Richoh v. Quanta (CAFC 2007-1567)

Invalidity

Ricoh lamely argued that two otherwise invalidating European patents taught away from '109.

"'A reference may be said to teach away when a person of ordinary skill, upon reading the reference, would be discouraged from following the path set out in the reference, or would be led in a direction divergent from the path that was taken by the applicant.'" Optivus Tech., Inc. v. Ion Beam Applications S.A., 469 F.3d 978, 989 (Fed. Cir. 2006) (quoting In re Kahn, 441 F.3d 977, 990 (Fed. Cir. 2006)); see also In re Fulton, 391 F.3d 1195, 1201 (Fed. Cir. 2004) (refusing to conclude that prior art disclosure taught away from the claimed invention where the disclosure did not "criticize, discredit, or otherwise discourage the solution claimed").

Alas, Ricoh offered "no explanation" why "a person of ordinary skill" would be discouraged from adapting what had been taught in the EP patents and gotten where Ricoh did.

Infringement

'955 claims formatting an optical disc as a background process.

The district court examined the evidence and concluded that Ricoh had presented no evidence of any process in the accused devices that starts as a background process. Accordingly, the district court granted summary judgment of noninfringement as to all asserted claims of the '955 patent because none of the accused devices starts a formatting process of an optical disc as a background process. Id. at 1118. On appeal, Ricoh argues that the district court mistakenly read the claims as requiring that the formatting process for the entire optical disc must start as a background process. It is Ricoh, however, that has mistakenly read the district court's opinion.

Infringement of a method claim "occurs when a party performs all of the steps of the process," BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1379 (Fed. Cir. 2007), and Ricoh reads the district court's opinion as improperly applying this standard.

But Ricoh had no evidence that infringement occurred, with the formatting beginning as a background task, or that the district court had got it wrong.

Infringement of '522 and '755 danced around case law distinction between patented processes and devices. And the fact that software is not a method, but "instructions for a computer," a technology the courts have put in patent purgatory. "[S]oftware instructions... can be separated from the hardware that actually carries out those instructions." "[A] party that sells or offers to sell software containing instructions to perform a patented method does not infringe [a method] patent under § 271(a)."

The district court ruled that: "[b]ecause the claims asserted in the '552 patent and the '755 patent disclose methods for writing and recording rather [than] an actual device, to prove direct infringement, it is not enough for plaintiff to show a sale or offer to sell of an accused device." Id. at 1123 (citing NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1321 (Fed. Cir. 2005)). In support of this reading of NTP, the district court relied on this court's opinion in Joy Technologies, Inc. v. Flakt, Inc., 6 F.3d 770, 773 (Fed. Cir. 1993), which stated that "[t]he law is unequivocal that the sale of equipment to perform a process is not a sale of the process within the meaning of section 271(a)." Nevertheless, Ricoh argues that the sale of a method can be distinguished from the sale of an optical drive practicing the method because the software instructions that control the drive can be separated from the hardware that actually carries out those instructions. Because NTP explicitly did not decide the question of whether a "method claim may not be infringed under the 'sells' and 'offers to sell' prongs of section 271(a)," 418 F.3d at 1320-21, Ricoh invites this court to provide an answer and hold that a party may directly infringe a method claim under 35 U.S.C. § 271(a) by offering to include patented methods in software sold as part of the accused devices.

The answer lies in the language of the statute, and we therefore begin with its text. Section 271(a) of Title 35 sets forth the requirements of a claim of direct patent infringement: "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." Ricoh thus argues that the issue in this case is whether "any patented invention" includes "process," such that a party who sells or offers to sell a patented process infringes the patent. As did the court in NTP, we conclude that we need not definitively answer this question to conclude as a matter of law that Quanta did not sell or offer to sell the invention covered by Ricoh's method claims.

