Joint or Divided Patent Infringement Law Provides Loophole for Infringers, Challenge for Patentees
Summary: The Court of Appeals for the Federal Circuit clarifies the standard for assessing whether two different entities are jointly liabile for patent infringement.
As illustrated in a post on this web site over a month ago, consider the hypothetical situation where a business performs steps A and B of a patented process, and another company performs steps C and D. Neither company would appear to be a direct infringer of a patent claim reciting steps A, B, C, and D. And as long as no one is directly infringing the claim by practicing all steps A through D, neither company should be held liable for contributory or induced infringement of the claimed process either. That's where the theory of "joint" or "divided" patent infringement liability comes into play. In BMC Resources, Inc. v. Paymentech, L.P., 2006-1503 (Fed. Cir. 2007), the Federal Circuit considered the proper standard for joint or divided infringement by multiple parties of a single claim.
At the outset, the Federal Circuit reiterated that liability for patent infringement requires a party to make, use, sell, or offer to sell a patented invention, meaning the entire patented invention. For example, direct patent infringement requires a party to perform or use each and every step of a claimed method. When a defendant participates in or encourages infringement but does not directly infringe a patent, the normal recourse under the law is for the court to apply the standards for liability under a theory of indirect infringement. However, the court said, indirect infringement requires, as a predicate, a finding that some party amongst the accused actors has committed the entire act of direct infringement.
In addressing the specific issue on appeal in BMC Resources, the Federal Circuit stated that the rules for vicarious liability might seem to provide a loophole for a party to escape infringement by having a third party carry out one or more of the claimed steps on its behalf. However, a party cannot avoid infringement, the court said, simply by contracting out steps of a patented process to another entity. In those cases, "the party in control would be liable for direct infringement." It would be unfair, the Federal Circuit went on to say, for the mastermind in such situations to escape liability.
Nevertheless, the Federal Circuit acknowledged that the standard requiring "control or direction" for a finding of joint infringement may in some circumstances allow parties to enter into arms-length agreements to avoid infringement. Recognizing that such agreements could form the basis for a defense to infringement, the court tried to assuage concerns by noting that patentees are allowed to structure their claims to capture infringement by a single party (citing Mark A. Lemley et al., Divided Infringement Claims, 33 AIPLA Q.J. 255, 272-75 (2005)). That is, methods of use or process claims could be drafted, the court intimated, in a manner that logically requires all of the recited steps to be performed by a single party, or at least does not make it easy for the individual steps to be performed by separate parties working under arms-length agreements.
Held: "Applying these standards to BMC’s charges against Paymentech properly results in a finding of no infringement."
