Sharpening a biotech patent through methods claims under the litigation strategy of induced infringement

Abstract

A CAFC en banc case from 2012 holds that all of the steps of a claimed method must be performed, but it is not necessary that all steps be performed by a single entity, which are the requirements of the traditional “all-elements rule,” for induced infringement to occur. An induced infringement is that an alleged infringer knowingly induces infringement and possesses intention to encourage another’s infringement. In this way, even when the entity omits a part or property from the claims of an existing patent, which has been a common and successfully used practice to avoid direct patent infringement, may still be liable for induced infringement. A case study discussed in this article demonstrates this possibility. To design-around a patent, one should pay attention to the methods claims to avoid both direct and induced infringement. On the contrary, a patentee should increase the scope of the methods claims for better protection. The patent owner may thus increase the patent’s power with the methods claims because not all steps of a claimed method would have to be committed by a single entity to find the induced infringement.

Keywords: :

• indirect infringement
• induced infringement
• design-around
• patent
• patent litigation

The patent system is organized to encourage innovation: a government grants the patentee the right to exclude others from practicing the technical development for a certain amount of time in return for disclosing the innovation. Other than the exclusive right to protect the innovation, the US patent law further regulates the induced and contributory infringements. Moreover, in a recent US Court of Appeals for the Federal Circuit (CAFC) en banc case,¹ a decision by full court judges overruled a previous decision² by the CAFC and removed the requirement that all steps in a method claim must be committed by a single entity to be liable for induced infringement. The new CAFC opinions highlight the subjectivity in the determination of patent infringement and can therefore affect patent design-around^3,4 strategies for biotechnology.

Exclusivity Rights of a Patent

The World Trade Organization (WTO) has established the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) as the minimum standards for intellectual property regulation as applied to citizens of WTO members. Article 28 of TRIPS provides that a patent shall confer on its owner the exclusive right to prevent third parties that do not have the owner's consent from the acts of making, using, offering for sale, selling or importing a product for these purposes.

Article 28 has similar power over processes or methods, an owner’s exclusive right is ability to prevent third parties that do not have owner's consent from the act of using the process and from the acts of using, offering for sale, selling or importing a product produced directly by that process.

Every WTO member, such as China, Japan, the United States of America and Taiwan, adopts this TRIPS Article into their national patent law. For example, USA patent law 35 USC §271 (a) indicates that “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.” Thus, persons who make, use, offer to sell or sell the patented invention within the USA or who import the patented innovation into the USA are direct infringers.⁵

The Indirect Infringement

Other than the direct infringement, as indicated in TRIPS Article 28 and many countries’ patent laws, the US courts^6,7 have long recognized that persons who aid and abet direct infringers should be liable as either inducers of infringement or contributory infringers. The US Congress codified the law relating to indirect infringers in the Patent Act of 1952 in 35 U.S.C. 271 (b) and (c) to clarify the law regarding active inducement and contributory infringement.⁸

Section 271 (b) provides that “whoever actively induces infringement of a patent shall be liable as an infringer.” Moreover, section 271 (c) indicates that “Whoever offers to sell or sells within or imports into the United States a component of a patented machine, manufacture, combination, or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.”

Contributory infringement would be straightforward when a defendant supplies a product or process that only has a single use that has been outlined in an already-existing patent. However, when a product or process sold has a dual-use purpose, that is either infringing or noninfringing, courts seek evidence whether the defendant intentionally help others to infringe upon an existing patent and then decide if the sale is illegal. For instance, courts may find indirect infringement if the defendant had advertised the product or process for use in a patented combination or had taught the direct infringer how to infringe.

Anyone who actively induces infringement of a patent by another may be held liable as an infringer. The inducing infringer would have pre-existing knowledge of a patent and intend to cause the infringing, while the direct infringer may be unaware of the existence of the patent. In a previous CAFC case,⁹ the defendant sold a popular toy known as the Rubik’s Cube and the patentee believed it to infringe on its patent on a rotating-cube puzzle. The patent claimed a method of solving the puzzle by rotating the faces of the cube. Thus, someone playing the Rubik’s Cube would actually perform the steps of the method and could thus infringe upon the patented method. The defendant did not directly perform the method but instead sold the Rubik’s Cube and instruction sheets that would lead purchasers to practice the method. Therefore, the court found the defendant to be held liable for inducing infringement.

