1 1 AIPLA 1 1 American Intellectual Property Law Association THE STATUS OF INDUCEMENT AIPLA IP Practice in Japan Committee AIPLA Annual Meeting Raymond E. Farrell* Carter, DeLuca, Farrell & Schmidt, LLP October 21, 2014 *With special thanks to Joe Calvaruso for his prior presentation material

2 2 AIPLA 2 Overview Brief Review –Statute –Proving Inducement Status Updates –Suprema v. ITC –Akamai v. Limelight

3 3 AIPLA 3 Statute 35 U.S.C. § Infringement of Patent (a) [W]hoever without authority makes, uses, offers to sell or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent. (b)Whoever actively induces infringement of a patent shall be liable as an infringer.

4 4 AIPLA 4 Alleged infringer: 1) induced direct infringement 2) had knowledge that the induced acts constitute patent infringement Required “knowledge” is either: — actual knowledge; or — “willful blindness” (not “deliberate indifference”) — Subjectively believes high probability that a fact exists; and — Takes deliberate actions to avoid learning the fact Proving Inducement

5 5 AIPLA 5 Proving Intent –The fact finder must examine the totality of the circumstances including whether or not the accused infringer: 1.Investigated the infringement asserted. 2.Explored design around approaches. 3.Took any remedial steps. 4.Obtained legal advice.

6 6 AIPLA 6 Advice of Counsel Under AIA 35 U.S.C. § Advice of Counsel — “The failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent, or the failure of the infringer to present such advice to the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of the patent.”

7 7 AIPLA 7 Advice Of Counsel And Intent To Induce Jury will not be instructed to consider that defendant failed to seek an opinion of counsel or that defendants sought an opinion of counsel but did not disclose it. If defendant obtained opinion of counsel, waives attorney client privilege and produces the opinion, the jury can consider that defendant obtained an opinion in evaluating defendant’s intent. If the defendant obtained an opinion of counsel, but does not waive attorney client privilege and present the opinion, then the jury will not be instructed to consider that the defendant obtained counsel’s opinion.

8 8 AIPLA 8 Opinions of Counsel Can Negate Intent –Noninfringement: A good faith belief of noninfringement tends to show that an accused inducer lacked the necessary intent. –Invalidity: A good faith belief of invalidity is evidence that may negate the specific intent to encourage another’s infringement, which is required for induced infringement.

9 9 AIPLA 9 Suprema, Inc. v. ITC Patent directed to method for capturing and processing a fingerprint image. Respondents imported into the U.S. scanners that the patentee alleged directly infringed the patented method when combined with software in the U.S. Patentee conceded the scanners have substantial noninfringing uses and that the scanners only infringed after importation when the software was added.

10 AIPLA 10 Suprema, Inc. v. ITC ITC found a violation: the scanners directly infringed in the U.S. when they were combined with certain software. the non-U.S. respondent induced by encouraging the infringing combination in the U.S.

11 AIPLA 11 Suprema, Inc. v. ITC Federal Circuit reversed: Section 337 sets forth the following conduct as being unlawful: * * * (B) The importation into the United States, the sale for importation, or the sale within the United States after importation... of articles that – (i) infringe a valid and enforceable United States patent....

12 AIPLA 12 Suprema, Inc. v. ITC Federal Circuit reversed: To prevail on inducement, the patentee must show, first that there has been a direct infringement. There is no completed inducement until there has been a direct infringement. The only pertinent articles are those which directly infringe at the time of importation. ITC’s authority under§337 does not extend to alleged inducement where the acts of underlying direct infringement occur post-importation.

