Divided Infringement of Method Claims: A Tough Sell
11DIVIDED INFRINGEMENT OFMETHOD CLAIMS:A TOUGH SELLby: Michael A. Ciceroby: Michael A. CiceroCPTCLA Spring MeetingCPTCLA Spring MeetingMay 1, 2009May 1, 2009
22Topics AddressedTopics Addressed• What is “Divided” Infringement of a MethodClaim?• The “Direct or Control” Requirement toEstablish Joint Direct Infringement• Litigation and Patent Prosecution LessonsLearned
33Authorities DiscussedAuthorities Discussed• BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d1373 (Fed. Cir. 2007);• Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318(Fed. Cir. 2008), cert. denied, ___ S.Ct. ___, 2009WL 578715 (U.S. Mar. 9, 2009);• Emtel, Inc. v. Lipidlabs, Inc., No. H-07-1798, 2008WL 4450310 (S.D. Tex. Sept. 30, 2008);• Global Patent Holdings, LLC v. Panthers BRHC,LLC, 586 F.Supp.2d 1331 (S.D. Fla. 2008);
44Authorities DiscussedAuthorities Discussed – (cont’d)• Friday Group v. Ticketmaster, No.4:08CV01203, 2008 WL 5233078 (E.D. Mo.Dec. 12, 2008);• Golden Hour Data Systems, Inc. v. emsCharts,Inc., 2009 WL 943273 (E.D. Tex. Apr. 3, 2009);and• NTP, Inc. v. Research In Motion, Ltd., 418 F.3d1282 (Fed. Cir. 2005).
55What is “Divided Infringement” of aWhat is “Divided Infringement” of aMethod Claim?Method Claim?Claim 1Claim 1:: Recites Steps A, B, C, D, & E.Recites Steps A, B, C, D, & E.DefendantDefendant:: Performs Steps A-C.Performs Steps A-C.Third PartyThird Party:: Performs Steps D & E.Performs Steps D & E.
66How can Defendant be Liable forHow can Defendant be Liable forDivided Infringement of Claim 1?Divided Infringement of Claim 1?1. Joint Direct Infringement: Must establish thatDefendant is vicariously liable for the Third Party’sperformance of Steps D & E.BMC at 1379; Muniauction at 1330.
77How can Defendant be Liable forHow can Defendant be Liable forDivided Infringement of Claim 1?Divided Infringement of Claim 1?2. Indirect Infringement (Inducement under § 271(b)):Must establish:a. Act of direct infringement;b. Defendant’s actions induced infringing act; andc. Defendant knew or should have known his actionswould induce actual infringement.Dynacore Holdings Corp. v. U.S. Phillips Corp., 363F.3d 1263, 1272 (Fed. Cir. 2004); DSU Med. Sys.Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1306 (Fed. Cir.2006).
88BMC Resources, Inc. v.BMC Resources, Inc. v.Paymentech, L.P.Paymentech, L.P., 498 F.3d 1373, 498 F.3d 1373(Fed. Cir. 2007)(Fed. Cir. 2007)
99Facts inFacts in BMC ResourcesBMC ResourcesBMC’s patents claim a method for telephonically processingdebit transactions without a PIN.Payee or payee’sagent telephonicallyenters access code,acct. #, debit card #, &payment amount.dataRemotePayment(ATM)NetworkCard-issuingFinancialInstitutiondataPaymentech marketed similar system, though parties agreedthat Paymentech did not itself perform every step of BMC’sclaimed method.
1010Holdings inHoldings in BMC ResourcesBMC Resources• BMC threatens; Paymentech files a DJ action; BMCcounterclaims for both direct and indirect infringement;both parties move for SJ on the infringement issue.• District CourtDistrict Court:: Grants Paymentech’s motion as to bothdirect and indirect infringement, on ground thatPaymentech did not direct or control the behavior of thefinancial institutions who performed the claimed methodsteps that Paymentech did not perform.• CAFCCAFC: Affirmed.
