Federal Circuit Reaffirms Its Expansive View of Divided Infringement

On December 19, 2017, the Court of Appeals for the Federal Circuit issued a decision in Travel Sentry, Inc. v. Tropp, No. 16-2386 (Fed. Cir. Dec. 19, 2017). The claims at issue relate to methods of improving airline luggage inspection through the use of dual-access locks. Travel Sentry, a lock manufacturer, had entered into an agreement with the United States Transportation Security Administration (TSA), by which TSA could unlock, inspect and relock Travel Sentry-marked luggage using a master key. Travel Sentry was considered to perform the first two steps of the claimed method steps, which included making and marketing the locks and master keys. TSA was considered to perform the last two steps, which included signaling to a luggage screener, using an identification structure, that the lock can be unlocked with a master key, and using the master key to open the lock pursuant to a prior agreement, after finding the identification structure on a piece of luggage. One of the issues decided by the court relates to divided infringement.

Legal Background

Divided infringement relates to a situation in which multiple actors are involved in the infringement of a method patent, and no single actor has performed all of the method steps.

The U.S. Supreme Court has recently opined on the proper legal standard for determining liability in a divided infringement situation. In Limelight Networks, Inc. v. Akamai Technologies, 134 S. Ct. 2111 (2014), the Court held that induced infringement cannot occur without direct infringement, and direct infringement requires that the performance of all the method steps be attributable to a single person. This is sometimes referred to as the “single-actor rule.”

On remand of the Akamai decision from the Supreme Court, the Federal Circuit issued an en banc opinion reaffirming its rather inclusive view of the scope of divided infringement. The Federal Circuit stated that “[w]here more than one actor is involved in practicing the steps, a court must determine whether the acts of one are attributable to the other such that a single entity is responsible for the infringement.” See Akamai Tech., Inc. v. Limelight Networks, Inc., No. 2009-1372 (Fed. Cir. Aug. 13, 2015). The Federal Circuit determined that an entity is responsible for another’s performance of method steps if that entity directs or controls the other’s performance, or if the actors form a joint enterprise. The Federal Circuit articulated a two-prong test to determine whether an entity directs or controls another’s performance. The test required that 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.”

Procedural History

In Travel Sentry, the District Court entered summary judgment that Travel Sentry and its licensees do not directly infringe any of the method claims, because the above-noted agreement between Travel Sentry and TSA did not establish the “control or direction” required for joint infringement liability. The District Court reasoned that the agreement was a mere “understanding” between Travel Sentry and TSA, and such understanding did not constitute a contract which renders Travel Sentry vicariously liable for TSA’s actions.

Analysis

The Federal Circuit held that the District Court had misapplied the above-mentioned Akamai two-prong test.

First Prong:

With respect to the first prong, the District Court held that TSA does not benefit from its cooperation with Travel Sentry, because TSA does not need Travel Sentry “to carry out the luggage screening mandated by Congress.” The District Court added that TSA “could design its own keys, break the locks on the luggage, or screen the luggage in another way.” The Federal Circuit determined that the District Court had been overly broad in its identification of the activity for which a benefit was received. The Federal Circuit held that the relevant activity relates more specifically to the use of master keys defined in the agreement. The Federal Circuit added that reasonable jurors could conclude that TSA receives benefits from using the Travel Sentry system. These benefits could include a reduction in the number of claims for broken luggage, a promotion of TSA’s public image, and a streamlined luggage screening process.

Turning to the “condition” requirement of the first prong, the Federal Circuit considered whether Travel Sentry conditioned TSA’s participation. The Federal Circuit reasoned that the above-noted benefits could only be realized if TSA performed the last two steps of the claims.

Second Prong:

With regard to the second prong, the Federal Circuit determined that a reasonable jury could find that Travel sentry had established the manner or timing of TSA’s performance. The Federal Circuit pointed to Travel Sentry’s ownership of trademarks relating to the identifying marks on the locks, and to Travel Sentry’s control of the design of the locks and master keys. The Federal Circuit reasoned that, based on this evidence, a jury could find that Travel Sentry had established the manner of TSA’s performance.

The Federal Circuit added that, while Travel Sentry does not supervise TSA’s conduct and does not require TSA to perform “technological feats” in exchange for access to Travel Sentry’ technology, Travel Sentry could only receive the benefits afforded by the Travel Sentry system if it uses the master keys distributed by Travel Sentry to open the locks pursuant to the agreement.

The Federal Circuit also observed that Travel Sentry “‘has the right and ability to stop or limit’ TSA’s ability to practice the final two claim steps—and thus receive the benefits that follow from practicing those steps—through a number of means, including terminating the [agreement], discontinuing its practice of replacing passkeys that are damaged or lost, and changing the design of future locks such that the keys previously provided to TSA no longer work.”

The court noted a common thread between Akamai and the present case: “evidence that a third party hoping to obtain access to certain benefits can only do so if it performs certain steps identified by the defendant, and does so under the terms prescribed by the defendant.” The Travel Sentry case thus indicates the Federal Circuit’s expansive view of the scope of direct infringement in a situation of divided infringement.

To review a copy of the opinion, please click here.