This past Monday was a busy day for the Supreme Court.  It handed down two unanimous decisions, each overturning lower Federal Circuit Court rulings.  In Nautilus, Inc. v. Biosig Instruments, Inc., the Court dealt with the esoteric question of patent claim construction and scope in view of the standard for definiteness (in layman’s terms, whether the patent claim is clearly written and defined in the patent disclosure).  In Limelight Networks, Inc. v. Akamai Tech. Inc., the Court dealt with the more straightforward question of whether a party, who only carries out some of the steps of a method patent, is liable for infringement if it encourages others to carry out the remaining steps – even if there would otherwise be no direct infringement.  I discuss the Limelightcase in this article.  The Nautilus case will be discussed in a future article.

As background, the plaintiff, Akamai, exclusively licensed US Patent No. 6,108,703 from the Massachusetts Institute of Technology.  The patent relates to a method of delivering electronic data using a content delivery network or “CDN”.  A CDN is simply a group of servers spread out across multiple data centers to enable content, i.e. data, to be more efficiently served to individual internet users.  Under the ‘703 patent, Akamai developed technology for increasing the speed with which internet users can access the content of Akamai customer websites.  The defendant, Limelight, who operates a competing CDN, had designed their system to require its website customers to designate (i.e. “tag”) the data components to be stored on the Limelight servers.  This direct tagging by Limelight’s customers allowed Limelight to avoid having to perform the tagging step under the ‘703 patent.

Akamai sued Limelight for patent infringement in the Massachusetts District Court, where the jury found for Akamai, awarding $40 million in damages.  The victory, however, was short-lived, because the Federal Circuit soon rendered a decision in another method case, Muniauction, Inc. v Thomson Corp.  Limelight moved for reconsideration of the District Court decision in view of Muniauction and obtained a reversal.  This reversal was upheld on appeal by a three judge Federal Circuit panel.  Akamai then obtained en banc review before the full Federal Circuit panel, which vacated and reversed.  The Federal Circuit reasoned that the evidence could support a judgment in favor of Akamai based on the §271(b) inducement statute, because Limelight had carried out some steps of the claimed method and encouraged others to carry out the remaining step, even though no party was liable for direct infringement under the other §271(a) infringement statute.  Limelight then appealed this reversal to the Supreme Court, which granted review.

In a rather short, almost sarcastically terse opinion, Justice Samuel Alito stated that “[t]he Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.”  It was explained that a method patent cannot be infringed unless all the steps are carried out, and that where there has been no direct infringement, there can be no inducement of infringement.  Furthermore, the Court refused to apply a rule where conduct that would be infringing in altered circumstances could then form the basis for infringement in the present case.  The Court stated that “Limelight cannot be liable for inducing infringement that never came to pass”.

The Court, however, did acknowledge the concern that its interpretation could be viewed as permitting 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.  But the Court dismissed this concern by pointing out that the Federal Circuit had created this very problem in their previousMuniauction decision, and that it was now up to the Federal Circuit to choose whether to deal with this issue when the case is back before it on remand.

It is my view the Supreme Court had to issue the decision it did based on the specific question before it:  “Whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. §271(b) even though no one [party] has committed direct infringement under §271(a)”.  Because there was no direct infringement by Limelight, the decision was clear – the Supreme Court could not hold Limelight liable for inducement.  Furthermore, the Supreme Court said it was not going to establish two parallel bodies of infringement law:  one for liability for direct infringement, and one for liability for inducement.  There was no way the Supreme Court would have answered the more challenging question of infringement split amongst multiple parties, whether direct or indirect.  This question could only have been addressed, if the Federal Circuit had reasoned the lower decision differently, if the direct infringement question had been briefed for the Court, and if the actual question of split infringement had been directly raised.  However, the last line of the decision leaves the door open by inviting the Federal Circuit to revisit the direct infringement question.

Once the Federal Circuit has had a chance to lick its wounds from this stinging Supreme Court blow, it will be interesting to see how it will now re-decide Limelight.