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IP Alert: Federal Circuit Issues New Opinion on Divided Infringement

April 22, 2016

Today, in Mankes v. Vivid Seats Ltd., the Court of Appeals for the Federal Circuit issued a significant opinion under the law of divided patent infringement. In its decision, the court held that the patentee, an individual named Robert Mankes, might be able to establish infringement of a method claim where some of the claimed steps were performed by the defendant and some were performed by a third party, if the plaintiff can prove that the third-party actions are “attributed” to the third party.

The law of divided infringement is somewhat complicated and has been in flux. In last year’s en banc decision in Akamai Technologies Inc. v. Limelight Networks Inc., the Federal Circuit held that attributions of method steps to a third party in a joint-enterprise setting may permit liability “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.” The en banc court further directed that “principles of attribution are to be considered in the context of the particular facts presented.”

In today’s Vivid Seats case, the court concluded that the patent claim at issue might present circumstances in which third-party attribution would be appropriate. Claim 1 of Mankes’s patent reads as follows:

1. A method for operating an Internet based active reservation system for the purchase of goods and services, comprising:

(a) providing an owner event server located at and operated by a local event owner having an available inventory of goods and services at a local site;

(b) providing an active reservation server located at and operated by user remote from said local site, said active reservation server accepting only data from said owner event server and formatting said data for viewing by an Internet-based consumer;

(c) allocating said available inventory by only said owner event server at all times between local inventory and Internet inventory;

(d) adjusting said available inventory by only said event owner at said owner event server at all times based on purchases of goods and services at said local event site;

(e) communicating said allocated Internet inventory only to said active reservation server;

(f) receiving purchase requests for goods and services in said Internet inventory at said active reservation server from said Internet-based consumer;

(g) communicating said purchase requests from said active reservation server to said owner event server;

(h) accepting said purchase requests solely at said local event server and adjusting said Internet inventory only by said owner event server at all times to establish an adjusted Internet inventory;

(i) communicating said accepting and said adjusted Internet inventory from said owner event server to said active reservation server; and

(j) communicating said accepting and confirmation indicia relative thereto from said active reservation system to said Internet consumer.
Mankes alleged that the defendants, Vivid Seats and Fandango, infringed the patent by operating Internet-based reservations systems for tickets for third-party venues. Some of the steps of Mankes’s claims specify operating an online system for selling tickets and communicating sales to the inventory holder, steps which the defendants themselves were alleged to practice. The remaining steps of the claim generally specified maintaining an inventory of tickets and updating the amounts in response to local and Internet sales, which the defendants themselves do not perform. Mankes conceded this, but alleged that local venues perform these steps and that the performance of these steps should be attributed to the defendants.

The Federal Circuit did not today reach any conclusion as to infringement. Nonetheless, following the latest Akamai case, the court concluded that “it does not suffice to reject direct-infringement liability here to conclude that local venues are not agents of the defendants and are not required by the defendants to take the claim steps that they performed.” The court determined that because the venues and the defendants were engaged in an “ongoing interactive commercial relationship,” Mankes therefore should have the opportunity to allege facts that might fall within the ambit of the “conditions participation” standard or that otherwise might justify finding direct infringement liability.

On the above analysis, the court vacated the district court’s grant of judgment on the pleadings and remanded for further proceedings. Specifically, the court held that Mankes must at least have a chance to amend his complaints, if deemed necessary, and instructed the district court to consider the law of divided infringement as applied to the newly amended complaints under the current standards.

Vivid Seats appears to be a significant decision. The case seems to signal a further relaxation of the circumstances under which a method claim may be held to be infringed by multiple actors. Fitch Even attorneys will continue to monitor the law in this area.

For more information, please contact Fitch Even partner Allen E. Hoover, author of this alert.

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