1111Holdings inHoldings in BMC ResourcesBMC Resources (cont’d)(cont’d)• “Direct infringement requires a party to perform or useeach and every step or element of a claimed method orproduct.”• “Indirect infringement requires, as a predicate, a findingthat some party amongst the accused actors has committedthe entire act of infringement.”• “[T]he law imposes vicarious liability on a party for theacts of another in circumstances showing that the liableparty controlled the conduct of the acting party.”
1212Holdings inHoldings in BMC ResourcesBMC Resources (cont’d)(cont’d)• “The concerns over a party avoiding infringement by arms-length cooperation can usually be offset by proper claimdrafting. A patentee can usually structure a claim to captureinfringement by a single party.”• “In this case, for example, BMC could have drafted itsclaims to focus on one entity. The steps of the claim mighthave featured references to a single party’s supplying orreceiving each element of the claimed process. However,BMC chose instead to have four different parties performdifferent acts within one claim.”• Court will not redraft “these ill-conceived claims.”
1313Holdings inHoldings in BMC ResourcesBMC Resources (cont’d)(cont’d)• “Applying these standards to BMC’s charges againstPaymentech properly results in a finding of noinfringement.”• Paymentech’s having provided customer data (debit card #,etc.) to the debit networks, without directions as to use ofthe data, was insufficient to establish Paymentech’s controlover debit networks.• Evidence of Paymentech’s control over financialinstitutions “was even scarcer.” There was no evidence ofany contractual relationship between Paymentech and thoseinstitutions.
1414Muniauction, Inc. v. Thomson Corp.,Muniauction, Inc. v. Thomson Corp.,532 F.3d 1318 (Fed. Cir. 2008532 F.3d 1318 (Fed. Cir. 2008),), cert.cert.denieddenied, ___ S.Ct. ___, 2009 WL 578715, ___ S.Ct. ___, 2009 WL 578715(U.S. Mar. 9, 2009)(U.S. Mar. 9, 2009)
1515Facts inFacts in MuniauctionMuniauction• Claims directed to methods for conducting municipal bondauctions over an electronic network.• Asserted claim recited, inter alia:• Bond issuer’s computer and a bidder’s computercoupled to at least one electronic network;• Step of inputting bid data into bidder’s computer;• Step of communicating message associated with bid toissuer’s computer.• Performance of all claimed steps through use of webbrowser.
1616Facts inFacts in MuniauctionMuniauction (cont’d)(cont’d)• Thomson (accused infringer) ran a central server thatenabled many of the same auction services claimed inplaintiff’s patent.• “Thomson neither performed every step of the claimedmethods nor had another party perform steps on its behalf.”• RESULT: CAFC reverses judgment of infringement byThomson.
1717Holdings inHoldings in MuniauctionMuniauction• “[D]irect infringement requires aa singlesingle partyparty to performevery step of a claimed method.”• “Accordingly, where the actions of multiple partiescombine to perform every step of a claimed method, theclaim is directly infringed only ifonly if one party exercises“control or direction” over the entire process such thatevery step is attributable to the controlling party, i.e., the“mastermindmastermind.”• Issue turned on whether Thomson sufficiently controlled ordirected other parties such that “Thomson itself can be saidto have performed every step of the asserted claims.”
1818Emtel, Inc. v. Lipidlabs, Inc.Emtel, Inc. v. Lipidlabs, Inc.,,No. H-07-1798, 2008 WL 4450310No. H-07-1798, 2008 WL 4450310(S.D. Tex. Sept. 30, 2008)(S.D. Tex. Sept. 30, 2008)
1919Holdings inHoldings in EmtelEmtel• “[T]o raise a fact issue as to direct infringement under thedirection-or-control standard, the alleged infringer mustcause third parties to perform steps of the claimed methodin accordance with specific instructions andspecific instructions andrequirementsrequirements.”• “Giving instructions or prompts to the third party in itsperformance of the steps necessary to completeinfringement, or facilitating or arranging for the thirdparty’s involvement in the alleged infringement, are notsufficient.”
