Today the Supreme Court issued its decision in Limelight v. Akamai, ruling that there is no liability for induced infringement under §271(b) induced infringement “when no one has directly infringed the patent under §271(a) or any other statutory provision,” thus reversing the Federal Circuit’s prior and more permissive standard that simply required that all claimed method steps are performed regardless whether there is a §271(a) direct infringer.  The Supreme Court, however, saved for another day and did not rule on what would constitute joint direct infringement or other multiple-actor direct infringement under §271(a).

Background.  The patent concerns a claimed method for delivering content where certain components of a website are “tagged” to be stored on certain servers within a content delivery network (CDN).  The alleged infringer, Limelight, would store tagged content on its servers, but required its customers to do their own tagging of the content.  Thus, Limelight did not itself perform the step of tagging components to be stored on its servers.

While the case was pending, the Federal Circuit issued its Muniauction decision that found direct infringement may occur even though claimed method steps are actually performed by multiple parties if a single defendant “exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party.”  In the Muniauction case, however, there was no direct infringement because, even though the defendant may have performed some claimed steps, the defendant did not exercise control or direction of its customers’ performance of the remaining claimed method steps.  A Federal Circuit panel thus affirmed the finding of no direct infringement by Limelight in this case, because direct infringement liability for one who performs some, but not all, claimed method steps arises only “when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.”

But the Federal Circuit then gave en banc review of the panel decision and then decided there was no need to address §271(a) direct liability issue, because liability in the case exists for §271(b) induced infringement without finding a §271(a) direct infringer.  The en banc Federal Circuit found that requiring proof of direct infringement to support induced infringement was not the same as proving “that a single party would be liable as a direct infringer”; it was sufficient that all steps were performed.

Supreme Court.  The unanimous Supreme Court decision, written by Justice Alito, reversed the en banc Federal Circuit decision.  The Supreme Court noted well-established law that liability for induced infringement required direct infringement, but the Federal Circuit erroneously ruled that direct infringement can exist “independently of a violation of these statutory provisions.”  A method claim “is not infringed unless all the steps are carried out” because each claim element “is deemed material … and a patentee’s rights extend only to the claimed combination of elements, and no further.”  In this case,  based on the Muniaction direct infringement standard, there is no infringement of the claimed method because not all steps performed are attrributable to any one person.  Limelight thus ”cannot be liable for inducing infringement that never came to pass.”

Importantly, the Supreme Court made clear that it was only assuming in this case–without deciding–that the Muniauction standard for direct infringement is correct.  The Supreme Court noted concerns that its ruling would leave loop holes based on the Federal Circuit’s narrow Muniauction rule for direct infringement, stating:

According to respondents, their understanding of the pre-1952 doctrine casts doubt on the Muniauction rule for direct infringement under §271(a), on the ground that that rule has the indirect effect of preventing inducement liability where Congress would have wanted it.  But the possibility that the Federal Circuit erred by too narrowly circumscribing the scope of §271(a) is no reason for this Court to err a second time by misconstruing §271(b) to impose liability for inducing infringement where no infringement has occurred.

Finally, respondents, like the Federal Circuit, criticize our interpretation of §271(b) as permitting a would-be infringer to evade liability by dividing performance of a method patent’s steps with another whome the defendant neither directs nor controls.  We acknowledge this concern.  Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction.  A desire to avoid Muniauction’snatural consequences does not justify fundamentally altering the rules of inducement liability …

Respondents ask us to review the merits of the Federal Circuit’s Muniauction rule for direct infringement under §271(a).  We decline to do so today. … [O]n remand, the Federal Circuit will have the opportunity to revisit the §271(a) question if it so chooses.

Accordingly, the Supreme Court’s decision requires infringement to exist under S271(a) (or some other provision) in order for there to be §271(b) induced infringement.  But the decision also leaves open the now important questions surrounding the narrow Muniauction rule for direct infringement under §271(a).