2013

How Divided/Joint Infringement Issues Arise A Person Invents A New And Useful Process That Requires Steps A-C To Be Completed By One Person And Step D To Be Completed By Another Person. While The Claims May Satisfy Every Aspect Required For Patentability, The Patent Holder May Be Left Without Any Means To Enforce His Or Her Patent Rights. —Why? Because, generally, until recently there could be no infringement of a patent claim if different entities perform separate steps of the claimed process. 2 © AIPLA 2013

Indirect Infringement Does Not Remedy The Problem Contributory Infringement – 35 USC§271(c) Induced Infringement – 35 USC§271(b) No Indirect Infringement Without Finding That Someone Was Liable For Finding Of Direct Infringement 3 © AIPLA 2013

Federal Circuit Addressed Divided Infringement En Banc Akamai Techs., Inc. v. Limelight Networks, Inc. McKesson Techs., Inc. v. Epic Systems Corp. 692 F.3d 1301 (Fed. Cir. Aug. 31, 2012) (en banc), petitions for cert. filed (U.S. Dec. 28, 2012) (Nos , ) 4 © AIPLA 2013

BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) Background BMC’S Patent Discloses A Method For Payment of Bills Requiring The Combined Action Of Several Participants: —Payee’s agent —Remote Payment Network (ATM Network) —Card-issuing financial institutions 5 © AIPLA 2013

BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) (cont’d) Federal Circuit Affirmed District Court Summary Judgment Of No Infringement Direct Infringement —Direct infringement requires a showing that a defendant has practiced each and every element of the claimed invention. —Courts faced with a divided infringement theory have generally refused to find liability where one party did not control or direct each step of the patented process. 6 © AIPLA 2013

BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) (cont’d) Federal Circuit Affirmed District Court Summary Judgment Of No Infringement (cont’d) Direct Infringement (cont’d) —“The concerns over a party avoiding infringement by arms-length cooperation can usually be offset by proper claim drafting.” —“Without this direction or control of both the debit networks and the financial institutions, Paymentech did not perform or cause to be performed each and every element of the claims.” 7 © AIPLA 2013

BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) (cont’d) Federal Circuit Affirmed District Court Summary Judgment Of No Infringement (cont’d) Indirect Infringement —“Indirect infringement requires, as a predicate, a finding that some party amongst the accused actors has committed the entire act of direct infringement.” 8 © AIPLA 2013

Akamai Techs., Inc. v. Limelight Networks, Inc. Claim At Issue In Akamai A content delivery service, comprising: —replicating a set of page objects across a wide area network of content servers managed by a domain other than a content provider domain; —for a given page normally served from the content provider domain, tagging the embedded objects of the page so that requests for the page objects resolve to the domain instead of the content provider domain; —responsive to a request for the given page received at the content provider domain, serving the given page from the content provider domain; and —serving at least one embedded object of the given page from a given content server in the domain instead of from the content provider domain. 9 © AIPLA 2013

Akamai Techs., Inc. v. Limelight Networks, Inc. (cont’d) Original Federal Circuit Panel Affirmed No Infringement –“[W]hat is essential is not merely the exercise of control or the providing of instructions, but whether the relationship between the parties is such that acts of one may be attributed to the other.” –That there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.” –The Federal Circuit found no infringement by Limelight because its customers were not tagging the objects on behalf of Limelight. 10 © AIPLA 2013

McKesson Techs. Inc. v. Epic Systems Corp. Claim At Issue In McKesson —A method of automatically and electronically communicating between at least one health-care provider and a plurality of users serviced by the health-care provider, said method comprising the steps of: initiating a communication by one of the plurality of users to the provider for information, wherein the provider has established a preexisting medical record for each user; enabling communication by transporting the communication through a provider/patient interface over an electronic communication network to a website… electronically comparing content of the communication with mapped content… returning the response to the communication automatically to the user’s computer… 11 © AIPLA 2013