2020Holdings inHoldings in EmtelEmtel (cont’d)(cont’d)Use of Agency LawUse of Agency Law• “[A] contracting party is not vicariously liable for theactions of an independent contractor unless that partycontrols the details of the independent contractor’s work tothe extent that the contractor cannot perform the work ashe chooses.”• “‘There must be such a retention of a right of supervisionthat the contractor is not entirely free to do the work in hisown way.’”• “The control must also ‘relate to the activity that actuallycaused the injury.’”
2121Holdings inHoldings in EmtelEmtel (cont’d)(cont’d)Suggestions for Rewriting Asserted Claims to Focus Solely onSuggestions for Rewriting Asserted Claims to Focus Solely onVideoconference System Provider and Not PhysiciansVideoconference System Provider and Not Physicians• “[D]iagnosing a medical condition” “receiving in acentral video conferencing station a physician’s diagnosis”• “[P]roviding instructions via said videoconferencing systemto said first medical caregiver” “transmitting thatdiagnosis to the satellite medical care facility”
2424Analysis inAnalysis in Global Patent HoldingsGlobal Patent Holdings• MOTION GRANTED. Action dismissed with prejudice.• Quotes Supreme Court’s 2007 Twombly decision: “Factualallegations must be enough to raise a right to relief abovethe speculative level.”• “The parties agree that the ‘341 patent requires twoindividuals or entities to complete all of the method’ssteps ... a remote computer user, and the website server.”• Plaintiff has, in no way, alleged that remote users arecontractually bound to visit the website . . .”
2525Friday Group v. TicketmasterFriday Group v. Ticketmaster, No., No.4:08CV01203, 2008 WL 52330784:08CV01203, 2008 WL 5233078(E.D. Mo. Dec. 12, 2008)(E.D. Mo. Dec. 12, 2008)
2626Facts inFacts in Friday GroupFriday Group1. Providing an opportunity to purchase a recording of a liveevent at a point-of-sale of tickets before the event occurs.2. Conducting the live event.3. Recording at least a portion of the live event.4. Manufacturing copies of the recording.5. Distributing the manufactured copies to those who preorderedthe recording.Patent: “Method of Selling and Distributing ArticlesPatent: “Method of Selling and Distributing ArticlesAssociated with Live Event”Associated with Live Event”
2727Facts inFacts in Friday GroupFriday Group – (cont’d)• Patentee sues Ticketmaster + 5 other defendants for actionsPatentee sues Ticketmaster + 5 other defendants for actionsrelated to its selling and distributing of articles associatedrelated to its selling and distributing of articles associatedwith live events, “for example, the Bonnaroo Music andwith live events, “for example, the Bonnaroo Music andArts Festival, Dave Matthews Band, the Police, The WhoArts Festival, Dave Matthews Band, the Police, The Whoand the Rolling Stones.”and the Rolling Stones.”
2828Friday Group: Global Déjà VuFriday Group: Global Déjà Vu• CitingCiting Global Patent HoldingsGlobal Patent Holdings, Defendants move to, Defendants move todismiss. Motion GRANTED without prejudice.dismiss. Motion GRANTED without prejudice.• ““Plaintiffs Complaint, however, does not allege that anyPlaintiffs Complaint, however, does not allege that anysingle defendant performed all of the steps of the method orsingle defendant performed all of the steps of the method orthat any defendant was the ‘mastermind’ behind thethat any defendant was the ‘mastermind’ behind theoperation.operation. See EmtelSee Emtel . . . . Absent the allegation that one. . . . Absent the allegation that oneof these defendants was the one that directed or controlledof these defendants was the one that directed or controlledthe method, Plaintiff fails to state a claim for directthe method, Plaintiff fails to state a claim for directinfringement.”infringement.”
