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Liability For Inducing Patent Infringement Arises Only With Proof Of Direct Infringement

The U.S. Supreme Court held in Limelight Networks Inc. v. Akamai Technologies Inc., Case No. 12-786 (June 2, 2014) (available here) that a defendant can only be held liable for inducing infringement of a patent under 35 U. S. C. §271(b) when another is found to have directly infringed the patent under §271(a) or any other statutory provision.  The Court left open the issue of divided infringement, when one party does some steps in a method patent claim and another party does other steps in the claim, but it did comment on divided infringement ruling in Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318 (2008).

The facts highlight the patent inducement issue addressed by the Court.  Massachusetts Institute of Technology (MIT) owns the Patent No. 6,108,703 (‘703 patent) for a method of delivering electronic data using a “content delivery network,” or “CDN.” Akamai Technologies, Inc., is MIT’s exclusive licensee. Akamai maintains a system of geographically distributed servers. Akamai’s customers are “content providers” who need to serve-up large files, such as video and music files, to end-users.  Under contract, Akamai delivers web site content to individual Internet users. The ‘703 patent claims require that files on Akamai’s servers be tagged, stored and accessed by Internet users. By aggregating the data demands of multiple content providers with differing peak usage patterns and serving that content from multiple servers in multiple locations, as well as by delivering content from servers located in the same geographic area as the users who are attempting to access it, Akamai is able to increase the speed with which Internet users access the content of its customers’ web sites.

Limelight Networks, Inc., also operates a CDN and carries out several of the steps claimed in the ‘703 patent. But instead of tagging those components of its customers’ web sites that it intends to store on Limelight servers (a step included in the ‘703 patent), Limelight requires its customers to do their own tagging. Akamai claims that Limelight “provides instructions and offers technical assistance” to its customers regarding how to tag, 629 F. 3d 1311, 1321 (CA Fed. 2010).  “[T]he record is undisputed that Limelight does not tag the components to be stored on its servers.”

In 2008, the Federal Circuit decided Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318 (2008) wherein the court rejected a claim that the defendant’s method, involving bidding on financial instruments using a computer system, directly infringed the plaintiff’s patent. The defendant performed some of the steps of the patented method, and its customers, to whom the defendant gave access to its system along with instructions on the use of the system, performed the remaining steps.

The Federal Circuit court held that the defendant in Muniauction was not liable for direct infringement because Muniauction did not exercise control or direction over its customers’ performance of those steps of the patent that the defendant itself did not perform.

Although the jury found that Limelight infringed the ‘703 patent, the trial court granted Limelight’s motion for judgment as a matter of law (JMOL) based upon the Muniauction decision.  An initial Federal Circuit decision  affirmed the JMOL, explaining that a defendant that does not itself undertake all of a patent’s steps can be liable for direct infringement only “when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps.” 629 F. 3d, at 1320.  A subsequent en banc review by the Federal Circuit reversed the JMOL because the evidence could support Akamai’s case on a theory of induced infringement.   The en banc court did not revisit the issue of divided infringement.

Per the Supreme Court, “Our case law leaves no doubt that inducement liability may arise ‘if, but only if, [there is] … direct infringement.’ Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S 336, 341 (1961).” opn. pg. 5.

“A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. See, e.g., Aro, supra, at 344 (a ‘patent covers only the totality of the elements in the claim and . . . no element, separately viewed, is within the grant’). This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. ‘Each element contained in a patent claim is deemed material to defining the scope of the patented invention,’ Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U. S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.” opn. pg. 5.

“Assuming without deciding that the Federal Circuit’s holding in Muniauction is correct, there has simply been no infringement of the method in which respondents have staked out an interest, because the performance of all the patent’s steps is not attributable to any one person. And, as both the Federal Circuit and respondents admit, where there has been no direct infringement, there can be no inducement of infringement under §271(b).”  opn. pg. 6.

“In both Deepsouth Packing Co. v. Laitram Corp., 406 U. S. 518 (1972), and this case, the conduct that the defendant induced or contributed to would have been infringing if committed in altered circumstances: in Deepsouth if the machines had been assembled in the United States, see id., at 526, and in this case if performance of all of the claimed steps had been attributable to the same person.” opn. pg. 7.

“Muniauction (which, again, we assume to be correct) instructs that a method patent is not directly infringed and the patentee’s interest is thus not violated-unless a single actor can be held responsible for the performance of all steps of the patent. Because Limelight did not undertake all steps of the ‘703 patent and cannot otherwise be held responsible for all those steps, respondents’ rights have not been violated.”  opn. pg. 8.

“Finally, respondents, like the Federal Circuit, criticize our interpretation of §271(b) as permitting a would-be infringer to evade liability by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls. We acknowledge this concern. Any such anomaly, however, would result from the Federal Circuit’s interpretation of §271(a) in Muniauction. A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability.”  opn. pg. 10.