On June 2, 2014, a unanimous U.S. Supreme Court held in Limelight Networks, Inc. v. Akamai Technologies, Inc. that direct infringement by a single party is a prerequisite to a finding of induced infringement. In doing so, the U.S. Supreme Court rejected the U.S. Court of Appeals for the Federal Circuit’s previous ruling that a defendant could be liable for inducing infringement even if direct infringement by a single party did not exist, as long as all elements of a patent claim were performed by some combination of actors.
Background of the Case
Akamai is the exclusive licensee of U.S. Patent No. 6,108,703 (the ‘703 patent). The ‘703 patent claims a method of delivering electronic data using a “content delivery network,” or “CDN.” The method includes a step known as “tagging” that involves designating certain content of a provider’s web site (e.g., large files) to be stored on servers hosted by Akamai and accessed from those servers by Internet users. Limelight Networks also operates a CDN and carries out several steps of the method claimed in the ‘703 patent except for the “tagging” step, which it requires its customers to do on their own.
Akamai sued Limelight Networks in district court for infringement of the ‘703 patent. A jury verdict finding infringement was later overturned by the district court in light of the Federal Circuit’s subsequent decision in Muniauction, Inc. v. Thomson Corp., in which the Federal Circuit held that direct infringement requires a single party to perform every step of a claimed method. The Federal Circuit further held that this requirement is satisfied even though the steps are actually performed by multiple parties if a single party exercises “control or direction” over the entire process such that the performance of every step is attributable to a single party.
A panel of the Federal Circuit upheld the district court’s decision, finding that there was no direct infringement because Limelight Networks did not perform all of the steps of the claimed method and did not control or direct its customers to perform the tagging step. The Federal Circuit then granted en banc review and reversed the panel’s decision. The Federal Circuit, sitting en banc, found that the evidence could support a judgment against Limelight Networks on the theory of induced infringement. Specifically, the court held that liability for induced infringement arises when a defendant carries out some steps of a claimed method and encourages others to carry out the remaining steps even if no single party would be liable as a direct infringer for having either performed all of the steps or having exercised direction or control over the steps performed by other parties.
U.S. Supreme Court Ruling
In rejecting the Federal Circuit holding in Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. Aug. 31, 2012) (en banc), the U.S. Supreme Court stated that “[t]he Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.” Limelight Networks, Inc. v. Akamai Technologies, Inc., 572 U.S. ___ (2014). The U.S. Supreme Court pointed to the Federal Circuit’s decision in Muniauction holding that direct infringement of a method only occurs if all of the steps of the method are “attributable to the same defendant, either because the defendant actually performed all steps or because he directed or controlled others who performed them.” See Akamai, 572 U.S. ____ (2014) at pages 5-6. The Court further held that “where there has been no direct infringement, there can be no inducement of infringement.” See Id. at page 6.
The Court rejected Akamai’s arguments that public policy considerations and legal theories from other areas of law (e.g., tort law, criminal law) dictated a different conclusion. In addition, pointing to other sections of the Patent Act that impose liability for conduct that itself does not constitute direct infringement, the Court noted that if Congress had intended to impose liability for inducing activity that does not itself constitute direct infringement, it would have done so by statute. See Id. at pages 8-9.
While the Court acknowledged the possibility under its holding that a would-be infringer could evade liability by dividing performance of a patented method’s steps with another whom the would-be infringer neither directs nor controls, the Court stated that such an anomaly would result from the Federal Circuit’s interpretation of the statutory language relating to direct infringement and “does not justify fundamentally altering the rules of inducement liability.” See Id. at page 10.
The U.S. Supreme Court’s decision in Limelight Networks, Inc. v. Akamai Technologies, Inc. returns patent owners and alleged infringers to the status quo by requiring direct infringement by a single party as a prerequisite to a finding of liability for induced infringement. This makes enforcement of certain multi-step method patents more difficult against infringers that can separate the functions between them, such as in internet-based technologies and life-sciences diagnostics. Although the Court declined to review the Federal Circuit’s holding in Muniauction, the Court did state that the Federal Circuit will have an opportunity to revisit that decision on remand. Accordingly, it is possible that the Federal Circuit may relax the standard for direct infringement on remand. If it does so, the U.S. Supreme Court may be presented, in the near future, with the question of the proper standard for direct infringement.