United States: Recent Federal Circuit Decision Broadening The Attribution Standard For Divided Infringement Results In Reinstatement Of Infringement Claims

Abstract

In Mankes v. Vivid Seats Ltd., the Federal Circuit considered a change in the law of divided patent infringement resulting from the Akami-Limelight series of cases. An en banc panel of the Federal Circuit in Akami Techs. v. Limelight Networks ("Akami IV") recently revisited the standards of direct divided-infringement, holding that steps of one entity could be attributed to another for purposes of finding infringement in a joint-enterprise setting or "when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance." Applying the broadened attribution standards of Akami IV, the Federal Circuit in Mankes v. Vivid Seats Ltd. reinstated the divided infringement claims and remanded to allow the plaintiffs to present additional facts related to attribution.

In Mankes v. Vivid Seats Ltd., the Federal Circuit considered the impact of the recently decided Akami-Limelight cases on liability for "divided infringement"—a situation that occurs when the steps of a patented method claim are performed by two or more parties, and that raises the question of whether the acts of one entity can be attributed to another and give rise to liability for infringement.

The claimed method in Mankes involves a series of steps for controlling goods sold both on the Internet and at local site where the local site maintains the total inventory of available goods and communicates information about the inventory to the Internet site. In separate cases, the plaintiff Robert Mankes accused both Fandango and Vivid Seats of infringement by their operation of Internet-based reservation systems for reserving, buying, and selling tickets to various events. Mankes did not allege that Vivid Seats and Fandango themselves performed every step of the claimed method, but argued divided infringement on the ground that local entertainment venues perform the remaining steps.

Mankes's cases came at a time when the law of divided-infringement was in a state of flux due to a series of Federal Circuit and Supreme Court decisions in a case between Akami and Limelight ("Akami-Limelight"). Mankes's cases against Fandango and Vivid Seats were filed after an en banc Federal Circuit ruled in "Akami II" that while Limelight could not be held liable for direct patent infringement under existing standards, induced patent infringement may be established even if no one party could be held liable for direct patent infringement. When the Supreme Court granted certiorari from that en banc decision, Mankes's district court cases were stayed pending the outcome of the Supreme Court's decision. The Supreme Court ultimately ruled that induced infringement did not exist in cases of divided infringement, but that the Federal Circuit could revisit the standards for showing direct infringement in cases of divided infringement.

On remand, the Federal Circuit took the Akami-Limelight case back up at the panel level. At that point, Mankes's cases resumed, and the defendants, Vivid Seats and Fandango, moved for judgment on the pleadings. Although there was no dispute that Fandango or Vivid Seats together with the local venues performed all the claim steps, the district court found that they could not be held liable under the current direct infringement standard because Mankes failed to allege sufficient facts showing that the defendants "direct or control" the local venues or their actions. Specifically, the district court found that Mankes did not allege that the local venues were either agents of the defendants', or that the defendants required them to take the particular actions that constitute performance of the claim steps. Accordingly, judgment on the pleadings was entered for the defendants in each case and Mankes appealed to the Federal Circuit. The separate cases against Fandango and Vivid Seats were combined for the purposes of the appeal.

During the pendency of Mankes's appeal, a panel of the Federal Circuit rejected direct-infringement liability for Limelight in "Akami III". Three months later, an en banc panel of the Federal Circuit in "Akami IV" took up the Supreme Court's invitation to revisit direct infringement under § 271(a) in cases of divided infringement. The en banc court addressed the circumstances in which others' acts may be attributed to an accused infringer to support direct-infringement liability for divided infringement, ruling that attribution is proper in a joint-enterprise setting, and "when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance." The court also noted that "[i]n the future, other factual scenarios may arise which warrant attributing others' performance of method steps to a single actor." For the first time, judgment was entered against Limelight and for Akami.

Considering the standard stated in Akami IV, the Federal Circuit in Mankes vacated the district court's judgments for Fandango and Vivid Seats. The Federal Circuit reasoned that under the new standard, it was no longer sufficient that the local venues are not agents of the defendants and are not required by the defendants to take the claim steps that they perform. The court noted that this change in standards was significant enough to change Akami's loss into a win on direct infringement. The court also noted the Akami IV court's guidance that "other factual scenarios may arise which warrant attributing others' performance of method steps to a single actor." The Federal Circuit left it to the district court to consider the facts regarding attribution on remand, but discussed Mankes's allegations regarding the commercial arrangements between Vivid Seats or Fandango and local venues, including that local venues are offered financial incentives to perform the steps of the claimed invention, and the possibility that Vivid Seats and Fandango establish rules for the necessary coordination with the local venues. The Federal Circuit determined that Mankes should be given an opportunity to allege additional facts with the broadened liability standard of Akami IV in mind.

Strategy and Conclusion

Mankes v. Vivid Seats is an early example of how Akamai IV has changed the law of divided infringement by broadening the circumstances that will support a finding of direct infringement by attributing the acts of others to the accused infringer. Patent owners no longer need to show that an accused infringer directs or controls another's actions. Instead, a broader range of circumstances now warrant attributing others' performance of method steps to a single actor. As noted in Akami IV, the various scenarios that warrant such attribution may continue to develop in future cases.

Footnotes

1 The Mankes v. Vivid Seats Ltd.  opinion may be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2016/MankesvVividSeats_151500Opinion42020161.PDF.

Previously published by LES Insights

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