Posts Tagged “infringement”

“Here, take a bite of the apple” No, no, Snow White, don’t do it.

Inducement. It even sounds evil. Well inducing infringement isn’t very nice either. And now, after a recent court ruling, it’s harder to get away with.

Inducing infringement is just what it sounds like. You don’t actually infringe someone’s patent… you are just the enabler who makes it easy for someone else “do the crime”. For example, maybe you sell an almost complete device…and tell your customers where to get the missing parts and how to install them to make an infringing system.

A more typical induced infringement in today’s internet age involves so-called methods patents. To directly infringe a method claim, the infringer must perform each and every step described in the claim.

Up to now, if you had a web-based app that leaves it up to users to perform some of the steps to complete the method while you perform the remaining steps on your server, you essentially dodged the infringement bullet. The rule was that one party had to perform ALL the steps, or at least one party had to control the people performing all the steps (in other words, you couldn’t just contract out some of the steps and get out from under the infringement cloud). The users of a web site are not being agents – they’re not being controlled by the company who has the site. So there is no direct infringement. And if there is no direct infringement, the logic went, there cannot be inducement to infringe (after all, if no one infringed, then “no one” was induced to infringe).

With the Court of Appeals for the Federal Circuit’s ruling in Akaimai v. Limelight last week, that last bit of logic goes away. Basically the Court ruling said what was obvious on the face of it; infringement is taking place, just not under the control of one entity, so if that entity sets up the opportunity for innocent users to perform the final steps that complete the infringement, the company should be held liable for inducing infringement in the sense that were it not for the actions of the company, no infringement would have taken place.

According to Hamilton, Brook, Smith and Reynolds, the ruling says “inducing acts include causing, urging, encouraging, or aiding one or more steps of a claimed method to be performed”. Ultimately, of course, a judge and jury will have to figure out exactly where that line between innocent behavior and inducement lies. It’s very much like the question of when does a police sting turn into entrapment – but I expect it will be a lot more clear cut when a company sets up a web site where a user logs in and “finishes” the infringement. That would be a lot like the police holding and aiming the weapon that is used to commit a crime.

In any case, although this ruling is very favorable to patent holders with method claims, I would still advise working very hard to write your method claims from the perspective of having one entity perform all the steps, even if it sounds contorted. After all, we could probably nail that wicked witch with a claim to the steps of “offering a heroine a portion of a poison apple” and “allowing a heroine to bite said poison apple”.

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Many years ago I owned a Mercury Sable with the cheaper of two optional sound systems. One day, retrieving it from the dealer after some sort of service, I was surprised that my radio was operating in a new mode – one that was part of the higher end option. Normally this would be a good thing, but since I had only purchased the low end system, my dashboard did not have a switch to exit this new mode. A trip back to the dealer restored my sound system to it’s old modus operandi. Clearly, the only difference between the high and low end sound systems was the operating controls on the dashboard. The guts of the system were identical and the extra cost of the premium system only changed what functions you had access to.

What happens when you build a system that has certain elements or functions that infringe a patent? Can you avoid an infringement suit by burying the infringing elements in the way Mercury denied me access to the advanced functions that were physically in the sound system in my Sable? Can you simply “turn off” infringement by turning off the infringing element.

In a recent Court of Appeals case, Secure Computing Corporation tried to make just that argument. Secure essentially sold software that used proactive scanning technology for computer security. They were successfully sued by Finjan, Inc. for infringing three patents. The patents include claims covering “systems”, “methods”, and “computer-readable storage media” – essentially a computer that is running the software, the steps performed by the software, and a tangible embodiment of the software.

Secure’s primary defense was that what they made and sold did not infringe because what they delivered to a user was not functional out of the box – each software module (there were eight) was locked and needed a separately purchased software key to unlock the module. It was the the end user, the entity that entered the software key and ran the software, who was infringing, not Secure, which only sold non-functional modules.

Neither the trial court nor the Court of Appeals was buying this line of thinking. Like my radio, Secure’s software was capable of operation and nowhere in Finjan’s system or media claims is there an indication that the claim was limited to operating software. Most system/apparatus claims protect the bits and pieces of the apparatus and how they are connected together and this protection does not depend on someone pressing the “ON” button.

Secure did win its point (on appeal) that it did not violate the method claims. Here it is true that only the end user is “performing” the method when he or she runs the software – but of course this win did not hinge on whether the software was locked or not.

For patent applicants the lesson is clear; watch what words your attorney uses in your claims. I faced this with one of my clients whose initial claim language called for a source “capable of generating” light in a certain wavelength band. The examiner objected because a source operating outside that band might be “capable” of generating the claimed band. He suggested we say “a source operating in” the wavelength band. Had we accepted his wording, our competition could happily make and sell a non-infringing device by simply not turning it on. We settled on “a source for generating”.

BTW, even if the language of the claim lets you get away with selling a non-operating or locked system you most likely will be guilty of inducing infringement or contributory infringement when your customer unlocks the system.

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“I am about to partner with an engineer to manufacture and sell his product. I am looking for the designer to “own” the design liability and my company will “own” the manufacturing liability. How do I do that?”