2929Friday Group: Global Déjà VuFriday Group: Global Déjà Vu• ““Plaintiff has merely alleged that any of the six defendantsPlaintiff has merely alleged that any of the six defendantsdirected or controlled the operations of the other fivedirected or controlled the operations of the other fivedefendants and, thereby, infringed the Patent ‘428. Such andefendants and, thereby, infringed the Patent ‘428. Such anindefinite and nebulous pleading does not meet the standardindefinite and nebulous pleading does not meet the standarddefined indefined in Bell Atl. Corp. v. TwomblyBell Atl. Corp. v. Twombly or the requirements asor the requirements asset forth inset forth in BMC ResourcesBMC Resources.”• ““Here, it appears that the patentee may have beenHere, it appears that the patentee may have beenoverreaching with respect to the breadth of its claim,overreaching with respect to the breadth of its claim,particularly when it attempted to include a ‘liveparticularly when it attempted to include a ‘liveperformance’ as part of its method claim.”performance’ as part of its method claim.”
3131Facts inFacts in Golden HourGolden Hour1. A computerized integrated data management system fortracking a patient incident, comprising:a first module capable of dispatchingdispatching an emergency transportcrew specific to a patient incident requiring emergencymedical care by the emergency transport crew, whereintransportation tracking information relating to the dispatch isrecorded; anda second module capable of receiving information from the firstmodule and billing the patient appropriately for costsindicative of the patient incident, including transportationcosts.
3232Facts inFacts in Golden HourGolden Hour – (cont’d)– (cont’d)15. A computerized methodmethod of generating a patient encounterrecord, comprising the steps of:collecting flight information relating to an emergency transportcrew dispatch;collecting patient information from a clinical encounterassociated with a patient incident requiring emergencymedical care by the emergency transport crew;and integrating the patient information with the flightinformation to produce an encounter record indicative of thepatients clinical encounter.
3333Facts inFacts in Golden HourGolden Hour – (cont’d)– (cont’d)• Golden Hour sues both emsCharts and Softtech for jointinfringement of Claims 1, 15, and dependent claims.• Softtech files cross-claim against emsCharts, alleging breachof fiduciary duty for intentionally infringing Golden Hour’spatent.• “There is no dispute that neither emsCharts nor theemsCharts.com software product dispatches. SofttechsFlight Vector system, however, dispatches.”
3434Procedural History inProcedural History in Golden HourGolden Hour• Jury returns verdict of joint infringement against emsChartsand Softtech.• emsCharts moves for JMOL, arguing there was insufficientevidence at trial of the requisite “control” needed to findjoint infringement.• Motion GRANTED – “no legally sufficient basis to find thatemsCharts and Softtech jointly infringe . . . .”
3535Analysis inAnalysis in Golden HourGolden Hour• “[O]ne of the companies needed to control or direct the otherto be joint infringement.”• Nonexclusive distributorship agreement between emsChartsand Softtech expressly stated it was not creating “agency,partnership, joint venture, or employee/employerrelationship.”• “emsCharts did not direct Softtech submit the bid. The twocompanies discussed and agreed to submit the bid.”• Fact that Softtech asserted breach of fiduciary claim againstemsCharts not sufficient to show that one actually existed.
3636Result inResult in Golden HourGolden HourNeither method nor system claims infringed due to lack ofNeither method nor system claims infringed due to lack ofsufficient “control.”sufficient “control.”BUT – was this result correct as to theBUT – was this result correct as to the systemsystem claims? Was itclaims? Was itcorrect to treat the system claims like the method claims?correct to treat the system claims like the method claims?
