Divided Infringement and���Mixture of Statutory Subject Matter

Kelly Kubasta Kelly@kk-llp.com

Direct Infringement - §271(a)

•  Section 271(a) defines infringement:

•  Making, using, offering to sell, selling, or importing •  Any patented invention

•  Within the United States •  During the term of the patent

Direct Infringement - §271(a)

•  A party must “perform or use each and every step or element of a claimed method or product”

Warner-Jenkinson Corp. v. Hilton Davis Corp., 520 U.S. 17 (1997)

“Direct Infringement”

•  BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007)

•  Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008)

•  Cross Medical Products, Inc. v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293 (Fed. Cir. 2005)

“Direct Infringement”

Can you combine the activities of more than one party to find direct infringement?

BMC v. Paymentech

•  BMC alleged Paymentech infringed two patented methods of paying bills by telephone using a debit card

•  Prompting a caller to enter a payment number and amount from a credit card •  Accessing a remote payment network associated with the entered payment number •  The accessed remote payment network determining whether sufficient available credit or funds exist in an associated account

Paymentech’s allegedly infringing process

•  Merchant collects billing, account information, sends to Paymentech

•  Paymentech sends to debit network (Cirrus, etc.) •  Debit network contacts customer’s bank

•  If authorized, account debited, and all parties notified

Is Paymentech Liable For Divided Infringement?

•  Method steps were literally met •  But four parties involved: merchant, Paymentech, debit network, bank

•  Two parties necessary to infringe

•  Can Paymentech be liable for direct infringement of BMC’s patent under “divided infringement”?

Confusion in the Federal Circuit

•  BMC argued that the Federal Circuit had created a new “participation and combined action” test requiring only “some connection” between the jointly infringing parties

•  On Demand Machine Corp. v Ingram Industries, 442 F.3d 1331 (Fed. Cir. 2006)

•  District Court decision seeming to apply this looser standard was affirmed “with no discernable error” •  But, On Demand was decided on a claim construction point

BMC v. Paymentech

•  Federal Circuit declared the On Demand joint infringement language to be dicta

•  One party must control or direct each step of the patented process

•  The “Mastermind”

•  Court noted that its ruling “may in some circumstances allow parties to enter into arms-length agreements to avoid infringement”

Findings

•  There were relationships between Paymentech and debit networks but no control of debit networks’ actions

•  Paymentech not liable for infringement

Summary

•  Party needs to “control or direct” each step: needs to be a “mastermind,” such that every step is attributable to the controlling party

•  Contracting out the work with control by the party is strong evidence of direct infringement

•  But arms-length agreements are likely ok

Muniauction v. Thomson

•  Muniauction’s claim 1 covered an electronic municipal bond auction system by original issuers using a web browser

•  Claim required at least two parties - issuer and bidder - to “input data into bidder’s computer”

•  Could actions of issuer and bidder be combined to find direct infringement?

Need “direct control”

“Where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed

only if one party exercises ‘control or direction’ over the entire process such that every step is attributable to the

controlling party, i.e., the ‘mastermind’”

Findings

•  “That Thomson controls access to its system and instructs bidders on its use is not sufficient to incur liability for direct infringement” •  Need a “situation where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another”

•  Subcontract

How to Catch “Partial Infringers” •  BMC Court noted that if you fear divided infringement, use proper claim drafting

•  Need to draft claim to cover steps performed by a single party, not multiple parties (multiple parties may never infringe if no “mastermind”)

•  Lemley et al., “Divided Infringement Claims” 33 AIPLA Q.J. 255 Cited with approval in BMC

Cross Medical v. Medtronic

•  Court of appeals construed a patent directed to a medical implant device

•  The defendant manufacturer argued that it did not infringe because the asserted claim required that the “lower bone interface [be] operatively joined to said bone segment”

Cross Medical v. Medtronic

The plaintiff argued: •  The medical device was capable of being used in an infringing manner (i.e., joined to a bone segment)

•  Defendant’s representatives appeared in the operating room, identified instruments used by the surgeons, and directed when the device was to be joined to the bone.

Cross Medical v. Medtronic

•  The court of appeals disagreed:

•  “[I]f anyone makes the claimed apparatus, it is the surgeons, who are, as far as we can tell, not agents of [defendant] Medtronic. Because Medtronic does not itself make an apparatus with the ‘interface’ portion in contact with bone, Medtronic does not directly infringe”

•  Remanded for indirect infringement determination

Indirect Infringement

•  Is indirect infringement a cure for divided infringement problems?