It was a short question but there was something about the wording that made me think a long answer was needed. I felt I needed to clear up this matter of “design liability” and “manufacturing” liability. Here’s my response:

Dear (xxxx),

You suggest that there is a difference between “design liability” and “manufacturing liability” and that the difference affects who will be the target in an infringement suit. That’s not really the case.

Keeping in mind that I’m not an attorney and don’t give legal advice (my lawyer makes me say this), infringement is the act of making, using, selling, etc. a patented device without permission. Technically I don’t believe designing a device, per se, is infringement.

Of course, very few people design a device and stop there. Once a designer of an infringing device lets someone make one, the designer may be liable for contributory infringement or perhaps inducing infringement while the builder is liable for direct infringment.

Now, let’s get to the business end. The patent law doesn’t really care about licensing (i.e., renting IP). Typically, in your situation, somewhere in your license agreement (which is just a contract between two parties) there will be an explanation of how any IP issues will be handled. It is important to have it there since when the Sxxx hits the fan nobody wants to own the problem.

In situations like yours, the designer usually starts off “owning” the liability since he should have checked out the IP territory before doing the design. By collecting money from you for use of his design he is selling something and should be willing to stand behind his work – you expect General Motors to warantee your car, right. The mechanism to get him to own the liability is a term in the license contract saying he will indemnify you for any infringement suit.

Of course, in many cases there is the up front recognition that the designer can’t shoulder all the liability, particularly since he is not garnering all the profits. Share the profits = share the liability. Again, how that cost is shared is to be included in the licensing agreement.

In other cases, where a small design house does work for a large, manufacturing partner, the larger partner may totally indemnify the small design house based on the financial realities AND the fact that the design house was only doing the design in the first place as an outsourced R&D function for the large partner.

So, bottom line, whether you pay for the use of the design on a flat fee basis (a license in your terminology) or on a per part built basis (royalty in your terminology) has zero bearing on who’s going to get sued. You will be sued for making and selling, the designer will be suited for contributory infringement, you both may be sued for inducing infringement in your customers, and, at least in theory, your customers can be sued for using. This last bit is typically only mentioned in large OEM sales, not in consumer sales, for all the obvious reasons.

What you need to care about is how you and the designer are going to split up the costs, and that split can be anything you two decide. Since damages are calculated on lost profits or a reasonable royalty basis, I expect you were thinking something along the lines of you “owning” the part of the damages that scales with the number of units made and your partner basically having a fixed liability. That is certainly reasonable if you are not paying him a per part royalty.

Good luck…and consult with an attorney to draw up the licensing agreement!

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Can you trespass on someone’s property before they own it? More to the point, can you be forced to pay back rent for the time during which you were acting like a squatter on public land that was later sold to a developer? In the world of land development the answer is (probably) no; in the world of IP development the answer is a definite maybe.

Back in the olden days, BP (Before Publication), the invention you disclosed in your patent application was kept secret until your patent issued. You could mark your product “patent pending”, which gave anyone copying your product fair warning that IF your patent issued they might have to stop making, using, selling an infringing product.

With the advent of pre-allowance application publication (~ 18 months after the priority date), the world was given access to your invention even though you had no patent to stop them from copying it. This, it would seem, violated the quid-pro-quo of the applicant’s “contract with society” [if you teach society about your invention you can have ~ 17 years of exclusionary rights]. To correct this imbalance, Congress added a modicum of pre-grant patent protection.

Of course, it’s still the case that no infringement action may be started until the patent is issued. After all, the patent may NEVER issue, in which case there can’t be infringement. However, once the patent issues, a patent owner can  collect “reasonable” royalties for infringement activities that occurred between an application’s publication and the date of issuance. In theory, that is. [for you doubting Thomases, see 35 U.S.C. § 154, section (d)].

To collect these royalties, a patent owner has to:

  1. sue to prove infringement (no cheap feat),
  2. prove that the claims that survived to form the issued patent are “substantially identical” to the claims in the published application,
  3. demonstrate that the infringer had “actual notice” of the published application, and
  4. show the infringing activity took place after the date of publication.

Of these 4 conditions, only the last will be easy to satisfy. The other three conditions are likely to cause more headaches and expense than the “reasonable royalties” are worth.

For an example of the headaches, consider the “actual notice” condition. Presumably this means the patent applicant has to observe a competitor building something that will possibly infringe the yet-to-be-examined patent and then send them a copy of the published application. But if they were working on it before publication (i.e., before public disclosure of the application), then their work might be prior art and you are probably required to inform the patent office, under your duty of candor. Failure to notify the patent office may cost you your patent even if the actual information turns out not to affect the examiner’s decision.

And on the other side of the equation, the “what’s in it for me” side, the “reasonable royalty” limit on what you can collect is reasonable, since the “infringement” being addressed is infringement of a non-existent patent. Indeed, infringement of a patent that might never come into existence at all. The patent application process should not become a show stopper for competitors. Competitors are already put on warning that they may have to stop selling their product if/when your patent issues; the reasonable royalty cost allows them to make a rational business decision about the risks of pre-issue activity.

So, my recommendation to a patent applicant is, in most situations, let this sleeping dog lie. And to the potential infringer, I suggest worrying more about what changes you might have to make if and when the patent issues, rather than worrying about the “reasonable” royalty you might have to pay for what you are doing now.

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