SCIPR, patents (Limelight/Medtronic)

(Ed. note: as is clear from my notes, I have a somewhat Gingerly approach to patent law. My apologies for any inaccuracies.)

Limelight Networks v. Akamai Technologies (Induced infringement when defendants have not directly infringed.)

Medtronic v. Mirowski Family Ventures, LLC (Whether licensee or patentee has burden of proof in licensee’s declaratory judgment action.)
Moderator: Grantland Drutchas, Partner, McDonnell Boehnen Hulbert & Berghoff LLP
Panelists: J.C. Rozendaal, Counsel to Limelight Networks; Partner, Kellogg Huber Hansen PLLC: Remand: The Fed. Cir.’s actions indicated to him (personally, not his client) that the Fed. Cir. is not particularly interested in resolving the 271(a) issue, and sent it back to the panel, which just heard argument. 
Thomas Saunders, Counsel to Medtronic, Inc. (and Akamai); Partner, WilmerHale LLP: Two judges from original majority were pretty silent in the argument; new judge, Judge Moore, was quite active.  J. Moore expressed concern with a 271(a) rule that would leave patentee defenseless if people joined forces to perform separate steps, but much focused on the unique procedural posture of this case.
Professor Timothy Holbrook, Emory University School of Law, who filed an amici brief on behalf of 10 IP Professors in support of Petitioner Limelight on the issue of extraterritoriality: single party rule will come back to SCt. Fed. Cir. knows it’s already split; SCt is interested in the issue but realized it couldn’t get to the question on this procedural posture.  Believes we’ll get a vague rule drawn from common law on joint tortfeasors.
Professor Cynthia Ho, Loyola University Chicago School of Law: agrees it will be back. Usually SCt just makes more of a mess—gives a general rule and then doesn’t like what the Fed. Cir. does with it.
Rozendaal: not sure it’s going back because the law is not unclear.  At the en banc level, 10 of 11 judges en banc agreed with current rule of Muniauction and weren’t willing to change it.
Saunders: not sure they’re agreed, but they didn’t want to disturb it given the procedural posture they had. Lots of amici and the SG told the Court that this was an important issue.
Q: is it too simplistic to say no indirect infringement without direct?
Rozendaal: follows more or less inevitably from the all elements rule plus the fact that infringement is strict liability.  Prior art can be improved by adding steps; it would be wrong to have people doing parts of methods to suddenly face liability for standard activity. One of the activities in the patent is “serving a webpage.”  But people have been doing that as long as there have been webpages. That conduct is not wrongful on its own. Liability requires legal responsibility for all the steps: are they all attributable to a single individual? That rule at common law has always been determined by vicarious liability.
Saunders: no one disputes the all elements rule.  Fundamental dispute here is the contours of what the common law allowed.  In strict liability circumstances, there are still rules that don’t allow you to act in concert w/ another to divide up the steps or take action knowing that what you’re doing in conjunction w/ another is going to cause the ultimate harm.  Clever planning should not allow circumvention of property right. 
Ho: SCt may be attracted to simple rule.  Basically ignoring policy issues.  In other cases, they’ve looked to policy: e.g., Grokster.
Holbrook: SCt oral argument showed substantial concern for policy/destruction of enforceability of certain patents.  But a lot of joint tortfeasor common law principles say they have to know they’re causing a harm: how can you know that without knowing there’s a patent?  That’s the tension of going to joint tortfeasor concepts.  Is that intent/knowledge through the back door via 271(a), which hasn’t been and he thinks shouldn’t be there?
Rozendaal: Court is clear that direct infringement is required for inducement.  Why did the Fed. Cir. use 271(b) instead of 271(a)? The fact that they found themselves pushed to (b) shows it’s very hard to come up with any rule other than Muniauction that avoids a number of collateral problems with joint liability.
This is special for methods, since the last person who touches a complete apparatus is an infringer and others may be jointly liable. The person who completes the last step of a method is not in the same position.
Holbrook: but “use” may be a different issue. We could blend it together, though there are problems w/ control and beneficial use test, but it is a way to get around divided infringement.
Q: is this a claim drafting issue?  Can this be addressed and corrected by proper drafting?
Saunders: nope.  Hits especially hard on innovations that are drafted to have more than one person working together, but the loophole isn’t so limited.  Any method for which the steps can be divided is vulnerable.
Rozendaal: could have rewritten claims so they didn’t require two people: write from single actor’s POV (e.g., receiving a message X instead of sending and receiving it).
Ho: sometimes, but what’s controlled by one entity today may be multiple tomorrow. Help at the margins.
Holbrook: Agrees.  Shocked if anyone’s drafting a claim like these today given the litigation. But can’t completely solve it.
Saunders: example: method of coadministering two drugs as therapeutic.  Can be drafted as one person, but can always be performed by two.
Q: should Congress act?
Holbrook: not yet. Not as easy to fix.  Congress is bad at predicting weird situations, and we should let the case law develop.
Saunders: what’s missing from the SCt’s opinion is the right to exclude. He understands why the situation seems unaddressed in 271, but the right to exclude use of those steps to perform the method is important. Even if you narrow who’s held liable, there’s still a property right and the person who induces it causes the same harm—with inducement you have someone who’s clearly a driving force. The SCt just didn’t address that.
Holbrook: correct statutorily.  You now have an ambiguous term “infringement” in 271(b) that isn’t defined w/o reference to 271(a).  “All elements” doesn’t come from 271.  Courts aren’t free to create new forms of infringement.  If we have to give 271(b) meaning, it has to be based on the statute.  Doesn’t think you can refer back to the right to exclude, given the explicit wording of 271.
Q: On to Medtronic!
Holbrook: this is a blip.
Ho: Agrees, doubts it will make a big impact. Most licensees will not challenge solely validity.
Rozendaal: Reflects residual hostility to Lear v. Adkins rule: policy message from Supreme Court was that there’s a public interest in getting rid of bad patents, and sometimes the licensee is in the best position to do that. Fed. Cir. has been digging in its heels ever since.
Q: any change in bargaining power of licensees?
Ho: no.
Saunders: may increase incentive to get into settlement, with a better shot at a no-challenge provision.  Otherwise the license doesn’t prevent a challenge.
Rozendaal: if people try to contract around this through settlement, see if that flies under antitrust law.
Saunders: brewing division in circuits about no-challenge clauses: see Judge Lynch’s decision in 2d Cir., looking at Fed. Cir. and expressing skepticism.  If litigation didn’t get very far, skeptical of no-challenge clauses.
Ho: arbitration instead.  SCt has deferred to arbitration clauses even w/unequal bargaining power.
Holbrook: SCt likes settlement in every other context. Would suggest channeling to arbitration, but Lear and Medimmune emphasize great public value in having invalid patents knocked out.  Challenge clauses sometimes provide for penalty—license fee triples if you challenge—and Fed. Cir. is more sympathetic. 
Q: Fed. Cir. has upheld no-challenge clauses as part of settlements. Will we see more suits designed to reach this result?
Saunders: if one of the lines recognized is initiation of suit, then sophisticated entities will understand this. Prudent course for no-challenge clause may then be to start litigation, not just C&D and then negotiation.  People may agree to no-challenge clause if they think they won’t have a good challenge, or if the license fee is good.  If the patent claim is weak, they may want to keep their options open, and they may use negotiating leverage to reject the clause since ability to challenge is now the default.

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