The US Supreme Court^a further held that induced infringement under §271(b) requires knowledge that the induced acts constitute patent infringement. A finding of the defendantnt under ntn can be supported by evidence under the doctrine of willful negligence, which is well established in US criminal law. Many criminal statutes require proof that a defendant acted knowingly or willfully, and the US courts applying the doctrine have held that defendants cannot escape the reach of these statutes by deliberately shielding themselves from clear evidence of critical facts that are strongly suggested by the circumstances. The Supreme Court agrees on two basic requirements of the CAFC applied toward the doctrine of willful blindness on the finding of the defendante henowledge of induced infringement. First, the defendant must subjectively believe that there is a high probability that a fact exists. Second, the defendant must take deliberate actions to avoid learning of that fact. These requirements give willful blindness an appropriately limited scope that surpasses recklessness and negligence.

The goal of indirect infringement litigation is to give patentees effective protection in circumstances in which the actual infringer either is not the truly responsible party or is impractical to prosecute. For example, a patent on a new use for an existing drug is directly infringed upon by each individual patient taking the drug for the new use or perhaps by the doctors who prescribe it. However, it is impractical to sue either the patients or the doctors. Inducement liability allows suits to be brought against the pharmaceutical company who provides the drug and encourages infringing usage. Furthermore, inducement law may avoid injustice by holding liable those who contract infringing work out to someone who cannot pay damages. Thus, a biotech patentee may effectively enhance the protection of innovation through methods claims with induced infringement litigation strategy.

The 2012 En Banc Induced Infringement Case

The CAFC en banc case¹ essentially included two litigations appealed from the district courts. One case was a patent covering a method of electronic communication between healthcare providers and their patients. The defendant was a software company that licenses their program to healthcare organizations. The licensed program included an application that permitted healthcare providers to communicate electronically with patients. The software company did not perform any step of the patent. Instead, the steps were divided between patients, who initiated the communications, and health organizations, which performed the rest of the steps. Thus, the patentee alleged that the software company induced their customers to infringe upon the patent.

The other appealed case was over a patent covering a method for efficient delivery of web content. The claimed method placed some of the provider’s content elements on a set of replicated servers and modified the content of the provider’s web page to instruct web browsers to retrieve the content from the servers. The defendant maintained a network of servers. As recited in the patented method, the network allowed for efficient content delivery by placing some content elements on the servers. The defendant, however, did not modify the content of the provider’s web pages but instead instructed customers on the steps needed to perform the modification. Therefore, the patentee alleged that the network company induced customers to infringe upon the patent.

Two US district courts handled the above litigations, and both relied on the same previous CAFC ruling² to grant summary judgment of no infringement on the grounds that the infringement must be committed by a single entity. The en banc CAFC case¹ removes the proposition that a single party must commit all acts necessary to constitute infringement. It should be further noted that six out of the 11 CAFC judges made the conclusion. One judge filed a dissenting opinion, which was support by three other judges. The last CAFC judge agreed neither with the majority’s conclusion nor the minority’s opinion and filed a second dissenting opinion.

In the 2012 induced infringement case,¹ the CAFC held that all of the steps of a claimed method must be performed but it was not necessary for all of the steps to be committed by a single entity to find induced infringement. A scant majority of the court cited another en banc case¹¹ and interpreted inducement to be when an alleged infringer knowingly induced infringement and possessed specific intent to encourage another’s infringement. Based on the new ruling, it is sufficient to conclude infringement occurs if the inducer “causes, urges, encourages, or aids the infringing conduct” and that the induced conduct is performed.

The Impact of the 2012 Induced Infringement Case on Biotechnology

According to the 2012 CAFC ruling, it is not necessary to prove that all steps of a claimed method are committed by a single entity to find induced infringement. An alleged induced infringer is the one knowingly inducing infringement and possessing specific intent to encourage another’s infringement. The CAFC decision may limit the patent design-around strategy that omits a part or property from the claim, one of the most successful existing methods.^3,4 For instance, omitting a step of the asserted method may avoid direct infringement but may still be liable for induced infringement.

On the contrary, a patent owner may strategically incorporate methods claims with induced infringement litigation to avoid the ‘all-elements rule’ requirements in which each limitation of the claim is expressed in the accused structure either literally or equivalently in the infringement suit.¹² According to the all-elements rule, literal infringement of a claim occurs when every limitation recited in the claim appears in the accused device while infringement under the doctrine of equivalents requires that the accused product contain each limitation of the claim or its equivalent.¹³

Indeed, CAFC¹⁴ has held that for a party to be liable for direct patent infringement under 35 U.S.C. §271 (a), that the party must commit all of the acts necessary to infringe upon the patent, either personally or vicariously. However, the new CAFC ruling removes the requirement that all of the steps of a claimed method must be committed by a single entity to find induced infringement. Thus, patentees may strengthen their patents’ power through method claims with induced litigation strategy. This would be especially useful to many patent owners who draft claims to protect the same invention in terms of the product itself, the method of using the product and the method of making the product.⁸

A Case Related to Immune Therapy

Cyclosporine is an important immunosuppressant agent and is typical used in recipients of organ transplantation to reduce the risk of rejection. Furthermore, cyclosporine is one of the traditional systemic therapies for psoriasis, a chronic inflammatory disease. However, cyclosporine is not very soluble in water and is thus not readily absorbed by the aqueous environment of the human body.

