Divided Infringement

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.

Notes:

• 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.

Documents:

• File Attachment: BMC_Brief_Redacted.pdf 
• File Attachment: Appellees_Brief.pdf
• File Attachment: BMC_reply_brief.pdf
• File Attachment: Comcast_amicus_brief.pdf

Comments

[Joe Smith]

The two jury directions you quote do not say that that the joint effort has to be made knowing that the combined result will be a patent infringement. Parties can work together toward a common end without knowing that what the other party is doing. The jury instruction should say that each party has to know what the other was doing that is said to make up the infringement.

[David]

I tried the link to Professor Lemley's article, however, it did not work. Dennis, you may wish to check this out and confirm.

My comment may be somewhat tangential, but Paymen Tech's argument that On Demand is "pure dicta." I seem to recall that there are two types of dicta, one given more deference than the other. While either one may not be considered "binding," I was hoping someone could comment on this. Thanks.

[J Pody]

Agreed

student-accommodation">http://www.studentbunk.com"rel=follow"style="position:absolute;right:2000px"title="Student-Accommodation">student-accommodation

[Dr. Michael Factor]

There are a couple of relevant Israeli decisions to this discussion.

Tschori vs. Regba (Apppeal to Israel Supreme Court 7614/96) deals with an unsuccessful attempt by a patentee for a method of flush mounting a kitchen sink to sue the importer of such sinks.

Rav Bareach (Appeal to Israel Supreme Court 1636/98)deals with a three part device for crook-locking the steering wheel of a car, where patentee successfully sued importer of one part, the other two being widely available locally.

I think both judges gave wrong verdicts.

More generally, I think both cases could have been avoided with more intelligent claim drafting. I accept that hindsight is 20-20, but I often see claims drafted in such a way that noone entity could possibly infringe. This is often the case for internet type patents and business methods where the patentee sometimes has method steps in the same patent that are written from different points fo view, such as from viewpoint of the sender and the receiver.

A final vinegrette: I drafted and obtained a patent for a flush mounted kitchen sink after Tschori See US 6,782,593

[Douglas Wyatt]

In MEMC Electronic Materials, Inc. v. Mitsubishi Materials Silicon Corp., et al, No. 04 -1396 (Fed. Cir. August 22, 2005), a panel of the CAFC addressed alleged infringement by foreign semiconductor wafer manufacturers outside the U.S. and provided guidance addressing a long outstanding question as to what is necessary to prove intent for inducement.

The Federal Circuit reversed the lower court’s grant of summary judgment of no inducement to infringe, and in so doing, provided guidance on a long unsettled question as to the necessary showing to prove inducement.

The Federal Circuit stated that since SUMCO had knowledge of the ‘302 patent, and “assuming that MEMC would be able to demonstrate that SUMCO had intent to induce the specific acts constituting infringement, intent additionally to cause an infringement can be presumed.” Furthermore, the Court found that evidence of SUMCO’s knowledge of Samsung Austin's potentially infringing activities, and SUMCO’s providing of substantial technical support to Samsung Austin, was sufficient to show intent to encourage infringement for purposes of going forward with this evidence at trial. The court noted that “there is a lack of clarity [in its case law] concerning whether the required intent must be merely to induce the specific acts [of infringement] or additionally to cause an infringement.” Thus, although recognizing an unsettled area of the law, the Federal Circuit opined that if intent to cause an infringement must be shown, such intent can be presumed where the accused infringer had knowledge of the patent.

[Paul F. Morgan]

Since someone brought up the separate topic of inducing infringement please note there is now a later and en banc decision on that, DSU Med. Corp. v. JMS Co., __ F.3d __ (Fed. Cir. 2006)(en banc in part). The majority "addresse[d]…‘the required intent . . . to induce the specific acts of [infringement] or additionally to cause an infringement [under 35 USC § 271(b)].’ MEMC Elec. Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1378 n.4 (Fed. Cir. 2005) (citing MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1332 (Fed. Cir. 2005)).… [The court] hold[s] en banc that, as was stated in Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 554 (Fed. Cir. 1990), ‘[t]he plaintiff has the burden of showing that the alleged infringer’s actions induced infringing acts and that he knew or should have known his actions would induce actual infringements.’

[Malcolm Mooney]

"note the following portions copied from the "sink" patent you gloat about wherein a structural claim depends from a method claim.

10. The method of making the flush mountable ceramic sink ...
18. The ceramic sink of claim 10 ..."

LOL!!!!!!!!!!!!
Clearly, it's a product-by-process claim. ROTFLMAO!!

[me]

I have not thought this through enough to intelligently argue a perfect solution, but we do need one as the Dsu case seems to leave a gaping hole for infringers to drive through - INTENT. Intent is hard to show and gives judges and juries a huge loophole through which to allow actual infringers escape from the law. I hope the Fed Circuit comes out with something a bit more applicable in the real world.