• "Joint Infringement" Rejected by Federal Circuit
  • November 6, 2007 | Authors: Monte Cooper; Neel I. Chatterjee; Fabio E. Marino
  • Law Firm: Orrick, Herrington & Sutcliffe LLP - Menlo Park Office
  • In a recent decision, the Federal Circuit narrowed patent infringement claims based on a theory of "divided infringement," which is of particular importance in telecommunications, networking, Internet and software patent litigation. "Divided infringement" arises when multiple unrelated parties are accused of performing actions which collectively could be considered infringing. In BMC Resources, Inc. v. Paymentech, L.P., No. 2006-1503 (Fed. Cir. Sept. 20, 2007), the Federal Circuit held there can be no direct or indirect infringement of a method claim covering a series of actions conducted by multiple parties unless a single party performed all of the steps of the claim, either directly or by controlling the actions of the others.  In ruling such "divided infringement" is not actionable under the patent laws, the Federal Circuit disclaimed dicta in its 2006 decision in On Demand Mach. Corp. v. Ingram Indus., Inc., 442 F.3d 1331 (Fed. Cir. 2006), which had been argued to stand for the contrary position.

    A copy of the court's decision is available at: http://www.cafc.uscourts.gov/opinions/06-1503.pdf

    The underlying patents in BMC Resources covered a method for processing a debit transaction without using a PIN. The relevant method claims each incorporated steps allegedly covering the functions of separate corporate entities that did not control one another's actions. As a result, for purposes of proving infringement, the actions of both entities were necessary to meet all the elements of the claims.

    In reviewing the matter, the Federal Circuit reaffirmed the longstanding principle that direct infringement can only occur when a single actor performs each and every element of an asserted claim and that indirect infringement requires proof of underlying single-actor direct infringement. The exception to this rule is that actions performed by others under the control of a party can be imputed to that party.

    Citing dicta in On Demand Mach. Corp., the plaintiff in BMC Resources sought to extend these general propositions to cover cases where parties cooperate in a manner that collectively infringes the patent, even though no single party controls the others. The Federal Circuit, however, refused to extend the reach of patent law in such a manner. Rather, the court acknowledged its articulated standard for "divided infringement" may in some circumstances allow parties to enter into arms-length agreements to avoid infringement liability but concluded any such problems can be avoided with appropriate claim drafting.

    Because many telecommunications, networking, Internet and software patents involve cooperative use of network systems and functions, this case may ultimately prove to have significant impact on patent litigation in these industries.