Inducement Not a Fix For Divided Infringement
On June 2, 2014, the Supreme Court in Limelight Networks, Inc. v. Akamai Technologies, Inc., 572 U.S. ___ (2014), held that a defendant may not be liable for induced infringement of a patent under 35 U.S.C § 271(b) where no one directly infringed the patent under 35 U.S.C § 271(a).
The Supreme Court in Akamai reviewed the underlying en banc decision of the Federal Circuit which held that an accused infringer who performed some, but fewer than all, of the steps of a patented method, but who induced a third party to perform the remaining steps, could be liable for induced infringement. The Supreme Court rejected this expansion of inducement liability and instead found that there can be no liability for induced infringement where there is no underlying direct infringer.
Akamai's Content Delivery System
Akamai operates one of the world's largest content delivery networks (CDNs). Using Akamai's CDN services, website operators can store copies of infrequently changing digital content at geographically diverse locations and enable expedited delivery of that content to users near those locations.
Akamai accused Limelight of infringing its patent covering a method for content delivery over the Internet. The steps of Akamai's method claim at issue included, among others, a "tagging" step which required designating certain elements of a web site to be stored on a content delivery network for efficient delivery to end users.1 While Limelight performed several steps of the claimed method, the tagging step was performed by Limelight's customers.
While Akamai's infringement case was pending before the district court, the Federal Circuit issued its decision in Muniauction.2 In Muniauction, the Federal Circuit addressed when an accused infringer who splits performance of a patented method with a third party can be liable for direct infringement. The patent in Muniauction covered a method for bond auctions over the Internet involving both a bidder and an issuer. Like Limelight (the accused infringer in Akamai), the accused infringer in Muniauction performed some, but not all, of the steps of the patented method; the third-party bidder performed the remaining steps.
The Federal Circuit held in Muniauction that there was no direct infringement because the accused infringer "neither performed every step of the claimed method nor had another party perform steps on its behalf."3 Where the accused infringer does not itself perform every step of a method, the court said, the question is "whether [the accused infringer] sufficiently controls or directs other parties (e.g., the bidder) such that [the accused infringer] itself can be said to have performed every step of the asserted claims."4 The court made clear that "mere 'arms-length' cooperation" is not enough,5 and focused instead on whether the accused direct infringer could be held "vicariously liable for the acts committed by another party that are required to complete performance of a claimed method."6
After the Muniauction decision was issued, the district court in Akamai found that Limelight could not be liable for direct infringement because Limelight neither performed, nor directed or controlled its customers' performance of, the tagging step. Akamai appealed the district court's finding of non-infringement.
Akamai at the Federal Circuit
An initial panel of the Federal Circuit affirmed the district court's finding of non-infringement because Limelight's customers -- not Limelight -- performed the tagging step.7 The court concluded that there was no direct infringement because no single party performed all the steps of the patented method. After the initial panel issued its decision, the Federal Circuit agreed to rehear the case en banc.
The en banc Federal Circuit reversed the district court's finding of non-infringement. The en banc court held that Limelight, while not liable for direct infringement, could be held liable under a theory of inducement because it carried out some steps of the patented method while encouraging (or inducing) its customers to carry out the remaining step.8 The Federal Circuit thus concluded that Limelight could be liable for infringement by inducement even if neither Limelight nor its customers were liable as direct infringers.9 The Federal Circuit reasoned that, even if there was no direct infringer under Muniauction, there was still direct infringement, because all of the steps of the method were actually being performed. Thus, Limelight could be liable for inducing this infringement. Limelight petitioned the Supreme Court for review.
Supremes: Inducement Requires a Direct Infringer
The Supreme Court sharply reversed the Federal Circuit. The Court started from the proposition, disputed by neither the Federal Circuit nor Akamai, that "liability for inducement must be predicated on direct infringement."10 The Court, however, took issue with the Federal Circuit's "free-floating concept of 'infringement'" based on which induced infringement could be found, even where no single party was liable as a direct infringer.11
Relying on, but without endorsing, the Federal Circuit's decision in Muniauction, the Supreme Court found that, because neither Limelight nor its customers performed all the steps of the patented method, there was no single, underlying direct infringer. Without a single, underlying direct infringer, the Court said, there was no underlying act of direct infringement on which to predicate a finding of infringement by inducement.
The Court thus concluded, "Limelight cannot be liable for inducing infringement that never came to pass."12
After Akamai, it is clear that to find liability for induced infringement current law requires an underlying act of direct infringement, as well as a single, underlying direct infringer that performs, controls, or directs each step of the claimed method. Because of this, it will be significantly more difficult for patentees to demonstrate liability for infringement in situations where multiple parties together perform all steps of a patent method.
Still, open questions remain. The Supreme Court in Akamai appeared to be questioning the Federal Circuit's decision in Muniauction, which lays out the standard in multi-party situations for direct infringement of a patented method. Although the Supreme Court did not articulate a particular concern with Muniauction, if the Federal Circuit revisits Muniauction post-Akamai, a new chapter in the ongoing story of divided infringement may be forthcoming.