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IP Alert: Federal Circuit Clarifies "Two-Pronged" Step for Proving Divided Infringement

December 21, 2017

Under 35 U.S.C. § 271(a), direct infringement occurs when all steps of a claimed method are performed by or attributable to a single entity. If a third party performs some of the steps under an obligation to the accused infringer, then the third-party actions may be attributed to the accused infringer. An accused infringer, however, does not avoid liability merely because a third party is under no obligation to perform the patented steps. Rather, so long as the third party must perform the patented steps to receive value from the accused infringer, the accused infringer may be liable in part because of the third-party actions. On December 19, the Federal Circuit, in Travel Sentry, Inc. v. David A. Tropp, further clarified the two-pronged test used to determine whether multiple parties jointly infringe a patent.

Plaintiff David A. Tropp, through his company Safe Skies, LLC, administers a lock system that permits TSA employees to unlock, inspect, and relock checked baggage. The asserted patents, U.S. Patents Nos. 7,021,537 and 7,036,728, contain method claims that require both (1) supplying the special lock, and (2) using a master key that locks and unlocks the special lock. The claims specify that step 2 is performed by a “luggage screening entity.” Defendant Travel Sentry administers a similar system that enables TSA employees to open the lock, search the bag as needed, and then relock it.

At the district court, the parties did not dispute that Travel Sentry supplies locks and that Travel Sentry was not itself a “luggage screening entity.” Travel Sentry moved for summary judgment of no direct infringement on this basis, and the patentee opposed, citing a Memorandum of Understanding between the TSA and Travel Sentry that provided certain stipulations for each party. The district court granted Travel Sentry’s motion, finding that “no evidence” that Travel Sentry had any influence on the TSA’s operating procedures.

The primary issue on appeal was if there was a genuine dispute over whether Travel Sentry “directs or controls the performance of certain steps of the claimed methods.” The Federal Circuit vacated and found that a reasonable jury could conclude that the TSA’s performance of the patented steps are attributable to Travel Sentry. In reaching its decision, the court reiterated its previous holding from its 2015 en banc holding in Akamai Technologies, Inc. v. Limelight Networks, Inc.(“Akamai V”) that an entity will be liable for the “others’ performance of method steps” under two circumstances: (1) where that entity directs or controls others’ performance, and (2) where the actors form a joint enterprise.

In clarifying this two-prong test, the court explained that liability under § 271(a) could be found when an alleged infringer “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.” The court further underscored the importance of identifying the relevant activity performed by the third party, the types of benefits received by the third party, and what is required to condition the third party’s conduct. In applying this legal framework, the court held that a reasonable jury could find that (1) the TSA derived a benefit from employing Travel Sentry’s luggage system; (2) this benefit was conditioned upon the TSA’s performance of the patented method; and (3) the Memorandum of Understanding demonstrates that Travel Sentry established the manner or timing of the performance by the TSA. 

The court further considered its prior holding in Eli Lilly and Co. v. Teva Parenteral Medicines, Inc., where the court determined that physicians were liable for a three-step drug administration routine in which one of the steps was performed by the patient under the physicians’ guidance. The court noted that there was a common thread that connects the present case, Akamai V, and Eli Lilly: “evidence that a third party hoping to obtain access to certain benefits can only do so if it performs certain steps identified by the defendant, and does so under terms prescribed by the defendant.” 

The Federal Circuit thus vacated the district court’s summary judgment in favor of Travel Sentry and remanded.

This case is relevant for those Fitch Even clients concerned with divided infringement, and may also be of interest to parties who obtain patents. For more information, please contact Fitch Even partner Eric L. Broxterman, author of this alert.

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