Federal Circuit Expands Liability For Divided Patent Infringement

A Brief History of Divided Infringement

While the present statute for direct infringement has been in effect with only one change since 1952, it took over half a century for the Federal Circuit to squarely address the question of whether two entities, separately carrying out different steps of one method claim, could directly infringe a patent. In 2007, the Federal Circuit held that liability for direct infringement of a method patent under '271(a) only exists if a single party carries out every step of the claimed process, either on its own or by “directing or controlling” another to perform some of the steps. BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1379'81 (Fed. Cir. 2007). In Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, (Fed. Cir. 2008), the Federal Circuit refined this holding, announcing that “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.'” Id. at 1329. Under Muniauction, a company that both: 1) controls access to the system where the additional steps are carried out; and 2) instructs the user on how to carry out those steps, does not “direct or control.” Id. Rather, liability for joint infringement only existed “in situations where the law would traditionally hold the accused direct infringer vicariously liable” for the third party's actions of completing the steps. Id.