McKesson Techs. Inc. v. Epic Systems Corp. (cont’d) Original Federal Circuit Panel Affirmed No Infringement –Confirmed that an agency relationship is required to support a finding of joint direct infringement. –Because the healthcare providers’ patients held the choice of whether to “initiate a communication” there was no joint direct infringement. –Without some direct infringement, there was no inducement. 12 © AIPLA 2013

Federal Circuit En Banc Decision, 692 F.3d 1301 (Fed. Cir. Aug. 31, 2012) (en banc), petitions for cert. filed (U.S. Dec. 28, 2012) (Nos , ) Federal Circuit Reversed and Remanded “Much of the briefing in these cases has been directed to the question whether direct infringement can be found when no single entity performs all of the claimed steps of the patent. It is not necessary for us to resolve that issue today because we find that these cases like them can be resolved through an application of the doctrine of induced infringement.” [W]e reconsider and overrule the... [BMC] decision in which we held that in order for a party to be liable for induced infringement, some other single entity must be liable for direct infringement. 13 © AIPLA 2013

Federal Circuit En Banc Decision, 692 F.3d 1301 (Fed. Cir. Aug. 31, 2012) (en banc), petitions for cert. filed (U.S. Dec. 28, 2012) (Nos , ) (cont’d) [I]nducement requires that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another’s infringement. On the other hand, inducement does not require that the induced party be an agent of the inducer or be acting under the inducer’s direction or control to such an extent that the act of the induced party can be attributed to the inducer as a direct infringer. It is enough that the inducer causes, urges, encourages or aids the infringing conduct and that the induced conduct is carried out. 14 © AIPLA 2013

Federal Circuit En Banc Decision, 692 F.3d 1301 (Fed. Cir. Aug. 31, 2012) (en banc), petitions for cert. filed (U.S. Dec. 28, 2012) (Nos , ) (cont’d) “[T]hat there can be no indirect infringement without direct infringement is well settled.” “[A]ll all the steps of a claimed method must be performed to find induced infringement but it is not necessary to prove that all steps were performed by single entity.” “Requiring proof that there has been direct infringement as a predicate for induced infringement is not the same thing as requiring proof that a single party would be liable as a direct infringer.” 15 © AIPLA 2013

Divided/Joint Infringement – System Claims 16 © AIPLA 2013 Centillion Data Systems LLC v. Qwest Communications International, 631 F.3d 1279 (Fed. Cir. 2011) To “use” a system for purposes of infringement, a party must put the invention into service, i.e. control the system as a whole and obtain benefit from it. A party does not have to exercise physical or direct control over each individual element of the patented system. But for the customer’s actions, the entire system would never have been put in service. The Court said this was sufficient control over the system and the customer clearly benefitted from this function.

Minimizing Divided/Joint Infringement Issues Draft Method Claims Such That The Recited Steps In Each Claim Can Be Satisfied By A Single Actor. —Focus on one entity – end user or a service provider - and whether it supplies or receives other elements of the invention. Minimize The Number Of Active Steps Recited In Claim. Draft Claims That Capture The Behavior Of Potential Infringers In The U.S. - Performance Of Any Method Step Outside The United States Will Likely Avoid Direct Infringement. 17 © AIPLA 2013

Minimizing Divided/Joint Infringement Issues Draft Claims Directed To Systems, Which Under Current Law More Easily Avoid Issues Of Direct Infringement. See Centillion. Set Up Cooperative Relationships That Avoid “Control Or Direction” Of One Party Over Another. Opinions Of Counsel Can Obviate Inducement. Provide Broad Notice Of Patents. 18 © AIPLA 2013

DIVIDED/JOINT INFRINGEMENT AFTER FEDERAL CIRCUIT’S EN BANC DECISION IN AKAMAI/MCKESSON CASES Joseph A. Calvaruso Orrick, Herrington & Sutcliffe LLP 51 West 52 nd Street New York, NY Thank You 19 © AIPLA 2013