•  Generally not because there is no underlying infringement

Other Divided Infringement Cases

•  In Global Patent Holdings LLC v. Panthers, the plaintiff asserted a patent claim covering the joint actions of a website and remote users •  The plaintiff argued that the remote user’s computer was “controlled” by defendant “because defendant puts Javascript programs on the remote user’s computer to allow the process to begin”

Other Divided Infringement Cases

•  The court granted defendant’s Rule 12(b)(6) motion

•  “The defendant’s system cannot start until the remote user visits defendant’s website”

Other Cases

•  In Golden Hour Data Systems, Inc. v. emsCharts, Inc., Judge Ward considered a patent directed to a “comprehensive system” for dispatching EMS teams, managing diagnoses, and billing

Other Cases

•  The plaintiff pointed to various pieces of anecdotal evidence that emsCharts and Softtech

•  worked together •  were jointly named in bids •  exchanged e-mails purporting to exert control over the other •  jointly closed sales •  reached price agreements

Other Cases

•  Post-verdict JMOL granted for defendant

•  The trial evidence failed to show that the distributorship agreement imposed the types of duties or responsibilities upon Softtech that would support a finding of direction or control by defendant emsCharts

Mixed Classes of Invention

•  IPXL Holdings, LLC v. Amazon.com, Inc., 430 F.3d 1377 (Fed. Cir. 2005)

•  A case of first impression •  Raised the issue whether a patent claim that has both apparatus and method features is valid under 35 USC §112, para. 2 (definiteness)

Mixed Classes of Invention

•  Claim 25: “The system of claim 2 … wherein the predicted transaction information comprises both a transaction type and transaction parameters associated with that transaction type, and the user uses the input means to either change the predicted transaction information or accept the displayed transaction type and transaction parameters.”

Mixed Classes of Invention

•  Outcome: affirmed summary judgment that claim 25 is invalid •  It is unclear whether infringement occurs:

•  When one creates a system that allows the user to change the predicted transaction information -or- •  When the user actually uses the input means to change transaction information -or- •  When the user accepts the transaction

Mixed Classes of Invention

“Because claim 25 recites both a system and the method for using that system, it does not apprise a person of ordinary skill in the art of its scope, and it is invalid

under section 112, paragraph 2”

But Distinguish Merely Functional Language

•  Collaboration Properties, Inc. v. Tandberg ASA

•  Claim was to a teleconference system “configured to reproduce images…”

•  The defendant argued that the claim improperly “injects method steps into the purported system claim and was therefore invalid under IPXL”

•  The District Court disagreed, reasoning that the IPXL rule does not apply “where the claims require capability, but not actual use”

But Distinguish Merely Functional Language

•  In Collegenet, Inc. v. XAP Corp., the District Court distinguished IPXL

•  The claims at issue in Collegenet contained a “functional limitation”

•  The Court held that such limitations merely “define something by what it does, rather than by what it is,” and “functional language does not, in and of itself render a claim improper”

But Distinguish Merely Functional Language

•  Yodlee, Inc. v. Cashedge Inc.: a “computer-readable storage device for storing instructions that upon execution cause a process to automatically access personal information,” and included steps which occur “upon activation of the presented link”

•  Does infringement occur when the device is manufactured or when the link is activated?

But Distinguish Merely Functional Language

•  Claim not invalid for mixing statutory subject matter

•  The claim describes what happens “upon activation of the presented link.” It does not seek to patent the activation of the link; it seeks only to patent a device which performs certain functions if and when the link is activated

Example Claim

•  In a wireless phone based system, a system for delivery of a requestable location-based service to be charged to the wireless phone user, comprising: •  a wireless phone including a GPS receiver for receiving GPS signals and a GPS antenna, said wireless phone being activated to place a call to an entity that arranges for delivery of said location-based service,

Example Claim

•  said wireless phone operated by a user on a wireless network and having a number associated therewith,

•  said wireless phone having a transmitter responsive to GPS signals for transmitting to said entity via said wireless network a signal useful in determining the geophysical location of said wireless phone and said number

Example Claim

•  said entity arranging for delivery of said location-based service responsive to said transmitted signal and

•  arranging for charging of said user at least in part for the requesting of the location-based service or for the requested service, said charging based on said transmitted number.

Example Structure Requirements – Plaintiff’s PICs

Example Method Requirements – Plaintiff’s PIC’s

Joint Infringement Plaintiff’s PICs

Thank You!

For more information, please contact:

Kelly J. Kubasta KLEMCHUK KUBASTA LLP

214-367-6000 kelly@kk-llp.com www.kk-llp.com