The US Court of Appeals for the Federal Circuit, sitting en banc, has expanded the scope of divided infringement (sometimes called joint or split infringement), a form of direct infringement in which the steps of a method claim are being performed by different parties.1 Akamai Techns., Inc. v. Limelight Networks, Inc., Nos. 2009-1372, 1380, 1416, 1417 (Fed. Cir. Aug. 13, 2015) (en banc). The case involves methods of delivering electronic data over a content delivery network, wherein performance of the claim steps was divided between Limelight and its customers.
In 2008, a jury found Limelight liable for patent infringement and awarded Akamai $45.5 million in damages. The district court overturned the jury’s verdict and found Limelight could not directly infringe the method claims because Limelight itself did not perform all of the claim steps or exercise sufficient control over its customers’ performance of the remaining steps to be held liable for their actions. Akamai v. Limelight, 614 F. Supp. 2d 90 (D. Mass. 2009). The Federal Circuit reversed, and held that Limelight could be liable for inducing infringement even though no single party was performing, directly or vicariously, every claim step. Akamai v. Limelight, 692 F.3d 1301 (Fed. Cir. 2012) (en banc). The US Supreme Court reversed the Federal Circuit by holding that there can be no inducement where there is no direct infringement. Limelight Networks, Inc. v. Akamai Techns., Inc., 134 S. Ct. 2111 (2014).
The Supreme Court recognized, however, that its holding may “permit a would-be infringer to evade liability by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls.” (Id. at 2120.) The court encouraged the Federal Circuit “to revisit” this question on remand, because the lower court may have previously “erred by too narrowly circumscribing the scope of [direct infringement of a method claim].” (See id. at 2119-20.)
In other words, where the Federal Circuit in its 2012 decision had sought to expand the law of induced infringement while leaving direct infringement untouched, the Supreme Court restored the previous law of inducement while suggesting that the Federal Circuit, on remand, expand direct infringement when the steps of a method claim are being performed by more than one party.
The Federal Circuit, again sitting en banc, expanded liability for divided infringement by loosening the standards by which a party may be held responsible for the actions of another. Previously, divided infringement required that the parties performing the method steps must be in a principal-agent relationship, parties to a contractual arrangement or members of a joint enterprise. (Slip Op. at 6.) UnderAkamai, divided infringement may also be found “where that entity directs or controls others’ performance,” as when an alleged infringer “conditions [another party’s] 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.” (Id. at 5.) Vicarious direction or control may also be found, as before, when one party “acts through an agent (applying traditional agency principles) or contracts with another to perform one or more steps of a claimed method.” (See id.)
The Federal Circuit also set forth a four-part test for determining when two or more actors form a “joint enterprise,” such that one actor can be held responsible for the actions of the other actor(s) as if it were performing all of the claim steps itself. A joint enterprise requires proof of: (1) an agreement, express or implied, among the members of the group; (2) a common purpose to be carried out by the group; (3) a community of pecuniary interest in that purpose, among the members; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control. (Slip Op. at 5-6.) Although the Federal Circuit had previously recognized that a joint enterprise may give rise to liability for divided infringement, Akamai represents the first time the court has expressly described the elements for proving the existence of such an enterprise.
The Federal Circuit proceeded to find that Limelight’s direction and control over its customers’ performance of certain claim steps (“tagging” and “serving”) was sufficient for it to be held accountable for their actions. In particular, Limelight requires that its customers perform the claimed tagging and serving steps in order to use its content delivery network and to integrate their webpages with Limelight’s hostname. Limelight also instructs its customers on how to use its services, and provides a technical account manager, engineering support and quality assurance testing to its customers. If a customer does not follow Limelight’s instructions, which include tagging, it will not be able to use its services. (Slip Op. at 7-9.) “In sum, Limelight’s customers do not merely take Limelight’s guidance and act independently on their own. Rather, Limelight establishes the manner and timing of its customers’ performance so that customers can only avail themselves of the service upon their performance of the method steps.” (Id. at 9.) Limelight’s vicarious accountability for its customers’ actions, coupled with its own performance of the other claim steps, made it liable for infringement of the method claims. The Federal Circuit again reversed the district court’s judgment of non-infringement as a matter of law, reinstated the jury’s original infringement verdict and damages award, and returned the case to the panel for resolution of all residual issues consistent with its opinion.
The Akamai decision is of particular interest to makers and sellers of electronic devices and software because their products and services, by their nature, may involve performance of certain method steps by their customers, suppliers, subcontractors or other related parties. Akamai should also be reviewed in connection with another recent en banc decision, in which the Federal Circuit held that the US International Trade Commission’s jurisdiction may extend to products that are not infringing at the time of importation, but may be made to infringe after importation by a customer or other party. Suprema, Inc. v. International Trade Comm’n, No. 2012-1170 (Fed. Cir. Aug. 10, 2015) (en banc). The accused products in Suprema were fingerprint scanners and their associated software development kits, which were being used by US customers after importation to develop custom software that operated the scanner in an infringing manner. (See the Dentons client alert of August 13, 2015, “Federal Circuit authorizes ITC to bar imports that may or may not be used to infringe.”) Akamai and Suprema are both instructive in understanding when a party may be liable for the actions of its customers or other third parties.