Supreme Court On Induced Infringement

7.10.14

On June 2, 2014, the U.S. Supreme Court issued an opinion that has the potential to significantly limit a patent holder’s ability to enforce its rights. Ordinarily, to prove direct infringement of a method patent, the patent holder must demonstrate that each step of the patented claim is performed by the defendant. A defendant may also be liable for indirect infringement if he actively induces another to commit infringement. While these concepts are simple on their face, complexity ensues where multiple parties together perform the steps of a method patent.

In Limelight Networks, Inc. v. Akamai Technologies, Inc., et al., 134 S. Ct. 2111 (2014), the Supreme Court answered one of the fundamental questions arising out of this problem: Can a defendant be liable for inducing infringement, even though no one party performs every step of the patented method?

At issue in Akamai was U.S. Patent Number 6,108,703 for a method for delivering electronic content and data using a “content delivery network.”  Essentially, the patent recited steps for connecting internet users with content on a webpage that is stored on a server separate from the rest of the webpage. One of the key steps in this method was “tagging” the data, so that requests for the content would be directed to the separate server. Limelight, the accused infringer, performed several steps of the patented method, but did not itself “tag” any content. Instead, it instructed customers on how to tag content themselves.

Because Limelight did not perform all of the steps in the patented claim, it was not liable for direct infringement. However, rather than performing the “tagging” step itself, it had simply instructed customers on how to perform that step. Even though every step of the claim was being performed by someone, no single party was liable for direct infringement.

The Federal Circuit held that even though there was no direct infringement by a single party, infringement could result from the discrete acts of two separate parties. Neither party could be held liable for direct infringement, but one of the parties may be liable for induced infringement. The court reasoned that Limelight had performed most of the claimed steps, while its customers performed the rest. Since Limelight had induced its customers to complete this last step, it could not avoid liability simply because one party had not performed every step.

The Supreme Court unanimously disagreed. Justice Alito, writing for the Court, articulated that induced infringement necessarily requires a finding of direct infringement. The Court reasoned that if a defendant can be held liable for inducing infringement, even when the conduct that it induced did not in itself constitute infringement, it would be impossible for a court to evaluate whether a patent holder’s rights had been violated.

The Court acknowledged that its holding leaves a large gap in patent holders’ ability to enforce their rights. For example, a would-be infringer may be able to evade liability simply by splitting a set of patented steps between herself and another defendant over which she exerted no control. The Court attributed this anomaly to the Federal Circuit’s test for determining when direct infringement has occurred. In doing so, it seemingly invited the Federal Circuit to broaden its test for direct infringement.

Akamai will likely make it more complicated for plaintiffs litigating software and business method patents as many such patents require multiple actors to perform the steps of a claim. Likewise, defendants may have an easier time seeking dismissals where there is not a single party that either performed or controlled the performance of all steps of an asserted patent claim.