Federal Circuit confirms expansion of liability for divided patent infringement

June 11, 2018
Patterson Thuente IP

Patentees have long struggled when trying to enforce method patents in “divided infringement” cases, where multiple parties carried out the required steps. The Federal Circuit Court of Appeals seems to have come to their rescue, though. The court, which hears all appeals in patent-related cases, recently made clear that it’s applying a looser standard when it comes to establishing direct infringement liability in divided infringement cases.

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Unlocking the case

David Tropp holds two patents on a method of improving airline luggage inspection through the use of “dual-access locks” with a combination lock component and a master key component. The method calls for four steps. The first two involve making and marketing the lock; the final two involve using the master key to access luggage for screening.

Travel Sentry administers another lock system that similarly permits the Transportation Security Administration (TSA) to access baggage. It entered a memorandum of understanding with the TSA, under which the company provided passkeys designed to permit screeners to open checked luggage secured with Travel Sentry’s certified locks without breaking them.

Tropp sued Travel Sentry for patent infringement, and the district court dismissed the case before trial, finding no evidence that the company had any influence on the third and fourth method steps carried out by the TSA. Tropp appealed.

Testing the keys to liability

Direct infringement occurs when all of a patented method’s steps are performed by or attributable to a single entity. If more than one actor performed the steps, a court must determine whether the acts of one are attributable to the other so that a single entity is responsible for the infringement.

In 2015, the Federal Circuit held in Akamai Technologies, Inc. v. Limelight Networks, Inc. (Akamai V), among other things, that direct liability can be found when an alleged infringer:

  1. Conditions a third party’s participation in an activity or receipt of a benefit on performance of a step or steps of a patented method, and
  2. Establishes the manner or timing of that performance.

In such circumstances, the third party’s actions are attributed to the alleged infringer, making the alleged infringer the single actor chargeable with direct infringement.

Finding the right key

On appeal in the Travel Sentry case, the Federal Circuit faulted the district court for interpreting the Akamai opinion too narrowly — as applying only to the facts in that case and leaving the existing standard for direct infringement liability intact. To the contrary, the court said, the two-prong test expanded the circumstances in which others’ acts can be attributed to an alleged infringer for purposes of direct infringement liability.

Applying the test to this case, the Federal Circuit held that a reasonable jury could conclude that the TSA’s performance of the two final steps in the patented method is attributable to Travel Sentry, rendering Travel Sentry liable for direct infringement.

Under the first prong, the court found that jurors could conclude that Travel Sentry conditions the TSA’s participation in the activity of screening luggage with its lock system on performance of two method steps. The TSA also received benefits from using the Travel Sentry system (for example, a reduced number of claims for broken luggage) only if it performed the last two steps.

For the second prong, the court cited evidence that Travel Sentry controls the design of the locks and passkeys and provided the TSA with training materials. In addition, the agreement between the parties describes the steps the TSA must follow to obtain the associated benefits. A jury could determine that these factors establish the manner of the TSA’s performance of the final two steps.

A check on infringement

The case confirms that the Federal Circuit will take an expansive view when it comes to proving direct infringement liability in divided infringement cases. This is good news for the holders of method patents and should serve as a warning to others that dividing patented steps among multiple parties may not protect them from infringement liability. •

Travel Sentry, Inc. v. Tropp, No. 16-2386, Dec. 19, 2017, Fed. Cir.

Akamai Technologies, Inc. v. Limelight Networks, Inc. (Akamai V), Nos. 2009-1372, 2009-1380, 2009-1416, 2009-1417. Aug. 13, 2015, Fed. Cir.

Conditioning can occur without obligation

The Federal Circuit in Travel Sentry, Inc. v. Tropp rejected the argument that the conditioning required to attribute the actions of a third party to an alleged infringer can’t occur if the third party isn’t obligated to perform part of the patented method. Travel Sentry, the alleged infringer, asserted that, because the Transportation Security Administration (TSA) is under no obligation to perform any particular luggage screening activity, the condition prong wasn’t satisfied.

The court acknowledged that the TSA isn’t obligated to adhere to the terms of its memorandum of understanding with Travel Sentry. But, it said, the TSA only receives something of benefit from Travel Sentry when it performs two of the patented method’s steps.

The court found it irrelevant that the TSA can meet its luggage screening mandate through other means. The critical fact was that the TSA must perform the two patent steps if it wishes to participate in the activity of screening luggage with the Travel Sentry system or receive benefits from using it.

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