Supreme Court Rejects Inducement Liability Where There’s No Direct Infringer

By Kerry Timbers. Co-Chair of our Litigation Practice Group

 

The issue of “divided infringement” — where multiple parties “share” infringement by performing different steps of a method claim — has vexed the courts of late, with the Federal Circuit see-sawing between two very different interpretations of the patent law. The Supreme Court has recently entered the fray, unanimously delivering the blunt criticism that the Federal Circuit, which handles all patent infringement appeals, “fundamentally misunderstands what it means to infringe a method patent.”

The bottom line from the Supreme Court, in Limelight Networks v. Akamai Technologies, is that there is no infringement, direct or by inducement, unless one party performs every step of the method, either itself or through control of another, such as by contract.

The patent asserted in Limelight claims a method for delivering electronic data using a content delivery network (CDN). The patent calls for, among other things, certain components of a website, like music or video files, to be “tagged” for storage on certain servers within the CDN. This increases the speed of accessing files.

The alleged infringer, Limelight, operated a CDN and performed all but one step of the patented method. It left to its customers, however, the task of tagging the files they wanted placed on Limelight’s servers. The claimed method was performed in its entirety, but no one actor performed all the steps.

There is good precedent for rejecting the idea that Limelight could be charged with direct infringement. The Federal Circuit held in 2007 and 2008, in BMC Resources. v. Paymentech and Muniauction v. Thomason, that there is no direct infringer unless a single actor performs all the method steps himself, or all the steps are performed on his behalf by another who is controlled by the alleged infringer.

The question in Limelight was whether Limelight might be guilty of inducing infringement, even in the absence of a direct infringer, because it encouraged or instructed the customer to perform the missing step, thereby ensuring every method step would be performed, albeit not by a single actor. Both BMC Resources and Muniauction answered no — to have inducement, you must first have a direct infringer.

In 2011, as we reported when Akamai’s case against Limelight first came before the Federal Circuit, a three-judge panel of that court further tightened the standard, making clear that mere directions or instructions to another entity — absent a legal obligation of that entity to perform the steps — is insufficient to establish direct infringement, and without that, there could be no inducement. (More)