On June 2, 2014, the Supreme Court issued a unanimous decision in Limelight Networks, Inc. v. Akamai Technologies, Inc. (U.S., No. 12–786) reversing an en banc Federal Circuit decision that expanded liability for induced infringement of a method claim.
In BMC Resources v. Paymentech and Muniauction v. Thomson, the Federal Circuit addressed the issue of joint or divided infringement of a method claim. In BMC Resources, the court held that induced infringement cannot occur absent direct infringement by some other single entity. In 2008, the court in Muniauction reinforced the BMC Resources rule that when multiple entities collectively perform all the steps of a claimed method, the claim is directly infringed only if one entity exercised control or direction over the entire performance such that all steps can be attributed to the controlling party.
In Limelight, however, the Federal Circuit—in a six-five decision—eliminated the single-entity requirement for induced infringement of a method claim. The court acknowledged the “well-settled” principle that liability for inducing infringement arises only if there is direct infringement. But the court articulated a new divided-infringement rule that permitted direct infringement to be divided among multiple parties who collectively perform all the steps in a claimed method. In doing so, the Federal Circuit drew a distinction between liability for an act of direct infringement under § 271(a) and an act of “infringement” taking place even if no party could be found liable: “Requiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” Thus, the court did not disturb the single-entity rule as it applies to direct infringement liability.
The Supreme Court disagreed. In a unanimous opinion by Justice Alito, the Court rejected the Federal Circuit’s divided-infringement rule. The Court reasoned that because the Federal Circuit’s interpretation of direct infringement of a method claim under § 271(a) requires that all steps be performed by a single entity, inducement liability under § 271(b) also bears that requirement. Thus, under the Court’s tightened standard, there can be no liability for inducing infringement of a method claim under § 271(b) when no single entity has directly infringed that claim under § 271(a).
At the outset, Justice Alito delivered a stinging rebuke to the Federal Circuit, accusing it of “fundamentally misunderstand[ing] what it means to infringe a method patent.” The Court then emphasized that the Federal Circuit’s own precedent in Muniauction compelled reversal of Akamai. The Court assumed that the Federal Circuit’s decision in Muniauction correctly recited the standard for direct infringement of a method claim. It follows, according to the Court, that there can be no infringement of a method claim—direct or indirect— where “the performance of all the patent’s steps is not attributable to any one person.”
Rejecting a series of arguments set forth by Akamai, the Court addressed the assertion that the Federal Circuit’s interpretation of § 271(b) would 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.” The Court faulted the Federal Circuit’s interpretation of § 271(a) in Muniauction for creating this possible outcome. The Court refused to “fundamentally alter the rules of inducement liability” and apply “some free-floating concept of ‘infringement’” in order to circumvent Muniauction’s consequences.
Notably, the Supreme Court limited its ruling to § 271(b), declining to review “today” the “merits of the Federal Circuit’s Muniauction rule for direct infringement under §271(a).” The Court said that it was “[a]ssuming without deciding” that Muniauction was correctly decided, implying that the decision needs to be revisited. Indeed, in remanding the case, the Court invited the Federal Circuit to “revisit” its standard for direct infringement “if it so chooses.”