Wrapping up a trilogy of cases refining the rule regarding “joint” or “divided” infringement of method claims, the Federal Circuit recently ruled that a patentee must show an agency or contractual relationship in order for joint liability on patent infringement to exist.1 It is a longstanding rule that direct infringement of a method claim only inures where a single accused infringer performs each and every step of the method.2 Joint infringement issues can arise when a patent holder asserts method claims over activities whose steps are not carried out by a single party. The Federal Circuit crafted an exception to direct infringement in two previous decisions leading up to Akamai. In BMC Resources, the court explained the “control or direction” test in which a district court can justifiably impose “vicarious liability on a party for the acts of another where the liable party controlled or directed the conduct of the acting party.”3 The court concluded that “it would be unfair indeed for the mastermind in such situations to escape liability” and, therefore, “[a] party cannot avoid infringement . . . simply by contracting out steps of a patented process to another entity.”4
The Federal Circuit… held that the requisite level of control or direction over the acts committed by a third party is met in circumstances in which “the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party.”
The control or direction test explained in BMC Resources left several questions unanswered, such as whether furnishing instructions to another opens the door to liability. Thus, the court clarified the test in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). At issue in Muniauction was an Internet-based auction service. While Muniauction performed several steps of the method claim in the patent at issue, a critical step – bidding – was performed by Muniauction’s customers. However, the patentee, Thomson Corp., argued that because Muniauction furnished its customers with instructions on how to use its online auction system, it directed and controlled those customers and was, therefore, liable as a joint infringer. The Federal Circuit disagreed and held that the requisite level of control or direction over the acts committed by a third party is met in circumstances in which “the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party.”5 The court determined that providing instructions to one’s customers was insufficient to trigger vicarious liability and, therefore, Thomson’s divided infringement theory failed.6
The Federal Circuit further refined this test in its decision in Akamai. Akamai sued its direct competitor Limelight for patent infringement. Limelight performed most of the claimed steps, but had its customers perform some of the other claimed steps. Because the performance of steps was split between Limelight and its customers, Akamai relied on a theory of joint liability, arguing that Limelight controlled or directed the activities of its customers. Acknowledging that the control or direction test established a “foundational basis” on which to determine joint infringement of method claims, the Federal Circuit nevertheless explained in this case that “[w]hile control or direction is a consideration, as is the extent to which instructions, if any, may be provided, what is essential is not merely the exercise of control or the providing of instructions, but rather whether the relationship between the parties is such that acts of one may be attributed to the other.”7 The court stated that such attribution is proper when the relationship between the accused infringer and the acting party is that of principal and agent, or when the acting party is contractually obligated to the accused infringer to perform a method step.8
Applying this rule to the facts of the case, the court determined that Limelight and its customers were not jointly liable for infringing Akamai’s patent. “[T]here is nothing to indicate that Limelight’s customers are performing any of the claimed method steps as agents for Limelight . . . [Limelight’s] customers are provided instructions on use of [Limelight’s] service and are required to perform some steps of the claimed method to take advantage of that service . . . the customers decide what content, if any, they would like delivered by Limelight’s CDN and, then perform the step of “tagging” that content. Limelight’s customers also perform the step of ‘serving’ their own web pages.”9 Moreover, there could be no joint infringement because the contract between Limelight and its customers did not obligate the customers to do anything.10
This case will precipitate an increase in the number of successful divided infringement defenses raised where accused infringers do not perform every step of method claims themselves. In such a situation, the patentee’s infringement claims will fail unless it can show a principle-agent or contractual relationship. Patent applicants should seek to avoid this potential pitfall by structuring their method claims to capture infringement by or enforceable against a single party. In other words, it would be advisable to have at least one independent claim, either a method claim or an apparatus claim, in which every element would be performed by or included in (either literally or by equivalents) a single party.