"Mastermind" is Required to Find Infringement of a Method Claim by Multiple Cooperating Parties

Muniauction, Inc v. Thomson Corporation [2007-1485] (July 14, 2008) [GAJARSA, Plager, Prost] The Federal Circuit reversed non-obviousness of some claims, reversed as to infringement of the remaining claims of U.S. Patent No. 6,161,099, and vacated $77 million in damages (including for willfulness) and permanent injunction.
SIGNFICANCE: Where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises “control or direction” over the entire process such that every step is attributable to the controlling party, i.e., the “mastermind.” Mere “arms-length cooperation” will not give rise to direct infringement by any party.
BRIEF: While the appeal was pending, the Federal Circuit issued two opinions relevant to issues presented by this case. First, In re Seagate Technology, LLC which changed the standard of willful infringement from one akin to negligence to that of objective recklessness. Second, BMC Resources, Inc. v. Paymentech, L.P. which held that where steps of a method claim are performed by multiple parties, the entire method must be performed at the control or direction of the alleged direct infringer.
Regarding validity, the Federal Circuit found that the expert evidence regarding the prior art was erroneous because it relied on a difference not set forth in the claims, and thus the court concluded that validity was not supported by substantial evidence. The Federal Circuit framed the issue: “A central principle in this inquiry is that “a court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.” The Federal Circuit found that it would have been predictable to use a web browser with the prior art. The Federal Circuit noted that the written description of the ’099 patent itself identifies the invention as using “a conventional Internet browser.” The Federal Circuit was not persuaded by evidence of secondary considerations, noted that at least some of the factors argued by Muniauction lack the requisite nexus to the claims, and that to the extent that some of the factors arguably meet the nexus requirement, their relationship to the claims is simply too attenuated to overcome the strong prima facie demonstration by Thomson that the claims are obvious.
Turning to infringement of the remaining dependent claims, Muniauction argued for joint infringement. The Federal Circuit said that it is axiomatic that a method claim is directly infringed only if each step of the claimed method is performed. The Federal Circuit further said that In BMC Resources, it clarified the proper standard for whether a method claim is directly infringed by the combined actions of multiple parties. The court’s analysis was founded on the proposition that direct infringement requires a single party to perform every step of a claimed method. The Federal Circuit said that where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises “control or direction” over the entire process such that every step is attributable to the controlling party, i.e., the “mastermind.” Mere “arms-length cooperation” will not give rise to direct infringement by any party. The Federal Circuit found that the jury instruction was incorrect, noting the 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 a claimed method. The Federal Circuit concluded that in this case, Thomson neither performed every step of the claimed methods nor had another party perform steps on its behalf, and Muniauction had identified no legal theory under which Thomson might be vicariously liable for the actions of the bidders, so there was no infringement.