In a highly anticipated ruling addressing issues of multi-party patent infringement, the Supreme Court unanimously held that a defendant cannot be liable for inducing infringement under 35 U.S.C. § 271(b) when no single party has directly infringed the patent as defined by 35 U.S.C. § 271(a).  Limelight Networks, Inc. v. Akamai Technologies, Inc. et al., 572 U.S. __ (2014).  At first blush, the decision signals additional hurdles patent owners must overcome to establish infringement in technology areas such as Internet technologies, e-commerce, telecommunications and life sciences.  However, the Court also invited the Federal Circuit to review its analysis of direct infringement under 35 U.S.C. § 271(a), which could completely undo the practical result of the Court’s decision.

Background

Akamai Technologies, Inc. (“Akamai”) accused Limelight Networks, Inc.’s (“Limelight’s”) content delivery network (“CDN”) of patent infringement.  CDN technology allows content providers, i.e., proprietors of web sites, to store certain information such as large files (e.g., video files) on servers maintained by companies such as Akamai or Limelight.  These servers are in turn accessed by Internet users to access the content provider’s website.  The patent claims at issue required the step of “tagging,” which is the process of designating portions of the content provider’s website to be stored on the servers of entities such as Akamai. 

The record was undisputed that Limelight does not “tag” components to be stored on its servers.  Rather, Limelight required its customers do their own tagging.  

Limelight argued that it did not infringe because its customers performed the “tagging” step, therefore it did not perform all of the steps of the patented method (the Court’s opinion focused on method claims rather than patent claims directed to apparatuses or systems).  Akamai countered that although there is no direct infringement, Limelight is liable under an induced infringement theory by inducing users to perform the “tagging” step.

What The Supreme Court Said

The Supreme Court addressed the question of whether a defendant may be liable for inducing infringement of a patent under 35 U.S.C. § 271(b) when no one has directly infringed the patent under 35 U.S.C. § 271(a). 

The Supreme Court’s answer: No, there must be direct infringement in order to find induced infringement.

The Court strongly rejected the Federal Circuit’s reasoning that induced infringement could be found in the absence of direct infringement: “our case law leaves no doubt that inducement liability may arise ‘if, but only if, [there is] . . . direct infringement.” The Supreme Court also criticized the Federal Circuit as “fundamentally misunderstand[ing] what it means to infringe a method”by allowing infringement even though not all of the claimed steps are carried out.

Moreover, the Supreme Court also rejected what it perceived as an attempt by the Federal Circuit to carve out a new basis for liability under the patent laws: “[W]hen Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so. The courts should not create liability for inducement of non-infringing conduct where Congress has elected not to extend that concept.”

What The Supreme Court Did Not Say

The Court’s ruling was a straight-forward analysis of the present state of direct and indirect infringement law. 

However, the Court repeatedly raised the issue of whether the Federal Circuit should revisit its analysis of direct infringement under 35 U.S.C. § 271(a) as set forth in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008):

The Federal Circuit held in Muniauction that a method’s steps have not all been performed as claimed by the patent unless they are all attributable to the same defendant, either because the defendant actually performed those steps or because he directed or controlled others who performed them. See 532 F. 3d, at 1329–1330. Assuming without deciding that the Federal Circuit’s holding in Muniauction is correct, there has simply been no infringement of the method in which respondents have staked out an interest, because the performance of all the patent’s steps is not attributable to any one person.

The Supreme Court further denied the request to review the merits of the Muniauction case and simply noted that the issue of direct infringement was not before the Supreme Court.  The Supreme Court did, however, leave that issue up to the Federal Circuit on remand if the Federal Circuit chooses to revisit the §271(a) question.

Impact

For the time being, the Court’s decision stands as a victory for defendants accused of infringement based on multiple parties’ technology or conduct.  In today’s highly complex world, even the most basic computer functions or transactions, or life sciences protocols, may require multiple parties and the Court’s decision may limit patent owners’ ability to establish infringement in those situations.  However, if the Federal Circuit uses the remanded case, or any other similar case that arises, to expand the scope of direct infringement to more easily allow for multi-party direct infringement as the Court has invited the Federal Circuit to consider, defendants may find themselves in a similar situation facing allegations of infringement even though they do not perform all of the patented steps of a claimed method.