3737NTP, Inc. v. Research In Motion, LtdNTP, Inc. v. Research In Motion, Ltd.,.,418 F.3d 1282 (Fed. Cir. 2005)418 F.3d 1282 (Fed. Cir. 2005)
3838Facts inFacts in NTPNTP• NTP patents claim both an e-mail systemsystem and relatedmethodsmethods.• Method claim limitations recite steps of “transmitting . . .from the interface switch,” “receiving at the interface,” and“receiving the originated electronic mail at the interface.”• Preamble for an exemplary system claim: “A system fortransmitting originated information from one of a plurality oforiginating processors in an electronic mail system . . . .”• RIM’s wireless system for the Blackberry®device used arelay component located in Canadarelay component located in Canada.
3939CAFC’s Analysis inCAFC’s Analysis in NTPNTP• Under U.S. patent law, “the concept of ‘use’ of a patentedmethod or process is fundamentally different from the use ofa patented system or device.”• To infringe a method claim, infringer must perform everystep of that claim in the United States.• With systems, “the components are used collectively, notindividually,” and “[t]he use of a claimed system . . . is theplace at which the system as a whole is put into service, i.e.,the place where control of the system is exercised andbeneficial use of the system obtained.”
4040CAFC’s Holding inCAFC’s Holding in NTPNTPCanada location of RIM’s relay component negatedCanada location of RIM’s relay component negatedinfringement of the method claims,infringement of the method claims, but not thebut not thesystem claimssystem claims, which were infringed because users, which were infringed because usersof the Blackberryof the Blackberry®®system were located in the U.S.system were located in the U.S.
4141Lessons Learned from CasesLessons Learned from CasesDiscussedDiscussed
42421. Discovery: These cases set a very high bar to successfullyassert divided infringement of a method claim. Detaileddiscovery must be made into the relationship betweenDefendant and the Third Party.2. Pleadings: Ensure that any allegations of dividedinfringement are set forth with enough specificity to showthe requisite level of control by the alleged “mastermind.”Litigation LessonsLitigation Lessons3. Infringement Contentions: Determine which, if any,claims avoid the divided infringement problem. If someexist, then consideration should be given to focus any actionfor infringement on those claims.
4343Litigation Lessons – (cont’d)Litigation Lessons – (cont’d)4. Markman: Don’t let system claim get lumped togetherwith method claim. Remember distinction preserved inBlackberry®case, and avoid Golden Hour result! Putanother way:= good = bad
44445. Alternative Forums: Investigate whether dispute lendsitself to bringing action in either: (1) the ITC, for importationof infringing items into the U.S.; and (2) the U.K., forinfringement of any method patent claims obtained there.Litigation Lessons – (cont’d)Litigation Lessons – (cont’d)6. Inducement & Joint Direct Infringement Theories NowRise or Fall Together: “[A] finding of indirectinfringement requires a ‘predicate finding of directinfringement,’ which thus requires a finding that oneparty practiced each element of the patented process.”Global Patent HoldingsGlobal Patent Holdings, 586 F.Supp.2d at 1334 (, 586 F.Supp.2d at 1334 (quotingquotingBMCBMC).).
45451. When drafting claims, ensure the patent application includesproduct and system claims whenever possible.2. Draft any method claims to ensure that the claim can beinfringed by only one single person.Patent Prosecution LessonsPatent Prosecution Lessons3. If a patent issues having only method claims presenting a“divided infringement” problem, and if the patent is lessthan 2 years old, consider filing a reissue to redraft suchclaims such that only one single person is needed toperform all steps. See discussions in BMC and Emtel.
4646Patent Prosecution Lessons – (cont’d)Patent Prosecution Lessons – (cont’d)4. Consider obtaining a British patent along with otherneeded patents if there are no viable alternatives toclaiming an invention other than with a divided methodclaim. In the U.K., “many of the problems with litigatingdivided infringement claims in the United States maysimply not arise under U.K. law.” Mark A. Lemley,Mark A. Lemley, et al.et al.,,Divided Infringement Claims,Divided Infringement Claims, 33 AIPLA Q.J. 255, 28033 AIPLA Q.J. 255, 280(Summer 2005).(Summer 2005).