WASHINGTON, D.C. — In a unanimous holding today, the U.S. Supreme Court found that a defendant is not liable for inducing infringement under 35 U.S. Code Section 271(b) when no one has directly infringed under Section 271(a) or “any other statutory provision” (Limelight Networks Inc. v. Akamai Technologies Inc. and The Massachusetts Institute of Technology, No. 12-786, U.S. Sup.; See 5/5/14, Page 8) [lexis.com subscribers may access Supreme Court briefs and the opinion for this case].
Writing for the court, Justice Samuel Alito — in reversing an August 2 012 en banc holding by the Federal Circuit U.S. Court of Appeals — deemed it a “simple truth” that “liability for inducement must be predicated on direct infringement.”
“The Federal Circuit reasoned that a defendant can be liable for inducing infringement under § 271(b) even if no one has committed direct infringement within the terms of § 271(a) (or any other provision of the patent laws), because direct infringement can exist independently of a violation of these statutory provisions. The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent,” the Supreme Court concluded.
Respondent Akamai Technologies Inc. and petitioner Limelight Networks Inc. provide Internet content delivery services and maintain their own content delivery network (CDN). U.S. patent No. 6,108,703, a “Global Hosting System” for website content, is assigned to the Massachusetts Institute of Technology (MIT) and licensed to Akamai. In 2006, Akamai and MIT (collectively, Akamai) sued Limelight in the U.S. District Court for the District of Massachusetts, alleging patent infringement. The case ended in a verdict in favor of Akamai, with jurors finding that Limelight infringed claims 19 to 21 and that none of the infringed claims — which pertain to the use of CDNs to deliver embedded objects — was invalid. Akamai was awarded lost profits and royalty damages of $41.5 million, along with prejudgment interest and price erosion damages of $4 million.
However, Judge Rya W. Zobel granted judgment as a matter of law to Limelight pursuant to Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008) [an enhanced version of this opinion is available to lexis.com subscribers], which held that an accused infringer’s control over its customers’ access to an online system, coupled with instructions on how to use that system, was not enough to establish direct infringement. A divided Federal Circuit in 2010 affirmed the ruling after finding that “what is essential” in evaluating a claim of liability for joint infringement is “whether the relationship between the parties is such that acts of one may be attributed to the other.” The panel said joint infringement “occurs when a party is contractually obligated to the accused infringer to perform a method step.”
En Banc Rehearing
The Federal Circuit granted a petition by Akamai for rehearing en banc, and in August 2012, a six-member majority found that although all claimed steps of a method must be performed to find induced patent infringement, it is not necessary to prove that all steps were committed by a single entity. The majority reconsidered and overruled the Federal Circuit’s 2007 holding in BMC Resources Inc. v. Paymentech LP, 498 F.3d 1373 (Fed. Cir. 2007) [enhanced version] that “some other single entity” must be liable for direct infringement for a different party to be held liable for induced infringement pursuant to 35 U.S. Code Section 271(b).
“Recent precedents of this court have interpreted section 271(b) to mean that unless the accused infringer directs or controls the actions of the party or parties that are performing the claimed steps, the patentee has no remedy, even though the patentee’s rights are plainly being violated by the actors’ joint conduct. We now conclude that this interpretation of section 271(b) is wrong as a matter of statutory construction, precedent, and sound patent policy,” the Federal Circuit majority held.
Limelight filed a petition for certiorari, which was granted in January. The Supreme Court held oral arguments on April 30.
Reversing and remanding, the Supreme Court began by noting that “a method patent claims a number of steps” and that pursuant to Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961) [enhanced version], “the patent is not infringed unless all the steps are carried out.” What’s more, according to the Supreme Court, pursuant to Muniauction, a method patent’s steps have not all been performed unless “they are all attributable to the same defendant, either because the defendant actually performed those steps or because he directed or controlled others who performed them.”
“Assuming without deciding that the Federal Circuit’s holding in Muniauction is correct, there has simply been no infringement of the method in which respondents have staked out an interest, because the performance of all the patent’s steps is not attributable to any one person. And, as both the Federal Circuit and respondents admit, where there has been no direct infringement, there can be no inducement of infringement under § 271(b),” the Supreme Court held.
To hold otherwise would deprive Section 271(b) of “ascertainable standards,” according to the Supreme Court, which mused that “if a defendant can be held liable under §271(b) for inducing conduct that does not constitute infringement, then how can a court assess when a patent holder’s rights have been invaded?”
“What if a defendant pays another to perform just one step of a 12-step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent,” the Supreme Court continued.
No Creation Of Liability
The en banc Federal Circuit’s holding would accordingly require courts to develop “two parallel bodies of infringement law: one for liability for direct infringement, and one for liability for inducement,” according to the Supreme Court. The Supreme Court found support for its interpretation of Section 271(b) in Section 271(f)(1), which imposes liability on parties who supply or cause to be supplied “in or from the United States all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe.”
“As this provision illustrates, when Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so. The courts should not create liability for inducement of noninfringing conduct where Congress has elected not to extend that concept. . . . In this case, performance of all the claimed steps cannot be attributed to a single person, so direct infringement never occurred. Limelight cannot be liable for inducing infringement that never came to pass,” the Supreme Court ruled.
Finally, the Supreme Court declined the respondents’ request for review of the Federal Circuit’s Muniauction standard for direct infringement under Section 271(a). The question presented in Limelight’s petition is “clearly focused” on Section 271(b), and not Section 271(a), the Supreme Court noted; furthermore, because the case will be remanded, “the Federal Circuit will have the opportunity to revisit the §271(a) question if it so chooses.”
Limelight is represented by Aaron M. Panner, John Christopher Rozendaal, Gregory G. Rapawy and Michael E. Joffre of Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington, Alexander F. MacKinnon of Kirkland & Ellis in Los Angeles and Dion Messer of Limelight in Tempe, Ariz.
Seth P. Waxman, Thomas G. Saunders and Thomas G. Sprankling of Wilmer Cutler Pickering Hale and Dorr in Washington; Donald R. Dunner and Kara F. Stoll of Finnegan, Henderson, Farabow, Garrett & Dunner in Washington; Mark C. Fleming, Lauren B. Fletcher, Brook Hopkins and Eric F. Fletcher of Wilmer Cutler in Boston; Robert S. Frank Jr. and Carlos Perez-Albuerne of Choate, Hall & Stewart in Boston; Jennifer S. Swan of Finnegan Henderson in Palo Alto, Calif.; and David H. Judson of Law Office of David H. Judson in Dallas represent Akamai.
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