United States: No Induced Infringement Possible When No Agency Or Contractual Relationship Exists To Create A Single Direct Infringer In Doctor-Patient Relationship

This article previously appeared in Last Month at the Federal Circuit, May, 2011.'

Judges: Newman (dissenting), Bryson (concurring), Linn (author)

[Appealed from N.D. Ga., Chief Judge Camp]

In McKesson Technologies Inc. v. Epic Systems Corp., No. 10-1291 (Fed. Cir. Apr. 12, 2011), a split panel of the Federal Circuit affirmed the district court's grant of SJ of noninfringement to Epic Systems Corporation ("Epic"). The majority held that the steps of McKesson Technologies Inc.'s ("McKesson") patented method not performed by companies licensing Epic's software could not be attributed to those licensees because no agency or contractual relationship existed between the licensees and the individuals who performed those steps. Therefore, no single entity directly infringed the claimed method, and without a direct infringer, Epic could not be liable for induced infringement.

McKesson's U.S. Patent No. 6,757,898 ("the '898 patent") is directed to a method of electronic communication between patients and healthcare providers using personalized web pages. Claim 1 includes the step of "initiating a communication by one of the plurality of users to the provider for information, wherein the provider has established a preexisting medical record for each user . . . ." Slip op. at 4 (emphasis omitted).

Epic licenses, but does not use, software products to healthcare providers, including the accused "MyChart" software. MyChart allows patients to communicate online with their healthcare providers through personalized webpages and allows the healthcare providers to update the patients' webpages with their medical records. Healthcare providers provide access to MyChart to their patients, but no healthcare provider requires that their patients use MyChart. The patient chooses to "initiate a communication" with their healthcare provider by logging on to the healthcare provider's MyChart webpage. Then the healthcare provider performs the other steps of the claimed method.

McKesson filed suit against Epic in the Northern District of Georgia, alleging that Epic's licensing of MyChart to healthcare providers who then provided MyChart to their patients constituted induced infringement of claims of the '898 patent. Epic moved for SJ, arguing that the claim required joint infringement, not direct infringement, and without a single direct infringer, Epic could not be liable for inducing infringement. The district court denied the motion so that more evidence could be presented on whether the healthcare provider-patient relationship allowed the actions of the patient to be attributed to the healthcare provider. Then, the district court granted Epic's renewed motion for SJ.

"McKesson has identified no viable legal theory under which the actions of MyChart users may be attributed to Epic's customers. Without an agency relationship or contractual obligation, the MyChart users' actions cannot be attributed to the MyChart providers, Epic's customers. Thus McKesson has failed to demonstrate that any single party directly infringes the '898 patent. Absent direct infringement, Epic cannot be liable for indirect infringement." Slip op. at 8-9.

Reviewing the decision de novo, the majority explained that an allegation of induced infringement of a method claim requires a single direct infringer who either performs every step of the method or "exercises 'control or direction' over the entire process so that every step is attributable to the controlling party.
Id. at 6 (quoting Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008)). "[T]he 'control or direction' standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of the claimed method." Id. (alteration in original) (quoting Muniauction, 532 F.3d at 1330). Citing Akamai Technologies, Inc. v. Limelight Networks, Inc., 629 F.3d 1311 (Fed. Cir. 2010), the majority noted that "there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps." Slip op. at 7.

In this case, the parties agreed that Epic did not directly infringe and that the healthcare providers did not complete all of the steps of the method by themselves, but that the patients performed the first step of "initiating a communication." Therefore, the question before the Court was whether the healthcare providers were able to "control or direct" patients in a way that support a finding of direct infringement by the healthcare providers, which would make Epic liable for inducing infringement.