13 AIPLA 13 Suprema, Inc. v. ITC But wait there’s more… Federal Circuit:  granted en banc review of the panel decision  vacated the panel opinion and judgment  reinstated the appeal

14 AIPLA 14 Suprema, Inc. v. ITC ITC argues: –overturned decades of court affirmed ITC practice –upended the law of inducement –contradicts Sup. Ct. and Fed. Cir. precedent –ignores Congressional endorsement of ITC’s statutory interpretation –fails to give required deference to the ITC –misinterpreted the ITC’s remedial orders

15 AIPLA 15 Suprema, Inc. v. ITC Cross Match argues: –drastically curtails the reach of §337 –strips the agency of the ability to enforce the statute –creates a gaping hole in the ITC's authority –permits foreign importers to induce domestic infringement with impunity –importers can evade ITC authority

16 AIPLA 16 Suprema, Inc. v. ITC Suprema Responds: –Petitioners' concerns "dramatically overblown" –Patent owners can still sue in district court –Case was properly decided based on the facts staple articles that had substantial non- infringing uses

17 AIPLA 17 Suprema, Inc. v. ITC AIPLA amicus brief: –ITC has authority to find violation under §337 where acts of underlying direct infringement occur post importation –Consistent with, indeed compelled by, Congressional intent and public policy Stay tuned…

18 AIPLA 18 Limelight v. Akamai Federal Circuit En Banc Decision (692 F.3d 1301) ̶ Well settled that there can be no indirect infringement without direct infringement. ̶ All steps must be performed to find induced infringement but not necessary to prove that all steps were performed by single entity. ̶ A party that performs some steps of a patented process and actively induces another to commit the remaining steps may be liable for inducement of infringement under Section 271(b), even though no party in that scenario would be liable for direct infringement under Section 271(a).

19 AIPLA 19 Limelight v. Akamai Question Presented: ̶ Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. §271(b) even though no one has committed direct infringement under §271(a)? Held: A defendant is not liable for inducing infringement under §271(b) when no one has directly infringed under §271(a) or any other statutory provision.

20 AIPLA 20 Limelight v. Akamai Liability for inducement must be predicated on direct infringement. (citing, Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341) Assuming that Muniauction's holding is correct, respondents' method has not been infringed because the performance of all of its steps is not attributable to any one person.

21 AIPLA 21 Limelight v. Akamai Sup. Ct. reading of §271(b) is reinforced by §271(f)(1), which illustrates that Congress knows how to impose inducement liability predicated on non-infringing conduct when it wishes to do so. Notion that conduct which would be infringing in altered circumstances can form the basis for contributory infringement has been rejected, (Deepsouth v. Laitram) and there is no reason to apply a different rule for inducement.

22 AIPLA 22 Limelight v. Akamai Fact that a would-be infringer could evade liability by dividing performance of a method patent's steps with another whose conduct cannot be attributed to the defendant, is merely a result of the Federal Circuit's interpretation of §271(a) –(another not so subtle reference to Muniauction) Desire to avoid this consequence does not justify fundamentally altering the rules of inducement liability clearly required by the statute’s text and structure.

23 AIPLA 23 Limelight v. Akamai Yet another reference to Muniauction… a less than subtle hint… “Because the question presented here is clearly focused on §271(b) and presupposes that Limelight has not committed direct infringement under §271(a), the Court declines to address whether the Federal Circuit's decision in Muniauction is correct.”

24 AIPLA 24 References 35 USC §271 Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972) Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct (2011) Broadcom v. Qualcomm, 543 F.3d 683 (Fed. Cir. 2008) DSU Med. Corp. v. JMS Co., Ltd., 471 F.3d 1293 (Fed. Cir. 2006) (en banc) Ecolab, Inc. v. FMC Corp., 569 F.3d 1335 (Fed. Cir. 2009) Bettcher Indus., Inc. v. Bunzl USA, Inc., 661 F.3d 629 (Fed. Cir. 2011) Commil USA, LLC v. Cisco Sys., Inc., 720 F.3d 1361 (Fed. Cir. 2013) Suprema, Inc. v. ITC, 2013 WL (Fed. Cir. 2013) Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 940 n.13 (2005) Crystal Semiconductor Corp. v. TriTech Microelectronics Int'l, Inc., 246 F.3d 1336 (Fed. Cir. 2001) Mentor H/S, Inc. v. Med. Device Alliance, Inc., 244 F.3d 1365, 1379 (Fed. Cir. 2001) Standard Oil Co. v. Nippon Shokubai Kagaku Kogyo Co., 754 F.2d 345, 348 (Fed. Cir. 1985) Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct (2014)

25 AIPLA 25 Questions? Raymond E. Farrell +1 (631)