United States: The Federal Circuit's Travel Sentry Case Broadens Divided Infringement Standard In A Way That Makes Method Claims More Viable In Litigation

Introduction

In Travel Sentry v. Tropp, the U.S. Court of Appeals for the Federal Circuit applied the two-step divided infringement test from Akamai Technologies Inc. v. Limelight Networks, Inc. in a way that broadened the scope of divided infringement liability by allowing the doctrine to cover a new landscape of contractual relationships.¹Under this broadened standard, divided infringement may provide a viable alternative to indirect infringement. Specifically, those asserting method claims in litigation and facing an uphill battle in proving the additional requirements for induced or contributory infringement may have better luck under a divided infringement theory.

Background

In Akamai, the en banc Federal Circuit held in part that the acts of multiple parties can be combined for the purposes of direct infringement when the first party:

(1) "conditions participation in an activity or receipt of a benefit upon performance of a step," and
(2) "establishes the manner or timing of that performance."²

The Travel Sentry court applied these Akamai legal standards to its facts. In Travel Sentry, the accused infringer (Travel Sentry), designed and licensed locks for luggage that could be opened either by the owner entering a combination or by a screening agency using a master key. Travel Sentry offered to provide 1,500 "master keys" to the Transportation Safety Administration (TSA) for use during screening. This arrangement was governed by a "Memorandum of Understanding." The relevant divided infringement issue was whether Travel Sentry could be found to directly infringe a method claim where the TSA performed the last two steps of the method in an infringing manner during airport screening.³The Federal Circuit found divided infringement. In particular, the court, applying the first Akamai prong, found that TSA realized a tangible "benefit" by using Travel Sentry's technology to identify, open, and inspect checked baggage.⁴The court also relied on TSA's representation that it would undertake "good faith efforts" to use the locks in its prong one analysis, finding that this representation could amount to a sufficient "condition" to receive a benefit. Moreover, the Federal Circuit reiterated that the second Akamai step no longer requires the first-party serve as the "mastermind" to the second. Travel Sentry had sufficient control to satisfy Step 2 because TSA had to use Travel Sentry's passkeys to open the infringing locks.⁵  In finding divided infringement, the Federal Circuit emphasized a particular type of evidence that is a hallmark of divided infringement liability: "evidence that a third party hoping to obtain access to certain benefits" only does so "if it performs certain steps identified by the defendant, and does so under the terms prescribed by the defendant."⁶

Implication for Contracts

After Akamai, questions remained about what types of contractual relationships were necessary to invoke divided infringement liability. In Travel Sentry, the Federal Circuit found that a party accused of divided infringement could not avoid liability simply because it did not impose "legal obligations or technical prerequisites" on the other party.⁷The relevant document at issue in Travel Sentry was a Memorandum of Understanding—i.e., a less formal alternative to a standard formal contract. Despite this less formal arrangement, the Federal Circuit still found that the Akamai test was satisfied (for the reasons described above). Thus, it appears that a writing between two parties, where one party expresses a good-faith willingness to perform an act in exchange for receiving a product or service, can result in divided infringement liability, regardless of whether the document governing the relationship between the parties is a traditional contract, formal contract, or not. Notably, it appears that the court focused more on the substance of the relationship between Travel Sentry and TSA than the technical legal relationship between the two entities. This means that it is more difficult after Travel Sentry to avoid divided infringement liability through clever contractual arrangements.

Increased Value for Method Claims and Alternative to Indirect Infringement

The broadened standard in Travel Sentry provides a possible alternative to indirect infringement. In Travel Sentry, TSA performed the last two steps in the method claim at issue. Had TSA performed all of the steps in the method, these facts would have aligned more with the indirect infringement doctrine because Travel Sentry would have facilitated the infringement of a third party who performed all steps of the method. In some cases, indirect infringement may be difficult to prove given the additional legal requirements that do not exist in direct infringement situations. For example, plaintiff seeking to prove contributory infringement must show, in addition to direct infringement, that the accused infringer had a certain level of knowledge, that the feature accused of infringing had no substantial noninfringing uses, and that the feature is material.⁸Likewise, a plaintiff seeking to prove induced infringement must show that the alleged infringer "actively induces" another to perform infringing acts.⁹

Claim language is often (intentionally) vague on the exact types of entities required to perform the claimed method. There is often room at the claim construction stage to mold the claims in this area. Litigants would benefit from considering whether they have a stronger divided infringement case or indirect infringement case at the claim construction stage. If the evidence on indirect infringement is weak (e.g., if it is difficult to identify a third party direct infringer), litigants could consider opting for a divided infringement argument and assert claim constructions leaving no doubt that two entities acting in concert perform all claim steps. Travel Sentry improves the viability of this approach.

Conclusion

In applying the Akamai standard, the substantive analysis of Travel Sentry appears to have broadened the scope of the divided infringement doctrine. This has implications for both in-house counsel who contract with other entities to use technology, as well as parties embroiled in litigation. Thus, intellectual property attorneys stand to benefit from understanding the ramifications of Travel Sentry.

Footnotes

¹  Travel Sentry v. Tropp, 877 F.3d 1370 (Fed. Cir. 2017) (citing Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020, 1023 (Fed. Cir. 2015))

²  Akamai, 797 F.3d at 1023.

³  Travel Sentry, 877 F.3d at 1373-74, 1377.

⁴  Id. at 1381-83.

⁵  Id. at 1383-85.

⁶Id. at 1380.

⁷Id. at 1376 (quoting Eli Lilly & Co. v. Teva Parenteral Medicines, Inc., 845 F.3d 1357, 1366 (Fed. Cir. 2017)).

⁸35 U.S.C. § 271(c).

⁹  35 U.S.C. § 271(b).

*Alex Harding is a summer associate at Finnegan.

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