McKesson did not argue that the doctor-patient relationship was an agency relationship or a contractual relationship. Instead, McKesson argued that the doctor-patient relationship was a special relationship that was "something more than a mere arms length relationship and [was] sufficient to provide attribution." Id. at 8. McKesson urged the Court to depart from the strict agency or contract analysis of Akamai because Akamai was allegedly inconsistent with "ordinary principles of law involving concerted action." Id. at 9. By following tort law, as courts had done in copyright law, joint tortfeasors could be found liable when "the acts of each of two or more parties, standing alone, would not be wrongful, but together they cause harm to the plaintiff." Id. (citation omitted).

The majority found McKesson's arguments that the doctor-patient relationship made the patient's actions attributable to the healthcare providers unpersuasive, stating that "[w]ithout an agency relationship or contractual obligation, the MyChart users' actions cannot be attributed to the MyChart providers."
at 8.

In any case, the majority found that there was no need to depart from their cited precedents because patent law already addressed the joint tortfeasor problem under the indirect infringement theories of contributory and induced infringement. An indirect infringer is a type of joint tortfeasor because, while his actions alone do not harm the patentee, his actions along with another cause a single harm to the plaintiff. That "single harm" is direct infringement, which is a strict liability offense limited to those who practice each and every element of the claimed invention. Without direct infringement, the patentee has not suffered a compensable harm. Finally, the majority noted that the patentee has the power to avoid this outcome because he defines the boundaries of his rights in the drafting of the claims. Therefore, because McKesson had not stated a viable legal theory, the Federal Circuit affirmed the SJ of noninfringement for Epic.

Judge Bryson concurred in a one-paragraph statement that he agreed that the result of the decision was correct in light of the precedent, but questioned whether the precedent it was based upon was correct.

In addition, Judge Newman dissented, noting that the majority decision actually contradicted precedent because earlier decisions, including a Supreme Court decision, supported McKesson's joint tortfeasor arguments. Thus, in her opinion, this panel should have followed the "prior panel" rule, and not selectively applied some newly minted panel rulings while ignoring others. In particular, Judge Newman took issue with the "single-entity rule," noting that the panel majority's holding means that even if every step of the claimed method is performed, there can be no infringement, on the theory that there is no direct infringement and thus no indirect infringement. "Some recent panel holdings are of similar vein, holding that neither collaboration nor joint action nor facilitation nor authorization nor invitation can overcome the immutable barrier to infringement when all participating entities are not under the 'control or direction' of the mastermind infringer." Newman Dissent at 2. Judge Newman further stated that the decision means that the '898 patent can never be infringed, which eliminates the patent incentive for such interactive procedures. In Judge Newman's view, patentees are not required to direct claims to a single infringer, and by following the single-entity rule, the Court improperly read a limitation into patent law that Congress had not expressed. Further, in Judge Newman's view, interactive methods that meet all the conditions and requirements of the Patent Act are fully entitled to participate in the patent system. In particular, Judge Newman noted that "[a] patent that can never be infringed is not a patent in the definition of the law, for a patent that cannot be infringed does not have the 'right to exclude'" as granted by 35 U.S.C. § 154(a)(1). Id. at 6. Furthermore, in Judge Newman's opinion, several of the older decisions relied on by the majority do not address the form of interactive situation at issue here and collectively "do not require an absolute 'single-entity rule' of infringement, for none of these cases turned on whether different entities independently or interactively perform different steps of a method claim." Id. at 10. Judge Newman noted that the patentee was not attempting to sue all physicians and all patients using the patented system, but was properly suing the entity, Epic, that induced the interacting parties to infringe. Finally, Judge Newman noted that there has been a recent string of decisions, including Akamai, that contradicted the older cases. She stated that, because there has never been an en banc reversal of those older decisions, the newer decisions cannot constitute Federal Circuit law. According to the dissent, if the proper analysis were applied, the control or direction standard would be applied in light of general tort law principles. Thus, Epic should have been found liable for inducing infringement, which would comply with Federal Circuit precedent, be consistent with patent law, and support the burgeoning field of interactive computer technologies.

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