Back in the Limelight

2.23.16

Federal Circuit expands liability for patent infringement

In some welcome news for patent owners, the U.S. Court of Appeals for the Federal Circuit has issued a unanimous decision (Akamai Technologies, Inc. v. Limelight Networks, Inc.) that expands liability for direct infringement. The ruling should make it easier for patentees to establish liability for infringement of patented methods when multiple parties carry out a method’s steps.

Where shall we begin?

Akamai Technologies is the exclusive licensee of a patent for a method of delivering electronic data using a content delivery network (CDN). Limelight Networks also operates a CDN and carries out several of the steps in the patented method. But its customers perform steps known as “tagging.”

Akamai sued Limelight for patent infringement. The trial court concluded that Limelight couldn’t have directly infringed the patent because infringement required tagging and the company didn’t control or direct its customers’ tagging. The court based its ruling on the Federal Circuit’s holding in Muniauction, Inc. v. Thomson Corp., in which it found that direct infringement requires that a single party perform every step of the allegedly infringed method.

The case made it to the U.S. Supreme Court, where, among other things, Akamai asked the Court to review the Muniauction rule for direct infringement. The Supreme Court declined to do so but noted that, because its decision on a different issue required a remand to the Federal Circuit, the appellate court would have the opportunity to review the rule.

What did the court do?

The Federal Circuit did indeed take the opportunity to review its direct infringement rule. Direct infringement occurs when all steps of a claimed method are performed by or attributed to a single entity. If more than one party is involved in performing the steps, a court must determine whether the acts of one are attributable to the other so that a single entity is responsible for the infringement.

According to the court, it will hold an entity (here, Limelight) responsible for others’ (here, Limelight’s customers) performance of method steps in either of two circumstances:

Where that entity directs or controls others’ performance, or
Where the actors form a joint enterprise.

The court explained that, to determine whether a single entity directs or controls the acts of another, it will use general principles of vicarious liability. Thus, a party is liable for direct infringement if it acts through an agent or contracts with another to perform one or more steps of a claimed method.

But the court held that a single entity can also be found to direct or control others’ performance in two other instances — namely, when an alleged infringer:

Compels participation in an activity or receipt of a benefit on the basis of the performance of a step or steps of a patent method, and
Establishes the manner or timing of that performance.

A joint enterprise can be found between two parties where there’s: a) an agreement, b) a common purpose, c) a common pecuniary interest, and d) equal control or voting rights. The court further said that, if two or more parties form a joint enterprise, each party can be charged with the acts of another — making each liable for the steps performed by the others.

In this case, the court found substantial evidence that Limelight directs or controls its customers’ performance of each remaining method step, so that all steps of the method are attributable to Limelight. The company conditioned the use of its network on customers performing the tagging step. And it established the manner and timing of their performance because customers can use the service only by performing the step.

Further expansion ahead?

The Federal Circuit seemed to leave the door open to additional expansion of direct infringement liability. It noted that, in the future, “other factual scenarios may arise which warrant attributing others’ performance of method steps to a single actor.”