Limelight Networks v. Akamai Technologies

The Supreme Court of the United States holds a defendant, in a patent infringement suit, is not liable for inducing infringement under 35 U.S.C. § 271(a) when no one has directly infringed under 35 U.S.C. § 271(a) or any other statutory provision.

(Supreme Court 2014, 12-786)

The opinion for a unanimous Court was delivered by Justice Alito.  The decision reversed the Federal Circuit’s decision that essentially made it easier to prove that a company is liable based on the theory of induced infringement

FACTS:

The patent at issue claims a method of delivering electronic data using a “content delivery network.”  The patent is assigned to the Massachusetts Institute of Technology and exclusively licensed to respondant, Akamai Technologies.   One of the steps of the method includes storing certain components of a content provider’s Web site on servers provided by Akamai.  This step is known as “tagging.”  Petitioner Limelight Networks, Inc. performs several steps claimed in the patent.  However, the customers of Limelight Networks (in an arguable assumption) perform their own tagging.

In 2006, Akamai sued Limelight in the United States District Court for District of Massachusetts for infringement.  A jury, finding Limelight infringed the patent, awarded more than $40 million in damages.  In view of the Federal Circuit’s decision in Muniauction v. Thomson Corp., 532 F.3d 1318 (2008), the District Court granted a motion for reconsideration by Limelight and held that Muniauction precluded a finding of direct infringment under § 271(a).  A panel for the Federal Circuit affirmed.  However, on en banc review, the Federal Circuit reversed holding a judgment could be found in favor of Akamai based on induced infringement.  The Federal Circuit explained that liability could be found when a defendant carries out some of the steps and encourages others to carry out the remaining steps of, even if no one is liable for direct infringement.

OPINION:

In the opinion, the Court stated “[t]he Federal Circuit’s analysis fundamentally misunderstands what is means to infringe a method patent.”  The Court concluded that Limelight cannot be liable for inducing infringement that never occurred directly since the steps performed were not attributed to one defendant. The Court warned that the Federal Circuit’s decision would “require the courts to develop two parallel bodies of infringement law: one for liability for direct infringement and one for liability for inducement.”  The Court also found Alkamai’s arguments comparing induced infringement to tort law unpersuasive.  The case was remanded for further proceedings consistent with the Supreme Court’s opinion.  The Court declined to revisit the merits of Muniauction.

Note:  The Federal Circuit may revisit and/or clarify the Muniauction decision on remand.  The Supreme Court acknowledged the concern that infringement could be avoided by dividing performance of method steps among multiple parties without direction or control.  However, the Supreme Court is leaving the opportunity to revisit the Municauction case with the Federal Circuit.

REVERSED AND REMANDED.