United States: Federal Circuit Provides Guidance On Joint Infringement Standard

In Travel Sentry, Inc. v. Tropp, Appeal No. 16-2386 (Fed. Cir. Dec. 19, 2017),1 the Federal Circuit clarified the scope of joint infringement under 35 U.S.C. § 271(a).2 Specifically, the court provided guidance on performing analysis under Akamai's two-pronged joint infringement test, which states that joint infringement may arise when an alleged infringer (1) conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method, and (2) establishes the manner or timing of that performance. Broadly speaking, Travel Sentry reaffirms the lessons from Akamai and subsequent cases; namely, the standard for joint infringement has been relaxed, and attribution may be found despite the absence of a principal-agent relationship, contractual obligation or joint enterprise. Travel Sentry, slip op. at 15.

At issue in Travel Sentry were U.S. Patent Nos. 7,021,537 (the '537 patent) and 7,036,728 (the '728 patent). The claims of the '537 and '728 patents are directed to methods for improving airline luggage inspection by use of dual-access locks. The basic idea is that each piece of luggage can be unlocked by both a customer's personalized key and the Transportation Security Administration's (TSA's) master key. This allows travelers to lock a checked bag while also allowing the TSA to open, search and relock the bag as necessary. Claim 1 of the '537 patent is representative, and includes the following steps:

  1. Providing customers with a dual-access lock having special identifying features.
  2. Marketing the dual-access lock in a manner that indicates that luggage utilizing the lock will be subjected to a special screening procedure by the luggage-screening entity (e.g., the TSA).
  3. The special identifying features of the dual-access lock signaling to the luggage-screening entity that the lock should be opened using a master key.
  4. The luggage-screening entity, acting pursuant to a prior agreement, identifying the dual-access locks via the special identifying features and using a master key to unlock the lock. at 4-5.

The plaintiff's theory for joint infringement was that Travel Sentry performed the first two steps of the claimed method directly, TSA performed the last two steps of the claimed method, and TSA's actions should be attributable to Travel Sentry for purposes of infringement liability analysis under 35 U.S.C. § 271(a). See id. at 11-12. The main piece of evidence offered to show that the Akamai test was satisfied was a memorandum of understanding (MOU) between Travel Sentry and the TSA. Among other things, the MOU stated that (1) Travel Sentry would provide master keys for the dual-access locks to the TSA, (2) the TSA would accept and distribute the master keys and training materials, (3) the TSA would make good faith efforts to use the master keys and relock the searched luggage, and (4) either party could terminate the MOU upon 30 days' notice. Id. at 6-8.

In granting summary judgment for noninfringement, the district court assumed that Travel Sentry performed the first two steps and the TSA performed the final two steps of the patented claim; however, the district court found that the TSA's actions could not be attributed to Travel Sentry. Id. at 12. The district court discounted the MOU, stating that the TSA "faces no consequences" for not following the patented method steps and the TSA "certainly does not take direction from Travel Sentry on the manner or timing of its luggage screening." Id. Accordingly, the district court found that there was "no evidence that Travel Sentry had any influence whatsoever on the third and fourth steps of the method carried out by the TSA." Id.

On appeal, the Federal Circuit vacated the district court's entry of summary judgment, holding that there were "genuine disputes of material fact regarding whether [defendant] directs or controls the performance of [the final two] steps of the claimed methods." Id. at 3-4. Before applying the law to the facts of this case, the court provided a useful summary of the current law on joint infringement, with emphasis on the Akamai and Eli Lilly decisions. Against this legal framework, the Federal Circuit began its analysis of the present case by stating that the district court interpreted Akamai too narrowly. Id. at 20. According to the court, Akamai "made clear" that the restrictive view of attribution for purposes of joint infringement is no longer the governing law. Id. The court proceeded to identify a number of specific errors the district court made in its Akamai analysis. Id.

