On remand from the Supreme Court, the Federal Circuit held that Limelight Networks, Inc. cannot be held liable for infringing an Akamai patent because Limelight did not perform all of the steps of the asserted method claim. As Limelight was not vicariously liable for the actions of its customers, the Court overruled a $45.5 million verdict in favor of Akamai Technologies, Inc. Judge Linn, who drafted the majority opinion, stated that, “…the record contains no basis on which to impose liability on Limelight for the actions of its customers” who performed the remaining method steps. The panel held that direct infringement does not occur unless, “all the steps of the claim are performed by or attributed to a single entity.”
Akamai is the exclusive licensee of U.S. Patent No. 6,108,703 (“the ’703 patent”) that claims a method of delivering electronic data using a content delivery network (“CDN”). Limelight operates a CDN and carries out certain steps claimed in the ’703 patent, but it does not carry out the claimed “tagging” step. Instead, Limelight’s customers carry out this step. Akamai sued Limelight for patent infringement in the United States District Court for the District of Massachusetts.
The District Court found no direct infringement because the “tagging” step—carried out by Limelight’s customers—could not be attributed to Limelight. A Federal Circuit panel affirmed this decision, but sitting en banc, the Court reversed, holding that a defendant who directly performs certain steps of a claimed method and induces another to perform the remaining steps is liable under a theory of inducement—even where no single party is liable for direct infringement. On appeal, the Supreme Court vacated the en banc decision and unanimously held that a defendant cannot be liable for inducing infringement when no party has been shown to directly infringe all the steps of a method claim. The case was remanded to the Federal Circuit.
On May 13, 2015, a divided panel held that Limelight did not directly infringed the ’703 patent under 35 U.S.C. § 271(a). The majority reasoned that Limelight did not perform all of the steps of the method claim and there was no basis to impose liability on Limelight for the actions of its customers. Even though Limelight may have encouraged its customers to carry out the remaining steps of the claimed method, inducement cannot be the basis for finding direct infringement under § 271(a) when the steps of a method claim are divided among multiple entities.
For a finding of direct infringement of a method claim, all of the claimed steps must be carried out by or attributed to a single party or entity. The court noted that if one party acts as a “mastermind” and sufficiently controls or directs the actions of a third party such that the actions of the third party are attributed to the “mastermind,” direct infringement of the method claim is satisfied.
The Court rejected Akamai’s argument that direct infringement occurs when an accused infringer “specifically tells a third party the step or steps to perform,” citing joint tortfeasor principles for support. The Court held that § 271(a) unquestionably does not incorporate joint tortfeasor liability and that §271(b) and §271(c) define the only ways individuals could be held liable if not liable under § 271(a). Any other reading would render §271(b) and §271(c) redundant.
Instead, the Court stated that § 271(a) includes the “traditional principles of vicarious liability.” In order to find vicarious liability for direct infringement, there must be, for example, contractual arrangements, principal-agent relationships, or joint enterprises—none of which were found to be present in this case. Limelight and its customers were found to have acted independently and for their own benefit. The Court found no evidence showing that Limelight’s customers were aware of the steps Limelight was taking and there was certainly no evidence that Limelight and its customers coordinated their actions.
Moreover, the Court stated that Limelight’s customers did not become its agents through the simple act of providing an instruction manual to explain how Limelight’s product can be used. And although Limelight may have entered into a contract with its customers, that contract did not obligate the customers to take any actions. Instead customers could decide for themselves whether to use Limelight’s service. Because customers acted for their own benefit, Limelight could not be vicariously liable for their customer’s actions.
In a dissenting opinion, Circuit Judge Moore said the decision “…creates a gaping hole in what for centuries has been recognized as an actionable form of infringement.”