Federal Circuit Abolishes “Single-Entity Rule” for Inducement of Patent Infringement in Landmark Akamai Decision

The Federal Circuit, in a controversial 6-5 en banc decision, Akamai v. Limelight, held that an alleged infringer may be liable for inducing infringement of a method claim if it 1) performs some of the steps and induces another party to perform the remaining steps or 2) induces other parties collectively to perform all of the claimed steps. Akamai Techs., Inc. v. Limelight Networks, Inc., 2012 WL 3764695 (Fed. Cir. Aug. 31, 2012). Importantly, the majority held that inducement liability does not require that there be a single induced party that performs all of the claimed steps, or that the induced party is under the direction or control of the inducer.

The Federal Circuit’s decision arose from its en banc rehearing of two cases: Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp. In Akamai, the owner of a patent claiming a method for delivering web content alleged that a network service provider performed all but one step of the method, and induced content providers to perform the final step. In McKesson, the owner of a patent claiming a method of electronic communication between healthcare providers and their patients alleged that a software company induced healthcare providers to perform some steps of the method, and induced patients to perform the other steps. In each case, a Federal Circuit panel affirmed judgment of non-infringement because the plaintiff failed to show that a single actor performed all of the steps of the claimed method. The en banc court reheard the cases jointly.

The Federal Circuit issued a per curiam opinion on August 31, 2012, reversing judgment of non-infringement in both the Akamai and McKesson cases, and remanding them for further proceedings. The court held that liability for induced infringement does not require that a single entity perform all the steps of a claimed method. Rather, liability for induced infringement arises when a party having the requisite specific intent (including knowledge of the patent) either 1) induces one or more actors to perform all the steps of the claimed method or 2) performs some steps of the claimed method itself and induces one or more actors to perform the remaining steps. The court reasoned that infringement by multiple actors causes the same harm to a patentee as infringement by a single actor, and noted that it would be a bizarre to hold someone liable for inducing another to perform all of the steps of a method claim but to hold harmless one who actually performs some of the steps himself.

In reaching its decision, the court did not reconsider the “single-entity rule” governing liability for direct infringement, which still requires that a single entity perform all the steps of a claimed method. The majority argued that its decision was supported by relevant legislative history, general tort principles, and prior case law. Conversely, the dissenting judges argued that the decision conflicts with Supreme Court precedent and basic principles of statutory interpretation.

The Federal Circuit’s decision simplifies the law of induced infringement. The decision is therefore favorable for patent owners and may give rise to more allegations of patent infringement because inducement liability no longer requires that a single induced actor perform all of the claimed steps. Also, an inducing act is very broadly construed to include acts of causing, urging, encouraging, or aiding. On the other hand, defendants accused of inducing infringement of method claims will have one less defense when multiple actors perform the claimed method. Companies that may be accused of inducing infringement may need to investigate whether their customers or suppliers are performing claimed steps, and if so, whether they may be inducing these steps, for example, by providing instructions to customers. There is also a possibility that the Akamai decision will not stand for long.