On June 2, 2014, the U.S. Supreme Court ruled in a unanimous decision that an entity cannot be liable for inducing patent infringement of a method claim where two or more entities perform the required steps of the claim. The decision limits induced infringement to cases where a single entity performs all the steps of a method claim.
There are generally two types of infringement: direct and indirect. Direct infringement typically occurs when a company accused of infringement performs all the elements or steps of a patent claim. Indirect infringement occurs when someone other than the accused company performs at least some of the elements or steps of the claim. A key type of indirect infringement is called induced infringement. It occurs when an accused infringer actively and intentionally causes another to directly infringe a patent claim.
Prior to yesterday's Supreme Court decision, the Federal Circuit had ruled that a party could induce infringement of a patent where it performed some steps of a patented claim and induced another company or entity to perform the remaining steps of the claim. This Federal Circuit precedent was rejected by the Supreme Court.
The Supreme Court Decision
In Limelight Networks, Inc. v. Akamai Technologies, Inc.,1 the Supreme Court overturned the Federal Circuit's finding of induced infringement by Limelight Networks, Inc. (Limelight), a content delivery network provider that allegedly performed all but one of the steps of an asserted method claim in patent exclusively licensed to Akamai Technologies, Inc. (Akamai). The missing step was allegedly performed by Limelight's customers.2
The Supreme Court held that a method claim is not infringed unless all of the steps in the claim are performed by a single entity.3 The Supreme Court pointed to the Federal Circuit's Muniauction decision regarding direct infringement to complete its analysis.4 The Supreme Court stated, "Assuming without deciding that the Federal Circuit's holding in Muniauction is correct, there has simply been no infringement of the method ... because the performance of all the patent's steps is not attributable to any person."5 It also confirmed that if there is no direct infringement, there can be no inducement of infringement.6
The Supreme Court decision in Limelight makes it more difficult to allege infringement by inducement of a method claim because inducement requires that a party induce a single party or those under the control of the single party. In particular, the decision will make it more difficult to assert business method and software patents because the technology associated with such patents generally require more than a single entity to perform a specific transaction. The impact of the decision will depend on the specific language of an asserted patent claim. Notwithstanding the new Limelight decision on induced infringement, the Supreme Court did not review the Muniauction decision, which required that a single party or those under its control perform all the steps before direct infringement can occur. Therefore, in the future, it is likely that litigants will urge courts to reconsider direct infringement under Muniauction in light of the new Supreme Court guidance.
1 Limelight Networks, Inc. v. Akamai Technologies, Inc, No. 12-786, 571 U.S. ___ (2014).
2 The Supreme Court assumed arguendo that Limelight's customers performed the step for purposes of its analysis and opinion.
4 Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008).
5 Id. at 6.