Direct patent infringement generally requires a single actor to practice every element of a patent claim. Indirect infringement, such as contributory infringement and inducement, also require a showing of underlying direct infringement by a single actor. The single actor requirement is commonly expanded under a loose agency concept -- one cannot avoid liability simply by having someone else perform one or more steps of the method.
However, two separate entities that each only performs a portion of a patented invention cannot be said to jointly infringe the patent if there is no knowledge of the patent and the relationship between the two entities is merely an arms-length contractual relationship.
Between the two extremes, lies an unexplored middle-ground. There is a concern that the bright-line single actor rules tends to promote tacit agreements by corporations to “jointly infringe” in a fashion that looks much like an arms-length transaction.
In a concept-piece written last fall, I proposed a new cause of action for conspiratorial infringement. Conspiratorial infringement would eliminate the single-actor requirement but would include a strong mens rea element.
In the wake of the CAFC's 2006 On Demand decision, several cases have raised the issue of conspiracy to infringe as well as the broader concept of divided infringement. In On Demand, the CAFC approved of a divided infringement jury instruction:
On Demand Jury Instruction: It is not necessary for the acts that constitute infringement to be performed by one person or entity. When infringement results from the participation and combined action(s) of more than one person or entity, they are all joint infringers and jointly liable for patent infringement. Infringement of a patented process or method cannot be avoided by having another perform one step of the process or method.
The On Demand statements are arguably dicta and, in any event, the opinion did not squarely address the issue. However, in Freedom Wireless v. Boston Communications, a Massachusetts district court gave the following jury instructions:
if separate companies work together to perform all the steps of a claim of a patent, the companies are jointly responsible, that is, responsible as a group for the infringement of the patent. Even if no single company performs all the steps of the claim, the companies are jointly responsible.
After losing a huge jury verdict, Boston Communications appealed on the jury instructions and asked for an emergency stay of the imposed injunction. The CAFC quickly issued an order staying the injunction — finding that the imposed vicarious liability appears to raise important unaddressed questions:
[W]e conclude that BCGI has demonstrated the existence of a substantial question whether the theory of liability applied by the district court departs from this court’s precedents regarding vicarious liability for infringement in such a manner as to bring the verdict into question. This court has not addressed the theory of joint infringement and there is relatively little precedent on that issue. (unpublished order)
Unfortunately, the case was settled for $87 million before the CAFC could make its final decision on the case.
Going the other way, the Delaware magistrate in Digene v. Ventana recently held that the patent statute preempts any separate state-law claim of 'conspiracy to infringe a patent.'
The next big kahuna is BMC v. PaymenTech. BMC is on appeal at the CAFC after the lower court dismissed BMC's joint-infringement claims. The PaymenTech case squarely presents the concept of divided infringement. BMC, the patentee, argues that joint infringement "may be shown by participation and combined action" and that neither direction nor control by one party is required. PaymenTech, on the other hand, argues that divided infringement is entirely bogus, that On Demand is pure dicta, and that the current statutory scheme does not allow for BMC's proposed strict-liability joint infringement.
- Professor Mark Lemley's article on divided infringement is instructive on this topic. (LINK). As part of the Keker Van Nest firm, Lemley has filed an amicus brief (on behalf of Comcast) arguing that the court should not extend its reach to cover divided infringement.
- Oral arguments are scheduled for April 5, 2007.