In this case, Ricoh has mistakenly confused software with a process as that term has been interpreted by this court. As the court in NTP recognized, "a process is nothing more than the sequence of actions of which it is comprised." 418 F.3d at 1318. This court has also stated that a process "consists of doing something, and therefore has to be carried out or performed." In re Kollar, 286 F.3d 1326, 1332 (Fed. Cir. 2002). In contrast, software is not itself a sequence of actions, but rather it is a set of instructions that directs hardware to perform a sequence of actions. See Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746, 1754 (2007) (recognizing that software is "the 'set of instructions, known as code, that directs a computer to perform specified functions or operations'" (quoting Fantasy Sports Props., Inc. v. Sportsline.com, Inc., 287 F.3d 1108, 1118 (Fed. Cir. 2002)); Microsoft Computer Dictionary 489 (5th ed. 2002) (defining "software" as "[c]omputer programs; instructions that make hardware work."); Alan Freedman, The Computer Glossary (9th ed. 2001) (defining "software" as "[i]nstructions for the computer."). Despite its arguments on appeal, Ricoh itself impliedly acknowledges the distinction between a process and instructions to perform a process in its statements to this court--"the software instructions that control Quanta's drives can be separated from the hardware that actually carries out those instructions." Appellant's Br. at 41.

The cases noted here make clear that the actual carrying out of the instructions is that which constitutes a process within the meaning of § 271(a). With this understanding of "process" in mind, we agree with the reasoning of NTP that the application of the concept of a sale or offer of sale to the actual carrying out of a sequence of actions is ambiguous. 418 F.3d at 1319 ("'[A] process is a series of acts, and the concept of sale as applied to those acts is ambiguous.'" (quoting Minton v. Nat'l Ass'n of Sec. Dealers, Inc., 336 F.3d 1373, 1378 (Fed. Cir. 2003))). Indeed, the Supreme Court recently recognized that "a patented method may not be sold in the same way as an article or device." Quanta Computer, Inc. v. LG Elecs., Inc., 128 S. Ct. 2109, 2117 (2008) (holding that despite this difference, the doctrine of patent exhaustion applied to method claims upon the authorized sale of a device embodying those claims). However, because the allegedly infringing sale in this case was the sale of software (i.e., instructions to perform a process rather than the performance of the process itself), we need not determine whether a process may ever be sold so as to give rise to liability under § 271(a). Accordingly, we hold that a party that sells or offers to sell software containing instructions to perform a patented method does not infringe the patent under § 271(a). Cf. Microsoft, 127 S. Ct. at 1753-55 (holding that as a set of instructions, software is not a component of a patented device within the meaning of § 271(f) until it is reduced to a machine-readable copy).

What all that meant is that no direct infringement. Contributory infringement was more conundrum to the majority that the district court figured, which was that "the drives were also capable of 'substantial noninfringing use'". Judge Gajarsa in dissent argued that Linn and DYK had made a mountain out of a molehill. The historical context is at least interesting.

For purposes of this appeal, we must accept as true Ricoh's evidence that Quanta's drives contain at least some distinct and separate components used only to perform the allegedly infringing write methods. In this posture, this case thus presents an important, and previously unresolved, question concerning the scope of liability for contributory infringement, the construction of § 271(c), and the interpretation of the Supreme Court's decisions in Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 416 (1984), and Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005).

The doctrine of contributory infringement long predated the enactment of § 271(c). See, e.g., Wallace v. Holmes, 29 F. Cas. 74, 80 (No. 17,100) (C.C. D. Conn. 1871) (holding that the sale of an unpatented burner component intended for use in a patented lamp combination contributorily infringed); see also AGro Mfg. Co., Inc. v. Convertible Top Replacement Co., Inc., 377 U.S. 476, 485-88 & n.6 (1963). Enacted as part of the Patent Act of 1952, § 271(c) was designed to codify the contributory infringement doctrine "that previously had been developed by the judiciary." Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176, 179 (1980).⁶ Section 271(c) provides:

Whoever offers to sell or sells within the United States 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.

