In Limelight Networks, Inc. v. Akamai Technologies, Inc., the Supreme Court restored the traditional standard of proof for induced infringement and issued a sharp rebuke to the Federal Circuit, stating that the en banc opinion below “fundamentally misunderstands” the law of infringement. In the June 2, 2014 opinion authored by Justice Alito and adopted by a unanimous court, the Court overruled the Federal Circuit and held that there can be no liability for induced infringement under 35 U.S.C. §271(b) when no single party has directly infringed under §271(a). The Court found that this result was mandated by precedent finding infringement of a method claim only when all steps were performed by the same party, and declined to review that precedent because it was not raised in the petition for certiorari.
Akamai makes it more difficult for plaintiffs to prove divided infringement and continues a trend of defendant-friendly Supreme Court rulings likely to curb suits brought by non-practicing entities. This case is particularly relevant to the software, electronics, and life-sciences industries, where performance of multiple operations by different parties is common.
- The Facts and Proceedings Below
Akamai sued Limelight alleging patent infringement. Akamai is the exclusive licensee of MIT’s U.S. Patent No. 6,108,703 that claims a method of delivering electronic data via the Internet. Limelight operates a content delivery network and carries out several, but not all, of the steps claimed in the patent—Limelight’s customers, rather than Limelight itself, perform the final “tagging” step of the patented method.
The jury found Limelight liable for infringement and awarded over $40 million in damages. The district court, however, granted Limelight’s motion for judgment as a matter of law in light of a Federal Circuit case decided after the verdict, Muniauction, Inc. v. Thomson Corp. That case held that liability for direct infringement under §271(a) could only be found if a single party performed every step of the patented method or if a single party exercised direction or control over the performance of each step. In light of Muniauction, the district court found that Limelight could not be liable for direct infringement because Limelight did not itself perform all steps of the method patent and did not direct or control its customers’ tagging. A Federal Circuit panel affirmed on the same reasoning.
- The En Banc Decision and Status of the Law Before Akamai
The Federal Circuit granted en banc review and reversed, overturning the long-standing precedent that liability for induced infringement requires direct infringement by a single entity. Instead, the court concluded that a defendant who performed some of the steps of a patented method and encouraged others to perform the rest could be liable for inducement of infringement under §271(b) even if no single party was liable for direct infringement under §271(a). The court acknowledged that “there can be no indirect infringement without direct infringement” but explained that requiring proof of direct infringement “is not the same as requiring proof that a single party would be liable as a direct infringer” under §271(a). Under this reasoning, performance of the steps of a patented method by multiple, unrelated entities could be an act of “infringement” sufficient to impose inducement liability under §271(b). The en banc court found Limelight liable under this standard because each step of the patented method was, in fact, performed by some party.
- The Court’s Reasoning and Future Guidance
The Supreme Court granted certiorari and reversed, holding that a defendant cannot be liable for inducing infringement under §271(b) when no single party has directly infringed under §271(a). The Court rejected the Federal Circuit’s reasoning, stating that the opinion below “fundamentally misunderstands what it means to infringe a method patent.” The Court reaffirmed the premise that “liability for inducement must be predicated on direct infringement.” Citing Muniauction, the Court explained that a patented method, which claims a number of steps, is not infringed unless performance of each step is “all attributable to the same defendant, either because the defendant actually performed those steps or because he directed or controlled others who performed them.” Where, as here, all the patent’s steps are not attributable to a single entity, there can be no infringement.
The Court’s opinion was an exercise in judicial restraint. First, the Court noted that the language of 35 U.S.C. §271(f)(1) reveals that Congress knows how to impose inducement liability predicated on non-infringing conduct when it wishes to do so. The court should defer to Congress and not create liability where Congress has elected not to do so. Second, the Court acknowledged the concern that its interpretation of §271(b) would allow potential infringers to evade liability simply by dividing the performance of a method patent’s steps with another whom the defendant does not control. The Court suggested this concern arises from the Federal Circuit’s interpretation of §271(a) in Muniauction, which it declined to review because this question was not presented in the petition for certiorari. Ultimately, the Court decided that any desire to avoid this consequence does not warrant “fundamentally altering the rules of inducement liability that the text and structure of the Patent Act clearly require.”
The Court’s restoration of the traditional standard for induced infringement makes it more difficult for patent plaintiffs to prove infringement. Akamai continues the Court’s trend of defendant-friendly rulings, the effect of which is likely to curb suits brought by non-practicing entities. Finally, Akamai is particularly relevant to the software, electronics, and life-sciences industries, where performance of multiple operations by different parties is common—and the Court’s ruling makes it more difficult for plaintiffs to prove infringement in this situation.