McKesson Technologies Inc. v. Epic Systems Corp.

April 14, 2011 – Blog Post

The Federal Circuit issued its opinion in McKesson Techs Inc. v. Epic Sys. Corp. on Tuesday, April 12, affirming a grant of summary judgment on appeal from the Northern District of Georgia. This case concerned liability for allegedly inducing infringement of a patented method where no single entity performed all of the steps in the method.

In this case, plaintiff McKesson sued defendant Epic for infringing patented methods of communicating between a healthcare provider and its patients. The asserted claims included a step requiring the patient to initiate communication. Epic, a software development company, licenses the accused MyChart software to its customers, who are healthcare providers. These healthcare providers can offer the MyChart software as an option to their patients. If a patient wishes to use the MyChart software, the patient must “initiate[] a communication” with the MyChart web page.

Epic moved for summary judgment of noninfringement and the district court denied the motion, but Epic later renewed its motion for summary judgment after claim construction and close of discovery. In support, Epic argued that McKesson failed to demonstrate that any single party directly infringed because Epic’s healthcare provider customers neither performed nor exercised control or direction over the “initiating a communication” step. The district court then granted summary judgment of noninfringement, and McKesson appealed to the Federal Circuit.

On appeal, McKesson agreed with Epic that no single party performs all of the steps of any asserted method claim, leaving the court to decide only whether the healthcare provider directly infringed though the patients’ initiation of communication using the MyChart software. Judge Linn, writing for the Federal Circuit, cited previous cases in which it had ruled that two or more parties’ combined steps can infringe a method claim “only if one party exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party.”[1] The Federal Circuit then drew parallels to Akamai v. Limelight, on which we previously reported. In that case the Federal Circuit found that Limelight did not oblige its customers or compel them as an agent to perform their steps of the claimed method. Therefore, the Federal Circuit in that case affirmed judgment as a matter of law of noninfringement. As in Akamai, the court here found no agency relationship or contractual obligation, and therefore upheld noninfringement. McKesson was unable to persuade the court with its arguments that the doctor-patient relationship was a special relationship like an agency relationship or a contractual obligation. Similarly, McKesson’s arguments attempting to broaden joint liability for patent infringement did not succeed in persuading the court.

Judge Bryson filed a very short concurring opinion, agreeing that Judge Linn’s opinion for the court had correctly applied Federal Circuit precedent but noting that anen banc rehearing could potentially overturn the precedent.

Judge Newman filed a dissenting opinion, taking issue with the “single entity rule” that some single entity must directly infringe in order for another party to be indirectly liable for infringement. The dissent raised objections based on two different aspects of this rule: its development and its implications. Judge Newman traced the development of the “single entity rule” from recent Federal Circuit panel decisions in apparent conflict with prior precedent and stated that the court should adhere to its earliest panel precedent unless overruling it en banc. Thus, Judge Newman argued that the “single entity rule” is of faulty judicial origin. The dissent further criticized the “single entity rule” due to its effective exclusion of “interactive methods” from patent protection. Patents for “interactive methods,” claimed methods that involve the participation of more than one entity, would essentially be unenforceable under the “single entity rule,” according to the dissent. However, the dissent argued that computer-based technology has yielded advances in interactive methods and that patent protection should be available for these developments.

Patent applicants should optimally seek claims that can apply to one directly-infringing entity. Even were the Federal Circuit to later hear this case en banc and rule differently, as Judge Newman seems to hope and as Judge Bryson also hints that he might support, a patent owner enforcing a patent can much more easily show infringement of a method claim if it can allege that the defendant itself practices every step of the claim. With that in mind, patent applicants with method claims should strive to keep their claims to the steps that a single entity would perform, where possible.

[1] Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008); BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007).