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En Banc Federal Circuit 'Unanimously Sets Forth the Law of Divided Infringement' in Akamai v. Limelight

August 13, 2015

Today, the full U.S. Court of Appeals for the Federal Circuit “unanimously set forth the law of divided infringement under 35 U.S.C. § 271(a)” and vacated the Court’s May 13, 2015 panel decision. This en banc ruling, inter alia, holds “an entity responsible for others’ performance of method steps in two sets of circumstances: (1) where that entity directs or controls others’ performance, and (2) where the actors form a joint enterprise.” Slip Op. 4. And, the Federal Circuit concluded that “substantial evidence supports the jury’s finding that [Limelight] directly infringes . . . under § 271(a).” Slip Op. 3-4. Today’s ruling may not bring to a close the litigation, which has seen myriad rulings concerning direct infringement under 35 U.S.C. § 271(a) and induced infringement under 35 U.S.C. § 271(b). We previously reported on last year’s decision from the Supreme Court in Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014).

Factual Background and Procedural History
Akamai Technologies, Inc. is the exclusive licensee of U.S. Patent No. 6,108,703, which claims a method of delivering electronic data using a content delivery network, or CDN. Akamai’s claimed method requires “tagging” of data files to be stored on its servers to increase the speed by which that data is ultimately accessed by individual internet users. Limelight Networks, Inc. also operates a CDN and carries out some of the steps of the method claimed in the ’703 patent, but does not itself tag content. Instead, Limelight’s customers perform the tagging step required by the asserted claims.

Akamai filed suit against Limelight in the District of Massachusetts in 2006. A jury returned a verdict of infringement of two independent claims of the ’703 patent and awarded Akamai more than $40 million in damages. Limelight’s motion for judgment as a matter of law was initially denied, but subsequently granted on reconsideration in light of Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), which held that liability for direct infringement could only arise where a single actor (i) performed all steps of the claimed method itself or (ii) exercised “‘control or discretion’ over the entire process such that every step is attributable to the controlling party.” Id. at 1329. The Federal Circuit panel affirmed, finding that Limelight neither performed the required tagging step nor controlled its customers’ tagging. On en banc review, the Federal Circuit reversed the panel decision; declining to revisit direct infringement and imposing liability for inducement where a single actor carries out some steps of the claimed method and encourages others to perform the remaining steps.

The Supreme Court granted certiorari to determine “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 has committed direct infringement under § 271(a).” On June 2, 2014, a unanimous Supreme Court held that liability for inducement may arise only where a patent is directly infringed under 35 U.S.C. § 271(a). The Supreme Court rejected the Federal Circuit’s reasoning that would have permitted induced infringement where multiple parties collectively performed the steps of a claimed method. Under the standard articulated by the Supreme Court, a party may be liable for induced infringement only where performance of all steps of the claimed method are attributed to a single actor.

The Supreme Court declined to reconsider the holding of Muniauction in light of its grant of certiorari to address inducement under § 271(b) on the assumption that direct infringement under § 271(a) was not at issue. The Supreme Court remanded the case and invited the Federal Circuit to “revisit” direct infringement under § 271(a).

The Federal Circuit “Revisits” Direct Infringement Under 35 U.S.C. § 271(a)
Following remand, a split Federal Circuit panel on May 13, 2015 held that performance of all steps of a claimed method may be attributed to a single actor “in a principal-agent relationship, a contractual relationship or in circumstances in which parties work together in a joint enterprise functioning as a form of mutual agency.” That Federal Circuit panel affirmed the district court’s grant of Limelight’s motion for judgment as a matter of law of non-infringement under § 271(a).

On en banc review, in today’s opinion, the Federal Circuit reversed the panel decision, “unanimously set forth the law of divided infringement,” and held that substantial evidence supports finding that all steps of the claimed method are attributable to Limelight.

All method steps may be attributed to a single entity, under the en banc Federal Circuit opinion, when “that entity directs or controls others’ performance.” Slip Op. 4. This “question of fact” is informed by “general principles of vicarious liability” and includes when such an entity: (i) “acts through an agent;” (ii) “contracts with another to perform one or more steps of a claimed method;” or (iii) “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.” Slip Op. 4-5.

The full Federal Circuit also declared that an entity may be held responsible for others’ performance of method steps “where the actors form a joint enterprise.” Slip Op. 4. A joint enterprise, also a “question of fact,” pursuant to the Federal Circuit’s ruling “requires proof of four elements: (1) an agreement, express or implied, among the members of the group; (2) a common purpose to be carried out by the group; (3) a community of pecuniary interest in that purpose, among the members; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control.” Slip Op. 5-6.

If you would like to discuss how this may affect your business, please contact a member of Bryan Cave’s Intellectual Property Client Service Group.

This document provides a general summary and is for information/educational purposes only. It is not intended to be comprehensive, nor does it constitute legal advice. Specific legal advice should always be sought before taking or refraining from taking any action.