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Akamai Technologies, Inc. v. Limelight Networks, Inc. and McKesson Technologies, Inc. v. Epic Systems Corp.

September 12, 2012

In an en banc opinion that will have a significant impact on the law of infringement for years to come, the Federal Circuit issued its much anticipated decision of Akamai Technologies, Inc. v. Limelight Networks, Inc., Nos. 2009-1372, -1380, -1416, -1417, and McKesson Technologies, Inc. v. Epic Systems Corp., No. 2010-1291 (Fed. Cir. Aug. 31, 2012) (en banc) (collectively “Akamai”). In Akamai, the en banc Court held that a party can show induced infringement under 35 U.S.C. § 271(b) where both the inducer and the induced party each perform some of the steps of a method claim. This decision, joined by six of the eleven Federal Circuit judges, including Chief Judge Rader and Judges Lourie, Bryson, Moore, Reyna, and Wallach, was the Court’s way of resolving the issue of “joint” or “divided” infringement under § 271(b) where two or more entities practice different steps of a method claim.

In explaining the basis for its decision, the Court stated that it was righting a perceived error in the law that a finding of induced infringement required a showing of direct infringement by a single entity, the so-called “single-entity rule.” In this respect, the Court reversed BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), and its progeny of cases. The Court specifically held that “[r]equiring proof that there has been direct infringement as a predicate for induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” Akamai, slip op. at 16. The Court noted the “bizarre result” of the single-entity rule, where a party inducing infringement could avoid all liability by merely performing some of the claimed method steps itself. Id. at 16-17. According to the Court, “[t]he party who actually participates in performing the infringing method is, if anything, more culpable than one who does not perform any steps.” Id. at 17. In terms of intent, the Court explained that “inducement does not require that the induced party be an agent of the inducer or be acting under the inducer’s direction or control to such an extent that the act of the induced party can be attributed to the inducer as a direct infringer.” Id. at 14-15. Rather, the Court noted that “[i]t is enough that the inducer ‘cause[s], urge[s], encourage[s], or aid[s]’ the infringing conduct and that the induced conduct is carried out.” Id. at 15 (alterations in original) (citation omitted).

The Court characterized its decision as in line with the text of § 271(b), which provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” 35 U.S.C. § 271(b). According to the Court, “‘infringement’ in this context appears to refer most naturally to the acts necessary to infringe a patent, not to whether those acts are performed by one entity or several.” Akamai, slip op. at 17. Likewise, the Court concluded that the legislative history supported the interpretation of induced infringement as not requiring that a single entity must perform all steps to infringe the claimed method. The Court cited comments by Judge Rich where he made clear that “the revised provisions on infringement were intended to reach cases of divided infringement, even when no single entity would be liable for direct infringement.” Id. at 19 (emphasis added). The Court also found that principles of criminal and tort laws support the holding that a party may be liable for inducing joint infringement. Id. at 21-26.

The en banc Court thus reversed the previous panels’ decisions and remanded the cases, instructing the district courts that liability could be found under induced infringement. Id. at 35-36. For example, the Court stated that “Limelight would be liable for inducing infringement if the patentee could show that (1) Limelight knew of Akamai’s patent, (2) it performed all but one of the steps of the method claimed in the patent, (3) it induced the content providers to perform the final step of the claimed method, and (4) the content providers in fact performed that final step.” Id. at 36.

Writing separately, Judge Newman agreed with the en banc Court’s decision that the panels’ decisions in both cases should be reversed. Judge Newman, however, dissented from the en banc Court’s “inducement-only rule,” arguing that instead, the Court should “restore direct infringement to its status as occurring when all of the claimed steps are conducted, whether by a single entity or in interaction or collaboration.” Newman, J., dissent at 38. According to Judge Newman, remedies would then be “allocated as appropriate to the particular case.” Id. Even under the inducement standard, however, Judge Newman disagreed with the majority that the cases required remanding. Id. at 31-38. Rather, Judge Newman would have found infringement liability in both cases under either her proposed standard or the inducement standard. Id.

A separate dissent, authored by Judge Linn and joined by Judges Dyk, Prost, and O’Malley, argues that the Court’s decision contravenes the statute and Supreme Court precedent that stand for the proposition that “if there is no direct infringement of a patent there can be no contributory infringement.” Linn, J., dissent at 2 (quoting Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961)). The dissent also cited to passages from the congressional record, including testimony of Judge Rich, in support of its position. Id. at 10. According to the dissent, “[t]he well established doctrine of vicarious liability is the proper test for establishing direct infringement liability in the multi-actor context.” Id. at 26. The dissent further noted that “[a]bsent direct infringement, the patentee has not suffered a compensable harm,” id., and concluded with a recitation of the standards discussed in BMC and Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008).

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