(emphasis added).

⁶ Although in Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661 (1944), the Supreme Court cast doubt on the continued existence of the contributory liability doctrine, § 271(c) was enacted "for the express purpose of reinstating the doctrine of contributory infringement as it had been developed by decisions prior to Mercoid, and of overruling any blanket invalidation of the doctrine that could be found in the Mercoid opinions." Aro Mfg., 377 U.S. at 492.

The language of the statute incorporates the core notion that one who sells a component especially designed for use in a patented invention may be liable as a contributory infringer, provided that the component is not a staple article of commerce suitable for substantial noninfringing use. As aptly summarized in the House Judiciary Committee report accompanying the enactment of § 271(c), providing liability for contributory infringement reflects that "[o]ne who makes a special device constituting the heart of a patented machine and supplies it to others with directions (specific or implied) to complete the machine is obviously appropriating the benefit of the patented invention." H.R. Rep. No. 82-1923, at 9 (1952). The statutory language "offers to sell or sells . . . or imports into the United States" applies not only to the bare sale of an infringing component, but also to the sale of that component as part of a product or device.

A component that infringes in a larger assembly must be considered contributory infringement, otherwise a liability loophole would exist, the majority reasoned, using copyright cases Grokster and Sony as buttress.

Under such a rule, evasion of the protection intended by Congress in enacting § 271(c) would become rather easy. A competitor who wished to sell hardware that would enable infringement of a patented process could do so without incurring liability for contributory infringement by selling a device that simply embedded the hardware for practicing the patented process within other hardware that also performs another process, or by combining the enabling hardware with other hardware before importing it. Moreover, only the first person in the supply chain (in the example above, the manufacturer who sells the microcontroller) could be liable for contributory infringement. The person who bought that infringing component and assembled it into something else would face no liability for contributory infringement, even if that component were good for nothing but infringement. And most importantly, no § 271(c) liability could ever be found where an infringing component is both manufactured and assembled into something else by the same person. In many of these situations, the only remedy would be against end users of the product for direct infringement. This result would be contrary to what the Supreme Court recognized in Grokster as a fundamental purpose of contributory infringement liability: because "it may be impossible to enforce rights in the protected work effectively against all direct infringers, the only practical alternative [is] to go against the distributor of the copying device for secondary liability." Grokster, 545 U.S. at 929-30.

The supposed analogous copyright cases make for thin gruel in drafting patent case law. The defensiveness is palpable, as the majority spills considerable ink dodging Gajarsa's three dissent bullets, directed at the heart of the logic.

First, the majority ignores the fact that Quanta does not sell or offer to sell the accused components, as the term "sell" is used in § 271(c). Second, the majority opts for an over-inclusive application of § 271(c) that directly contravenes Supreme Court guidance on how this section ought to be interpreted. Third, the conduct to which the majority objects relates to the design and manufacture of "components," even though § 271(c) only addresses the act of selling a component.

The district court's summary judgment denial of active inducement got a shakedown as well at the CAFC, again going with Grokster copyright case law, when it could have more simply determined that factual determination was lacking, as it started with this issue.

Initially, we note that a finding of inducement requires a threshold finding of direct infringement--either a finding of specific instances of direct infringement or a finding that the accused products necessarily infringe. ACCO Brands, Inc. v. ABA Locks Mfrs. Co., 501 F.3d 1307, 1313 (Fed. Cir. 2007); Dynacore, 363 F.3d at 1275-76. However, the district court found that material issues of fact exist as to whether and to what extent direct infringement occurs during the normal use of Quanta drives. Summary Judgment Order, 579 F. Supp. 2d at 1122. On this record, we therefore reject Quanta's argument that the district court's summary judgment of no inducement can be affirmed on the alternative basis that Ricoh has failed to make the requisite showing of direct infringement.

Active inducement remanded for factual determination.

Affirmed in part, vacated in part, remanded in part.