In its June 2, 2014 decision, Limelight Networks, Inc. v. Akamai Technologies, Inc., the Supreme Court unanimously overturned a previous Federal Circuit ruling, holding that a defendant will not be liable for induced infringement under 35 U.S.C. §271(a) when no one has directly infringed the patent. To infringe a patent under 35 U.S.C. §271(a), one must without permission make, use, offer to sell, or sell a patented invention. Infringement can be more difficult to establish for a method patent because, to establish direct infringement of a method, the defendant must perform every step of the method. If even one step is not performed, the defendant is not liable for direct infringement. (Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318.) Accordingly, patent owners struggled with enforcing their patents when the defendant avoided performing some of the method steps while having their customers perform the remaining method steps.
The Federal Circuit tried to address this struggle when ruling in this case two years ago. At that time, the Federal Circuit held that a defendant that carries out some patented method steps and encourages others to carry out the remaining steps can be found liable for induced infringement, even if no one is liable as a direct infringer. (Opinion at 4, citing the Federal Circuit’s en banc holding in Akamai Technologies v. Limelight Networks, Inc., 692 F. 3d 1301 (Fed. Cir. 2012).) The Federal Circuit based its ruling on 35 U.S.C. §271(b), which states that a person who does not commit direct infringement can be liable for induced infringement if that person asks or induces another to infringe or sells a product with advertising or instructions about an infringing use. This ruling allowed patent owners to enforce their patents against defendants that performed some of the method steps, while having the customer perform the remaining method steps. According to the Federal Circuit ruling, defendants in this type of scenario would be liable for induced infringement, even if no single defendant performed every method step, i.e. directly infringed.
The Supreme Court disagreed. The Supreme Court reasoned that a patent is not infringed unless all the method steps are carried out because "a patentee’s rights extend only to the claimed combination of elements, and no further." (Opinion at 5.) Based on this reasoning, the Supreme Court held, based on its own precedence, that induced infringement may only arise if and only if there is direct infringement. (Opinion at 5, citing Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1966).)
The Supreme Court decision changes how companies evaluate infringement risk. Prior to the Supreme Court decision, a company had to consider not only whether it was directly infringing, but also whether it was an induced infringer. To evaluate whether it was an induced infringer, a company had to look at the steps being performed by its customers or by its suppliers in conjunction with the steps the company was performing. For example, a chemical company had to consider the synthesis steps of its suppliers or its customers in conjunction with the company’s own synthesis steps before evaluating whether the step combination infringes any patents.
With this decision, the infringement risk evaluation has become more simple. Now, a company needs to only consider the steps it performs. No longer can a company be found to infringe under induced infringement by performing some steps while its customers or suppliers performed other steps. This Supreme Court decision did not eliminate all induced infringement. If someone is found to be a direct infringer, there can also be an induced infringer. Although the induced infringement analysis has become more simple, the analysis has not been eliminated completely.
Interestingly, the Supreme Court did not address the question of whether a company could be a joint direct infringer with its customers or suppliers (i.e. the Supreme Court did not overturn the Federal Circuit decision in Muniauction v. Thomson holding there must be a single party direct infringer). The Federal Circuit will likely consider the question based on this recent Supreme Court decision – so a company still needs to be cautious when considering its customers and suppliers and stay tuned for what the Federal Circuit decides about joint direct infringers.