Recent Changes in U.S. Patent Law Affecting Cloud Services

Recent Changes in U.S. Patent Law

Affecting Cloud Services

About Goodwin Procter



Global law firm

›

Most of our attorneys in Boston, California, and New York City.



Large technology companies practice

›

160+ attorneys focused on technology clients.

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Many attorneys from Testa Hurwitz, Gunderson Dettmer, Wilson Sonsini.

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Open source clients include Acquia, Citrix (Xen), Engine Yard, Hadapt, Hortonworks, Modo Labs, Pentaho, RStudio, Sencha, Twilio & Vyatta.

Agenda



Statement of the Problem



Patent law in United States, pre-

Limelight



The

Limelight

Decision



The

McKesson

Decision



Recommendations

Statement of the Problem



More data, more businesses moving into the cloud.

›

Not a return to “client-server” model; third parties in the mix.

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Cloud services providers, cloud services consumers, private clouds.



Patent litigation is prevalent, increasing.

›

Outright purchases of patents also increasing.

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Strategic patent litigation in the minority, more troll litigation.



Are you increasing your exposure by migrating to a cloud model?

Patent Law in United States, pre-

Limelight



A patent is a right to stop others; not a right to do something.



Patents can cover methods of doing things, as well as things per se.



A patent is a territorial right.

›

E.g., U.S. patent reaches U.S. activities, but nothing lacking “nexus” with the U.S.



Strongest kind of IP protection there is.

›

Protects against independent reimplementation.

Patent Law in United States, pre-

Limelight

(cont’d)



Joint infringement/a.k.a. divided infringement

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Infringement of a method requires a single entity to perform all the steps of the method.

›

Third parties only count if they are: (a) “agents” of the entity, or (b) acting at the direction and control of the entity.



What about infringement claims involving acts outside the U.S.?

›

Microsoft v. EOLAS/AT&T – Software crossing territorial borders counts as a component of an invention for infringement purposes

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Bayer v. Housey Pharma – But mere information does not

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NTP v. RIM – A system is used where it is used “as a whole” or where it is “controlled”; in contrast, a method is used in a jurisdiction when all of the steps are performed in the jurisdiction

Patent Law in United States, pre-

Limelight

(cont’d)



Induced infringement

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You can also be liable if you get another to infringe a patent.

›

But consider the interaction with joint infringement.



Under these rules, you could reduce patent risk by:

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Shifting operations completely outside of the United States

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Breaking operations into stages and, optionally, placing a stage outside the United States

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Locating apparatus that you don’t control outside the U.S.

The

Limelight

Decision



Akamai

has patent on a method for efficient delivery of web content

›

Place some of a content provider’s content elements on a set of

replicated servers, and

›

Modify the content provider’s web page to instruct web browsers to retrieve that content from the replicated servers



Limelight

›

Maintains a network of servers and allows for efficient content delivery by placing some content elements on its servers

›

Does not modify the content providers’ web pages

The

Limelight

Decision (cont’d)



Finding of non infringement after jury verdict

›

For a party to be liable for induced infringement, some other single entity must perform all steps of method

›

No one infringing entity - Limelight’s customers (and not Limelight itself) performed one of the steps of the claimed method.



Decision reversed on appeal. New rules announced.

›

Limelight would be liable for inducing infringement if Limelight:

▪

Knew of Akamai’s patent

▪

Performed all but one of the steps of the claimed method,

▪

Induced the content providers to perform the final step, and

Law of Induced Infringement and New Question



35 U.S.C. § 271(b)

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“Whoever actively induces infringement of a patent shall be liable as an infringer”

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A party who advises, encourages, or otherwise induces others to engage in infringing conduct is liable



Inducement requires that

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Alleged infringer knowingly induced infringement, and

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Possessed specific intent to encourage another’s infringement



No indirect infringement without direct infringement

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Inducement gives rise to liability only if the inducement leads to actual infringement



Should a party inducing infringing conduct be liable when no single

“induced” entity commits all of the infringing acts or steps?

Court’s Reasoning



Proving that there

has been

direct infringement is not the same as

proving that a single party would be

liable

as a direct infringer

(original emphasis)



No reason to immunize an inducer

›

If the inducer knowingly induced others to commit the acts necessary to infringe a patent, and

›

Those others commit those acts

›

Simply because the parties structured their conduct so that no single defendant committed all of the acts constituting infringement



Statute and underlying policy do not distinguish between inducing

one direct infringer and several actors who infringe together

The

McKesson

Decision



McKesson has a patent on a method of electronic communication between healthcare providers and their patients



Steps are divided between

› Patients who initiate communications, and

› Healthcare providers, who perform the remainder of the steps



McKesson loses on summary judgment

› Patients (and not Epic’s direct customers) performed the step of initiating the communication



On appeal, Epic can be held liable for inducing infringement if it:

› Knew of McKesson’s patent

› Induced the performance of the claimed method steps, and

› Those steps were performed

Recommendations – for Patent Holders



Always file system claims



Draft method claims to avoid joint infringement.

›

One party per group of claims: CSP, cloud customer, or end user.



Patent technology visible to end user.

›

Easier to identify infringement.



Patent what is new and non-obvious.

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Not enough to move known service to the cloud.



File multiple applications for each invention.

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Recommendations – for Cloud Users



Cloud migration doesn’t make patent exposure better or worse.

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BUT!, be careful not to move regulated data in contravention of law

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E.g., personally-identifiable information, healthcare data, controlled technologies, etc.



Still prudent to make cloud vendor bear that risk.

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Can’t diligence their technology, can’t control their operations.



Freedom to operate opinions under old standard may be obsolete

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Old standard: no direct infringement, no indirect infringement

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New standard: do you know customers are infringing using your products/services?

Questions?