On August 13, 2015, the US Court of Appeals for the Federal Circuit held en banc that Limelight Networks Inc. (“Limelight”) was liable for infringement of U.S. Patent No. 6,108,703 (the “’703 patent”).1 The decision is the latest attempt by the Federal Circuit to clarify whether and when a party can be held liable for direct infringement despite not performing all the steps of a patented method.

Patented Method Steps

The method claims of the ’703 patent covers delivering electronic data from the content providers (web-site owners) to individual internet users via a content delivery network. Both Akamai Technologies Inc. (“Akamai”), an exclusive licensee of the ’703 patent, and Limelight operated such content delivery networks. It was undisputed that Limelight’s network carried out several method steps claimed in the ’703 patent.

Limelight argued that it was not liable for infringement because it did not directly perform two steps of the method: the so-called “tagging” step and “serving” content step as defined in the claims. Rather, Limelight argued that these steps were performed by its customers. The “tagging” step included a process of designating components to be stored on the network’s servers by “tagging” the content. Instead of performing this step, as Akamai’s network did, Limelight required customers to tag the content. The “serving” content step was also performed by Limelight’s customers.

When are Steps “attributable to a single party”

In the initial Limelight’s infringement action, which began in 2006, the jury was instructed, based on the standard developed in BMC Resources2 decision that direct infringement could be found if all steps of the method were performed by or were attributable to a single party. The same decision stated that all steps could be attributable to a single party, and it could be held vicariously responsible, if it “directed or controlled” the actions of the other party.3

The jury determined that Limelight was directing or controlling the customers’ performance of the tagging and serving method steps, and Akamai was awarded more than $40 million in damages. However, the jury’s infringement verdict was later set aside by the District Court,4 as a matter of law, as this verdict appeared inconsistent with the subsequent Muniauction5 decision. (InMuniauction, the Federal Circuit also followed BMC Resources, but did not find "direct or control" of customer's performance in quite similar circumstances.)

When reviewing Limelight en banc in 2012, the Federal Circuit refused to revisit the question of direct infringement, instead developing a theory of how Limelight induced infringement.6 According to this theory, one actor could induce infringement by performing some steps of a patented method while inducing another actor to perform the other steps of the patented method. The Federal Circuit’s interpretation of “infringement”, when induced, did not require all method steps to be performed by a single entity.

The Supreme Court reversed the Federal Circuit’s decision and held in 2014 that liability for induced infringement could not arise where there is no direct infringement, and that direct infringement requires all method steps to be performed or to be attributable to one entity.7 The Supreme Court declined to clarify when method steps performed by one entity are attributable to another entity to support a finding of direct infringement. Instead, they invited the Federal Circuit to revisit both the direct and induced infringement questions.

New Test

In its en banc decision dated August 13, 2015, the Federal Circuit revisited the question of when method steps can be attributed to a single entity that does not perform them. According to the Federal Circuit, Limelight would be responsible for customers’ performance of the patented method steps (1) if Limelight and the customers formed a joint enterprise, which was not the case, or (2) if Limelight directed or controlled customers’ performance.

To determine whether Limelight directed or controlled customers’ performance, the Federal Circuit considered general principles of vicarious liability: one actor may direct or control another actor and therefore be liable for patent infringement if it (a) “acts through an agent” or (b) contracts with another actor to perform one or more steps of a claimed method.8

The Court also held that there was another way in which one actor may direct or control another actor and therefore be liable for patent infringement. Citing Metro-Goldwyn-Mayer,the Court held that one actor may also be liable for infringement if it (c) “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance”10 by another actor.

Although the jury of the initial trial at the District Court had been asked whether Limelight was “directing or controlling” customer’s performance of the method steps, the actual meaning of “directing or controlling” was unclear. The Federal Circuit has now clarified the test by providing three kinds of “directing or controlling”.

Application of the Test to the Facts

When applying the new test, the Federal Circuit considered the evidence and facts presented to the jury during the initial trial. For example, Limelight required its customers to sign a standard contract. To have access to the network, the customers had to perform a certain number of steps, including “tagging” and “serving” step.  Limelight also imposed the manner and timing of each customer’s performance by, for example, sending welcome letters which referred to an “integration process”. Such “integration process” included the “tagging” step. Finally, if Limelight’s customers did not follow the steps suggested by Limelight, including the ’703 method’s steps, Limelight’s network service would not be available to them. The Court therefore determined that Limelight directed or controlled customers’ performance because it conditioned participation in an activity upon performance of the steps of the patented method and established the manner or timing of that performance.

The Court held that substantial evidence had been presented to the jury in the initial trial to determine that Limelight directed or controlled its customers’ performance for those method steps of the ’703 patent that Limelight did not perform itself. Therefore, all steps of the method were performed by or were attributable to Limelight and Limelight was held liable for direct infringement.

One party can be held liable for direct infringement of a patented method if all steps of the method were performed by or were attributable to that single party. The Federal Circuit has clarified the test for determining whether the patented method steps, performed by others, can be attributable to an alleged infringer. Under this test, a party can be held liable for direct infringement despite performing only some steps of a patented method if it conditions participation in an activity, or receipt of a benefit, upon performance of the other steps of the patented method and if it establishes the manner or timing of that performance.