The Supreme Court’s decision in Limelight v. Akamai yesterday requires a single actor, direct infringer to exist as a prerequisite to any finding of direct or indirect infringement. This decision, in view of the Federal Circuit’s prior decision in Muniauction v. Thomson, renders many multi-actor method claims D.O.A. as no single supplier for many of today’s e-commerce (and other) solutions infringes such claims by “controlling or directing” the actions of one or more vendors, suppliers or customers as is often necessary to practice every step of such claims.

More specifically, in the Limelight decision, respondent Akamai Technologies, Inc. is the exclusive licensee of a patent (U.S. Patent No. 6,108,703 – the “’703 Patent”) that claims a method of delivering electronic data using a content delivery network (CDN) by designating (or “tagging”) content, such as an image or a video, to be stored on third-party servers. When an end user accesses the website, the end user’s browser is directed to retrieve the “tagged” content from the CDN rather than the content provider’s own server. This approach decreases the time needed to access web content. Petitioner Limelight Networks, Inc. operates a competing CDN and carries out several of the steps claimed in the patent, but requires its customers to perform the tagging step.

Since Limelight’s customers and not Limelight itself performed the tagging, the District Court of Massachusetts concluded that Limelight could not have directly infringed the patent. On appeal, the Federal Circuit panel initially affirmed the District Court ruling. However the Federal Circuit, sitting en banc, then reversed and held that a defendant who performed some steps of a method patent and encouraged others to perform the rest could be liable for inducement of infringement even if no single party was liable for direct infringement. See Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 1307 (Fed. Cir. 2012).

In an opinion authored by Justice Alito, the Supreme Court yesterday unanimously reversed the Federal Circuit and held that a defendant cannot liable for inducing infringement under §271(b)when no one has directly infringed under §271(a).

Muniauction: The Supreme Court began its analysis with the Muniauction case where the Federal Circuit held that “direct infringement [under §271(a)] requires a single party to perform every step of a claimed method.” Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318, 1329 (2008) (emphasis added). The Federal Circuit explained that to the extent the steps of a claimed method are undertaken by multiple parties, the “single party” requirement is still satisfied if a single defendant “exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party.” Id.

The Supreme Court then set forth the basic proposition that “liability for inducement must be predicated on direct infringement.” See Aro Mfg. Co., Inc. v. Convertible Top Co., 365 U.S. 336, 341 (1961). Noting the Federal Circuit’s failure to apply this basic proposition as a “fundamental misunderstanding,” the Supreme Court concluded that Limelight cannot be liable for inducing infringement that never occurred directly since the performance of the claimed steps cannot be attributed to one defendant. The Supreme Court warned that the Federal Circuit’s en banc holding in Akamai would “require the courts to develop two parallel bodies of infringement law” where liability under § 271(a) requires a single actor (or a single actor directly controlling others) to perform all steps of the patented method, whereas a single actor is not necessary for inducement infringement liability under § 271(b). For further support, the Supreme Court looked to contributory infringement provisions under § 271(f), which provides for liability for inducing others outside of the United States to perform all or a substantial portion of the components of a patented act. Therefore, the Supreme Court reasoned that if Congress intended to allow inducement liability under § 271(b) for substantial inducement, it would have expressly said so.

The Supreme Court found as unpersuasive Akamai’s arguments analogizing inducement infringement under the Patent Act to third-party liability principles under tort law and to aiding and abetting provisions under federal criminal law. Moreover, the Supreme Court declined to alter its opinion based on any purported problematic consequences that may arise from its interpretation of §271(b) based on the Federal Circuit’s interpretation of §271(a) in Muniauction. Finally, the Supreme Court noted that certiorari was granted on the question relating to §271(b) and declined Akamai’s request to revisit the merits of the Muniauction rule for direct infringement.

The Supreme Court’s decision, in view of Muniauction, likely renders many patented method claims directed to web commerce and similar computer systems effectively unenforceable. To the extent any claimed steps require performance by third party end users, a finding of inducement infringement is effectively precluded unless the patentee can show that the defendant exercises “control or direction” over the end users. Limelight further suggests that a contractual provision instructing one’s customers (vendors or suppliers) to perform certain steps of a method is insufficient in and by itself to establish the required “control or direction” – as the actual tagging of content by Limelight’s customers, “could not be attributed to Limelight” (Limelight, Slip Op., fn. 2, p.4) notwithstanding Limelight’s contract specifically instructing its customers to so “tag.” Inferentially, direct infringement now requires even more “control or direction.”

A potential takeaway is to emphasize the pairing of system claims with method claims to preserve inducement infringement claims in litigation. A point of contrast to the Akamai decision is the Federal Circuit’s treatment of direct infringement of a “system” claim where multiple actors are in physical possession of different elements of the system. See Centillion Data Sys. LLC v. Qwest Comm. Int’l Inc., 631 F.3d 1279, 1283 (2011). The asserted patent in Centillion disclosed the “use” of a system for collecting, processing and delivering information from a service provider, such as a telephone company, to a customer. Id. at 1281. Whereas Muniauction held that a patented process can only be directly infringed by a single actor, the “use” of a system claim contains no such limitation. Instead, direct infringement analysis for system claims depends on where “a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it,” despite the fact that multiple actors operated the components of the system. Id. at 1284. In Centillion, the Federal Circuit rejected the argument that the “use” of a system claim required “a party [to] exercise physical or direct control over each individual element of the system.” Id. The Federal Circuit held that customers “use” the system when the requested information is provided through a “back-end system” maintained by a service provider. Id. at 1285. Thus, the presence of paired system claims with method claims may allow patent holders to circumvent the “single actor” direct infringement limitation in Limelight.

This decision will certainly have a negative impact on non-practicing entities (NPEs) now that the threat of inducement infringement has been significantly restrained.

This decision also places greater emphasis on patent practitioners to draft more precise patent claims to cover “single actor” infringement scenarios. However, patented methods in certain industries are inclined towards, or may even inherently require, the involvement of multiple parties. Here, patent practitioners may focus on drafting system claims in view of Centillion to capture system users as direct infringers and those that put the components of the system into service liable for inducement.

Ultimately, one should not expect any immediate or profound impact from this decision, as further clarification from the Federal Circuit is almost guaranteed based on the Supreme Court’s open invitation to the Federal Circuit to revisit the Muniauction decision on remand.

 

Topics:  Akamai Technologies, Direct Infringement, E-Commerce, En Banc Review, Induced Infringement, Limelight Networks, Miniauction, Patent Infringement, Patent Litigation, Patents, SCOTUS

Published In: Civil Procedure Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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