■ John P. Fandrey
In August of 2015, the Federal Circuit Court of Appeals issued its second en banc decision in Akamai Techs., Inc., v. Limelight Networks, Inc., Nos. 2009-1372, 2009-1380, 2009-1416, 2009-1417 (Fed. Cir., August 13, 2015), a case which began in 2006. The underlying issue is whether there is liability for so-called “divided” or “split” infringement involving multiple actors. The Federal Circuit explained that in patent infringement cases the acts of one actor may be attributed to another where the other “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.” This test is in addition to the agency relationships, contractual relationships, and joint enterprises that may give rise to direct infringement attributable to a single entity. Despite Akamai’s long procedural history, the Supreme Court’s 2014 opinion and the Federal Circuit’s most recent en banc decision provide two straightforward propositions. First, the Supreme Court has stated that a party cannot be liable for induced infringement where no direct infringement has occurred. Second, the Federal Circuit has expanded the scope of what constitutes direct infringement, holding that where “more than one actor is involved in practicing the steps [of a claimed method], a court must determine whether the acts of one are attributable to [another] such that a single entity is responsible for the infringement.”
In 2006, Akamai Technologies sued Limelight Networks for infringement of three of Akamai’s patents, U.S. Patent No. 6,108,703, U.S. Patent No. 6,553,413, and U.S. Patent No. 7,103,645. Akamai Techs. Inc. v. Limelight Networks, Inc., 629 F.3d 1311, 1316 (Fed. Cir. 2011). Akamai’s patents claim methods for serving web page content over the internet. A jury found that Limelight infringed Akamai’s 6,108,703 patent and awarded over $40 million to Akamai. Akamai Techs. Inc. v. Limelight Networks, Inc., 629 F.3d 1311, 1316 (Fed. Cir. 2011). Akamai proceeded on a theory of joint liability because the defendant, Limelight, did not perform all the steps of the asserted claims itself. Instead, Limelight’s customers performed a step known as tagging. The jury was instructed that Limelight could only be found liable if the jury found that Limelight’s customers were acting under Limelight’s direction and control.
Limelight moved for judgment as a matter of law after the jury returned its verdict. At first, the district court denied the motion. However, shortly after the jury returned its verdict the Federal Circuit Court of Appeals issued its decision in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). Limelight then moved for reconsideration and the district court granted Limelight’s motion finding that Limelight did not infringe Akamai’s patents. On appeal, the Federal Circuit affirmed the district court’s finding of noninfringement citing its decision in Muniauction for the proposition that there can be no infringement unless every step of a patented process is carried out under the control or direction of one party.
The Federal Circuit reheard the case en banc and reversed the district court. Akamai Techs. Inc. v. Limelight Networks, Inc., 629 F.3d 1301 (Fed. Cir. 2012); See also Katherine J. Rahlin, Induced Infringement Broadened, K&L IP News™ (Winter 2012). The Federal Circuit explained that the trial court was correct in its holding that Limelight did not directly infringe Akamai’s patent because it did not direct and control the actions of content providers. However, the Federal Circuit reversed and remanded because it believed Limelight could be liable for inducing infringement.
The United States Supreme Court granted certiorari on the question of “whether a defendant may be liable for inducing infringement of a patent under 35 U.S.C. §271(b) when no one has directly infringed the patent under §271(a) or any other statutory provision.” The Supreme Court, citingAro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961), provided that one cannot be liable for inducement if there has been no direct infringement. Limelight Networks, Inc. v. Akamai Techs., No. 12-786 (United States Supreme Court, June 2, 2014). The Court also stated that “[a] method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out.”
On remand a three judge panel of the Federal Circuit affirmed the district court’s finding of non-infringement. Akamai Techs. Inc. v. Limelight Networks, Inc., 786 F.3d 899 (Fed. Cir. 2015). The panel, with one judge dissenting, held that Akamai did not show that the allegedly infringing activities of Limelight’s customers could be attributed to Limelight. The panel relied on the fact that Akamai did not show that Limelight’s customers were Limelight’s agents, that they were contractually obligated to Limelight or that they were acting in a joint enterprise with Limelight.
2015 En Banc Decision:
The Federal Circuit granted rehearing en banc and ultimately reversed the district court, holding that the jury had substantial evidence upon which to base its verdict of infringement. Akamai Techs. Inc. v. Limelight Networks, Inc., Nos. 2009-1372, 2009-1380, 2009-1416, 2009-1417 (Fed. Cir. August 13, 2015).
The Federal Circuit stated that in a case of divided infringement “a court must determine whether the acts of one entity or party are attributable to another such that a single entity is responsible for the infringement.”
The Court explained that in applying the direction or control test it continues to consider general principles of vicarious liability, such as agency, contractual relationships and joint enterprises. Direction or control will be found if there is an agency relationship or one party contracts with another to perform one or more steps of a claimed method. However, the Court added that liability can also be found when a party “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance. In those instances, the third party’s actions are attributed to the alleged infringer such that the alleged infringer becomes the single actor chargeable with direct infringement.”
In supporting this rule, the court cited Metro-Goldwyn-Mayer Studios, Inc. v. Grokster. 545 U.S. 913 (2005). In Grokster, the Supreme Court found that distributors of software could be held liable for inducing copyright infringement where the distributors knew their software was primarily used for copyright infringement and the distributors encouraged such use.
In applying the test above the Federal Circuit, in Akamai, focused on several facts to find that the jury had substantial evidence to support a finding that performance of the claimed steps was a condition to participating in Limelight’s service. Specifically, Limelight’s contract with its customers outlined the steps that customers had to perform in order to use the service. Limelight’s contract also required that customers provide Limelight with all the “cooperation and information reasonably necessary” for Limelight to implement its service. The court also found that there was substantial evidence to support a finding that the timing or manner of performance was established by Limelight. Here the court highlighted: Limelight’s assignment of a technical account manager to each customer to implement Limelight’s service; Limelight providing a hostname for customers to integrate into their webpages; and Limelight’s engineers assisting with installation and performing quality assurance testing.
It’s easy to see that some method claims provided little protection to patentees. Prior to the Federal Circuit’s most recent Akamai decision, a would-be infringer could avoid infringement liability by doing two things: 1) allowing a third party to practice some of the steps of a claimed method while 2) avoiding creating an agency relationship, a contractual relationship, or a joint enterprise with the third party.
The most recent Akamai decision may strengthen some patents that were not previously seen as being infringed by the acts of single entities or persons. This is because the decision adds to the list of ways to establish liability for direct infringement when the alleged infringement involves more than one actor. In its second en banc opinion the Federal Circuit provided that “a court must determine whether the acts of one are attributable to [another] such that a single entity is responsible for the infringement.” In addition to the traditional tests of vicarious liability such as, agency and contractual relationships, now an entity that “conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and [establishes] the manner or timing of that performance” may be liable for direct infringement.
Akamai may strengthen some method claims. However, attorneys drafting claims should always try to structure the claims so that only one actor’s conduct will be needed to establish direct infringement. This may not always be possible. If the claims involve computer networks this may be extremely difficult. This is because of the ease with which the steps can be distributed among different actors.
Categorised in: Newsletter Vol. 8, Issue 1