Intellectual Property Law

February 20, 2013

Mobile banking and the Federal Circuit's "divided infringement" decisions

The rapid growth of the mobile banking industry, the raft of litigation that has followed such growth, and why the Federal Circuit's much-anticipated "divided infringement" decisions in Akamai v. Limelight and McKesson v. Epic Systems have done little to provide clarity on a legal issue that is critical to that industry is discussed in a recent Manatt-authored article. This article, "The Hard Cell" (featured in the February 7, 2013 issue of Intellectual Property Magazine click here), recognizes a mobile banking industry that is projected to reach $617 billion by 2016 and that is marked by substantial patent litigation often based on method patents that implicate multiple layers of technology and multiple parties (e.g., banks, consumers, network providers).

Because of the multiple layers of technology and the multiple parties in the mobile banking industry, the following question becomes crucial: To what extent can there be direct liability for patent infringement when two or more entities (rather than a single entity) together perform each step of a method patent (i.e., When is there direct liability for divided infringement)?. While a four-justice dissent in the Akamai/McKesson decisions would have established a clear rule holding there is never direct liability for divided infringement, and a one-justice dissent would have embraced imposing direct liability for divided infringement, the six-justice majority essentially punted on the key issue presented. The six-justice majority, instead, developed a theory of indirect liability (i.e. inducing infringement) when two or more entities together perform each step of a method patent. In the wake of the Akamai/McKesson decisions, direct liability for divided infringement remains an open question.

Why It Matters
Knowing the parameters for when there is direct liability for divided infringement is not only important for the development and deployment of technologies that stand at the heart of the booming mobile banking industry, but similar questions and concerns are raised in other high-growth industries that rely on increasingly dispersed and interdependent technologies, such as Internet or cloud-based services.

To read the full article, click here.