Federal Circuit illuminates two-prong direct infringement test

As 2017 came to a close, the U.S. Court of Appeals for the Federal Circuit issued its opinion in Travel Sentry, Inc. v. Tropp, illuminating how the Federal Circuit's two-prong test may be applied to find liability for direct patent infringement where there is no contract between the multiple actors each performing different steps of the method claim. 877 F.3d 1370 (Fed. Cir. 2017).

Akamai V

At the direction of the U.S. Supreme Court's decision in Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111 (2014), the Federal Circuit confirmed the principle that direct infringement under 35 U.S.C. Section 271(a) occurs where all steps of a claimed method are performed by or attributable to a single entity. Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (Akamai V). With regard to attribution, Akamai V held that an entity could be held liable for the performance of method steps by another party where the entity directed or controlled the other party's performance, or where the entities formed a joint enterprise. Based on the facts in Akamai V, the Federal Circuit concluded that the "direction or control" of another's performance encompassed a situation where the accused infringer "[1] conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and [2] establishes the manner or timing of that performance." (Emphases added.)

Akamai V involved a method patent for delivering content over the internet, wherein Limelight Networks, Inc., as a web-hosting service, performed all of the claimed steps except two -- the "tagging" and "serving" steps. After a series of opinions, the Federal Circuit eventually found Limelight liable for infringement based on its customers' performance of the tagging and serving steps using and based on instructions and direction provided to those customers by Limelight. Specifically, the Federal Circuit found that prong [1] was satisfied because Limelight required its customers to sign a contract which "delineates the steps customers must perform if they use the Limelight service," including "tagging and serving content," thereby conditioning the use of its network on the performance of these steps (and others) pursuant to contract. The Federal Circuit found that prong [2] was satisfied because Limelight established the manner and timing of performance by providing instructions and ongoing engagement regarding how the customers were to use Limelight's web hosting service.

Akamai V left open the question of whether the conditioning and establishing prongs of the test would need to be performed pursuant to a contract or other legally binding relationship in order for liability to attach.

That question was first answered "no" early in 2017, in Eli Lilly & Co. v. Teva Parenteral Meds., Inc., 845 F.3d 1357 (Fed. Cir. 2017), and confirmed again in a different context in Travel Sentry.

Eli Lilly

Eli Lilly involved a method patent comprising three relevant steps: (i) administering a particular dosage of folic acid; (ii) administering a particular dosage of vitamin B12; and (iii) administering the pharmaceutical compound pemetrexed disodium after the administration of the folic acid and vitamin B12. Though physicians administered the vitamin B12 and the pemetrexed disodium, their patients self-administered the folic acid with guidance from their physicians. Applying the two-prong test, the Federal Circuit found single-actor direct infringement by physicians notwithstanding the self-administration by patients of the folic acid step of the asserted claims. The court held that the physicians (1) conditioned the pemetrexed treatment by withholding it if the patients failed to self-administer the folic acid pretreatment, and (2) established the manner and timing of the self-administration through the prescription of daily folic-acid doses. Based on the direct infringement by the physicians under Section 271(a), the court ultimately found the generic providers of the pharmaceutical product liable for inducement under subsection (b) through the product label, which directed the activity of the prescribing physicians.

Travel Sentry

Using reasoning similar to that used in Eli Lilly, the Federal Circuit in Travel Sentry found the actions of the Transportation Security Administration attributable to the defendant, Travel Sentry, such that the defendant was held liable for infringement of method claims where TSA performed two of the steps in the asserted claims in the absence of a contract between TSA and the defendant.

In Travel Sentry, the claims at issue involved methods for improving airline luggage inspection. The defendant makes dual-access luggage locks openable by the owner and TSA workers who use Travel Sentry's passkeys to screen bags. At the district court level, there was a finding of no liability under Section 271(a) because: (1) TSA screens luggage based on its congressional screening mandate, not because of any purported "benefit" as would be required by prong [1] of the Akamai V test; and (2) TSA does not take direction from Travel Sentry on the manner and timing of its luggage screening, as required by prong [2] of the Akamai V test.

The Federal Circuit reversed, finding that the district court applied the Akamai V two-prong test "too narrowly." First, the court found that the district court's characterization of the relevant "activity" of prong [1] as "luggage screening mandated by Congress" was "unduly broad." Because the language of the Memorandum of Understanding between Travel Sentry and TSA provided for the distribution of keys and information to open baggage secured by the Travel Sentry locks, the Federal Circuit held that the proper characterization of the "activity" is "screening luggage that TSA knows can be opened with the passkeys provided by Travel Sentry."

Next, the Federal Circuit held that the district court misapprehended the "benefits" Travel Sentry conditioned on TSA's performance of the claim steps. The Federal Circuit explained that, "a reasonable juror could conclude that the 'benefit' to TSA contemplated in the MOU is the ability to open identifiable luggage using a master key, which would obviate the need to break open the lock."

The Federal Circuit further explained that: (1) TSA received a benefit through having the ability to identify Travel Sentry-marked luggage and, if necessary, open that luggage with Travel Sentry's passkeys; and (2) Travel Sentry established the manner and timing of performance by providing TSA with training materials to help TSA screeners identify luggage bearing such locks. Interestingly, the court found support for its finding of the type of benefit required by Akamai V in the fact that the two entities had a business arrangement in the first instance: "The fact that TSA entered into the MOU with Travel Sentry implies that TSA believed it would receive some benefit from the arrangement." Thus, like Eli Lilly, the Federal Circuit focused on the nature and purpose of the relationship between Travel Sentry and TSA to find the benefit and conditioning required by Akamai V. On Jan. 18, Travel Sentry and other luggage makers petitioned the Federal Circuit for rehearing en banc.

It appears from Eli Lilly and Travel Sentry that the test set out by the Federal Circuit in Akamai V is more expansive than may have originally been envisioned. The analysis depends not on the existence of a contract requiring the performance of method steps, but rather on the interactions between the parties performing the method steps and the reasons why the actors do what they do to reach a specific, shared goal.

The views and opinions set forth herein are the personal views or opinions of the authors; they do not necessarily reflect views or opinions of the law firm with which they are associated.