First, the district court "misidentified the relevant activity at issue, broadly defining it as 'the luggage screening mandated by Congress.'" Id. at 21. Relying on the details of the MOU, the Federal Circuit determined that a narrower definition of the relevant "activity" was required. Specifically, the court found that the appropriate definition was "screening luggage that the TSA knows can be opened with the passkeys provided by Travel Sentry," which is what is required by the last two steps of the patented claim. Id. The court warned against defining the relevant "activity" too broadly, as that would typically lead to a faulty finding that the first prong of the Akamai test was not satisfied. Id. at 21-22. Furthermore, the court stated that the "activity" analysis should not "generalize from an agreement between two entities to engage in only limited aspects of an activity that the relevant activity is the entire set of activities." Id.

Second, the district court "misapprehended what types of 'benefits' can satisfy Akamai V's first prong." Id. at 21-23. This error flowed naturally from the district court's overly broad definition of the relevant activity. Id. at 22. According to the Federal Circuit, when the relevant activity is properly defined (i.e., screening luggage specifically identified as having the dual-access lock), a reasonable juror could find that TSA receives a benefit from being able to identify, open and relock luggage having the dual-access lock. Id. at 23. Contrary to the district court's belief, why the TSA screens luggage – Congressional mandate – was irrelevant. Id. What mattered to the court was how the TSA screened luggage (i.e., in the manner proscribed under the MOU), and whether the TSA received a benefit from the chosen screening method. Id. The court then noted that the benefit could be "tangible (e.g., a reduction in the number of claims submitted by aggrieved travelers or an improvement in the health of its employees) or intangible (e.g., promotion of the public's perception of the agency)." Id.

The district court's third error under the Akamai test's first prong was that it "mischaracterized what is required for one to 'condition' a third party's participation in an activity or receipt of a benefit on the third party's performance of one or more claim steps." Id. at 23-24. This error is linked to the district court's faulty "activity" and "benefit" analysis. When you substitute the Federal Circuit's "activity" and "benefit" results into the "condition" requirement, the question becomes: Could a reasonable juror find that the TSA only receives the benefits of the lock system (e.g., reduction in claims, improved public perception, etc.) by performing the last two claim steps (i.e., identifying the dual-access locks and using the master key)? Id. The Federal Circuit answered this question in the affirmative. Id.

The district court also erred in its analysis under the Akamai test's second prong when it determined that no reasonable juror could find that "Travel Sentry has established the manner or timing of TSA's performance" of the final two claim steps. Id. at 25-26. The district court viewed the MOU as mere guidance, which TSA could decide to follow or not. Id. To the extent that the district court's reasoning was based on a "mastermind" theory of liability,3 the Federal Circuit made clear that this "theory is no longer the governing standard." Id. at 25-26. In the court's view, the simple fact that the "TSA cannot unlock luggage bearing Travel Sentry certified locks for screening or realize the benefits of such screening unless it performs the final two claim steps" was dispositive. Id. at 27.

Finally, the Federal Circuit emphasized the importance of context, stating that "[P]rinciples of attribution are to be considered in the context of the particular facts presented." Id. at 29 (citing Akamai V, 797 F.3d at 1023). The court cited Grokster, a case relied upon to formulate Akamai's two-prong test, for the proposition that "an actor 'infringes vicariously by profiting from direct infringement' if that actor has the right and ability to stop or limit the infringement." Id. (citing Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005)). Here, as in Grokster, Travel Sentry had the right and ability to stop or limit TSA's ability to practice the final two claim steps, and this additional context tends to support a finding that attribution is appropriate. Id.4

This case, as well as Akamai and Eli Lilly, makes clear that the standard for joint infringement has been relaxed. Traditionally required elements, such as control, legal obligation, supervision, etc., are no longer required to justify attribution. Courts may be willing to find attribution where there is "evidence that a third party hoping to obtain access to certain benefits can only do so if it performs certain [patented] steps identified by the defendant, and does so under the terms prescribed by the defendant." Id. at 20.

Footnotes

1 Judges Lourie, O'Malley and Taranto sat on the panel for the Federal Circuit. The opinion was authored by Judge O'Malley.

2 "Joint" or "divided" infringement refers to a situation where the acts necessary to give rise to liability for direct infringement are shared between two or more actors but can be legally attributed to a single actor.

3 See 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).

4 The court listed a number of actions Travel Sentry could have taken, such as terminating the MOU, discontinuing its practice of replacing passkeys that are damaged or lost, and changing the design of future locks.

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