SUMMARY

In Limelight Networks, Inc. v. Akamai Technologies, Inc.,1 the Court unanimously reversed the Federal Circuit Court of Appeals, holding that there can be no statutory liability for inducement to infringe a patent under 35 U.S.C. § 271(b) unless there has been a direct infringement of that patent under § 271(a). Because Federal Circuit precedent requires that all steps of a method patent be performed by a single entity to constitute a violation of § 271(a), yesterday’s decision means that inducement liability under § 271(b) also bears that requirement. The Court suggested that the Federal Circuit may wish to revisit its decision requiring a single actor under § 271(a), so Limelight may not be the last word on inducement liability.

BACKGROUND

Under 35 U.S.C. § 271(a), “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, . . . infringes the patent.” Infringement of a method patent occurs when a person carries out all the steps of that method. It has long been the case that direct infringement of a method patent under § 271(a) is governed by the “single entity rule,” under which liability for direct infringement cannot be established unless a single entity (or multiple entities where one acts vicariously through the others) performs each step. The Court of Appeals for the Federal Circuit applied this rule in Muniauction, Inc. v. Thompson Corp., 532 F.3d 1318 (Fed. Cir. 2008), which rejected a theory of joint infringement under § 271(a). § 271(b) provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

Akamai is the exclusive licensee of a patent that covers a method for delivering web content using a “content delivery network” (“CDN”). Limelight operates a CDN and carries out most of the step of Akamai’s claimed method. However the last step, known as “tagging,” is performed by Limelight’s customers, not by Limelight.

Akamai sued Limelight for patent infringement. Following a trial in which the jury concluded that Limelight had infringed the asserted patents, the district court granted judgment as a matter of law that Limelight could not be liable for infringement because no single entity had performed all of the method steps, and Limelight did not direct or control the actions of its customers.

On appeal, the Federal Circuit, sitting en banc, did not dispute that liability for direct infringement of a method patent under § 271(a) required that all steps be performed by a single entity. It held, however, that inducement liability under § 271(b) did not require that any single person or entity had violated § 271(a), because “infringement” as used in § 271(b) included forms of infringement not addressed in or predicated on § 271(a). In reaching that conclusion, the court overruled a prior panel decision, BMC Resources Inc. v. Paymentech, L.P., 498 F.3d 1373, 1379 (Fed. Cir. 2007), which held that liability for inducing infringement required, as a predicate, a finding of direct infringement by a single entity. For a more detailed analysis of the Federal Circuit’s opinion in Limelight, please see our earlier memorandum. At Limelight’s request, the Supreme Court granted review.

THE SUPREME COURT’S DECISION

The Supreme Court reversed the Federal Circuit, stating flatly that the “Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.”2 The Court reasoned that a method patent “is not infringed unless all of the steps [in the method] are carried out,” and in Muniauction the Federal Circuit held that “a method’s steps have not all been performed as claimed by the patent unless they are all attributable to the same defendant.” 3 Based on these precedents, there could be no direct infringement of Akamai’s patent by Limelight, “because the performance of all the patent’s steps is not attributable to any one person.”4 And where “there has been no direct infringement, there can be no inducement of infringement under § 271(b).”5

In short, the Court held that where direct infringement as covered by § 271(a) has not been shown, there can be no liability for inducement of infringement under § 271(b). The Court’s decision stressed that the Federal Circuit’s approach would leave “infringement” in § 271(b) “untethered to the statutory text,” and would “deprive the statute of ascertainable standards,” requiring courts to develop separate bodies of law for direct infringement and inducement liability.6

The Court declined Akamai’s request to review the Federal Circuit’s holding in Muniauction, because that case dealt with § 271(a), and the question on which the Court granted certiorari presupposed that Limelight had not violated § 271(a). The Court noted that, on remand, the Federal Circuit would have the opportunity to review its holding in Muniauction, should it choose to do so.

IMPLICATIONS

The Supreme Court’s decision restores the law as it existed before the Federal Circuit’s opinion: proving a claim for inducement liability requires a showing of direct infringement by a single entity. The practical effect of this decision is to roll back some of the implications of the lower court’s opinion, which would have allowed patent agents and attorneys to draft method claims without ensuring that that all of the steps will be performed by a single entity, potentially allowing for an expansion in the scope of certain patents. The lower court’s decision would also have relaxed the requirements for bringing an inducement action based on a method patent, potentially increasing the value and number of such claims.

Because the Court declined to review the Federal Circuit’s precedent in Muniauction, the Federal Circuit remains free to overrule that holding. If the Federal Circuit were to do so and embrace a theory of joint infringement under § 271(a), today’s holding would allow for a finding of inducement liability where multiple entities carried out the steps of a patent. In sum, the Court ruled that inducement under § 271(b) requires underlying direct infringement under § 271(a), but did not address whether direct infringement requires that all limitations of a claim be carried out by a single actor (and its agents), as the Federal Circuit held in Muniauction. It remains to be seen whether there is sufficient support in the Federal Circuit to reverse Muniauction.