A pharmaceutical company addressed this problem when it discovered a formulation for administering cyclosporine as a solution containing drug nanoparticles. The formulation was prepared by dissolving cyclosporine in a water-miscible solvent and then adding a comparatively large amount of vigorously stirred water to the solution. The process resulted in an aqueous dispersion of drug nanoparticles that could be more readily absorbed by the body. Furthermore, a stabilizing compound, such as citric acid and gelatin, was added to keep those small solid particles from growing larger. This patented innovation claimed the following: a solution that is composed of solid particles of cyclosporine and a stabilizer that maintains the size distribution of said particles, wherein said cyclosporine has a water solubility below 0.5 g per 100 mL, and said particles have a weight ratio of cyclosporine to water of approximately 1:300 to 1:1500 and a weight ratio of cyclosporine to said stabilizer of approximately 1:1 to 1:50.

Design-around capsules¹⁵ containing cyclosporine dissolved in a small amount of ethanol did not include water recited in the above claim. Thus, the capsules would be outside the scope of the solution patent. However, if the patentee had claimed a method of using the solution in which the solution would mix with the aqueous environment of the user’s stomach when ingested by the patient, the method claim would have been infringed upon.

According to the new induced infringement rule, an alleged inducer “causes, urges, encourages, or aids the infringing conduct” and the induced conduct is performed. A patient taking capsules would carry out the method claim, and the capsule manufacturer would be responsible for the infringing conduct. Thus, the company fabricating the capsules would be an alleged infringer.

Conclusion

In addition to direct infringement, which states that third parties cannot perform the acts of making, using, offering for sale, selling or importing a product for these purposes, the US common law^6,7 has also long recognized that persons who aid and abet direct infringers should be liable as either inducers of infringement or contributory infringers. Contributory infringement would be straightforward when a defendant supplies a product or process that has no use except the one disclosed in an existing patent. On the other hand, anyone who knows of an existing patent and intends to cause the infringing acts by another party may be held liable as an infringer.

A CAFC ruling² in 2007 indicated that direct infringement requires a single party to perform or use each and every step or element of a claimed method or product. The CAFC judges citing the US Supreme Court’s Warner-Jenkinson case¹⁶ held that both literal infringement and infringement under doctrine of equivalents must be tested element by element. Furthermore, infringement occurs when a party performs all of the steps of the process in a patented process or method. When a defendant participates in or encourages infringement but does not directly infringe upon a patent, the US court would apply the standards for liability under indirect infringement. Indirect infringement requires a finding that some party among the accused actors has committed the entire act of direct infringement.¹⁷ Thus, without directing or controlling unrelated parties to carry out the other steps, a defendant performing some but not all of the steps of the asserted method would not bear responsibility for the actions of the other.²

A CAFC en banc case¹ in 2012 overruled the previous decision² and removed the requirement that all of the steps must be committed by a single entity to be liable for induced infringement. The new CAFC ruling held that all of the steps of a claimed method must be performed but it is not necessary for all of the steps to be committed by a single entity to find induced infringement. An induced infringement occurs when an alleged infringer knowingly induced infringement and possessed specific intent to encourage another’s infringement.

According to the new CAFC ruling,¹ omitting a part or property from the claim, one of the most successful design-around methods,^3,4 may avoid direct infringement but may still be liable for induced infringement. A case study discussed in this article demonstrates this possibility. Thus, patent design-around strategies, especially in biotech field, should also pay attention to methods claims to avoid induced infringement. Certainly, the new CAFC ruling may bring uncertainty in patent design-around strategies or cause “dramatic changes in the law of infringement,” as the dissenting opinion¹ indicated.

On the contrary, the new CAFC ruling may help patentees sharpen the power of their methods claims to avoid the traditional ‘all-elements rule’ requirements.¹⁶ Because not all steps of a claimed method need to be committed by a single entity to find induced infringement, a patent owner may increase the patent’s power through the methods claims incorporating with the induced litigation strategy. The consequences of the new CAFC ruling for technology fields may be “disincentive and new potential for abuse,” as the dissenting opinion¹ concluded.

Disclosure of Potential Conflicts of Interest

No potential conflicts of interest were disclosed.

Acknowledgments

This work is supported in part by the National Science Council (NSC 101-2325-B-075-003 and 101-2221-E-075-001) and Taipei Veterans General Hospital (V102C-068), Republic of China.

End Notes

^aGlobal-Tech Appliance Inc. v. SEB S.A.: The US Supreme Court, 2010.

10.4161/hv.27533