On August 13, 2015, the Federal Circuit decided en banc¹ to effectively expand the scope of direct infringement under 35 U.S.C. § 271(a).  Akamai Techs., Inc. v. Limelight Networks, Inc., Nos. 2009-1372, -1380, -1416, -1417 (Fed. Cir. Aug. 13, 2015) (en banc).  Specifically, the court held that in cases of divided infringement, one entity could be liable under two circumstances: (1) where the entity directs or controls the other entity’s performance, or (2) where the actors form a joint enterprise.  More significantly, the court greatly enlarged the circumstances under which the direction or control test could be satisfied and made divided direct infringement under 35 U.S.C. § 271(a) a viable option for patent owners.

Background

Akamai sued Limelight in 2006 for infringement of several patents, including U.S. Patent No. 6,108,703 (“the ’703 patent”), which claims methods of delivering content over the Internet.  The claimed methods of the ’703 patent require the steps of “tagging” the content with an identifier for use during delivery and “serving” the tagged content when requested.  Limelight performed each step of the method, but for the tagging and serving steps.  Instead, Limelight required that its customers perform those steps in order to use its service.  Limelight also sent its customers a welcome letter instructing the customer how to use its service, provided step-by-step instructions for using its service, and had its engineers continuously engage with its customers’ activities.

Procedural History

The jury found Limelight liable for direct infringement of the ’703‘ patent and the district court denied Limelight’s motion for judgment of noninfringement as a matter of law, ruling that Akamai had presented substantial evidence that Limelight directed or controlled its customers in performing the steps of the claimed methods that it did not perform.  Before the case closed, however, the Federal Circuit issued its opinion in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), which held that there can be no direct infringement of a method claim unless one party exercises control or direction over the entire process such that every step is attributable to the controlling party.  On a motion for reconsideration, the district court granted Limelight’s motion for judgment as a matter of law and reversed the jury’s verdict.  Limelight appealed to the Federal Circuit.

On appeal, a three-judge Federal Circuit panel affirmed that decision, finding that, even though Limelight provided instructions on how to tag, and tagging and serving were necessary steps in using Limelight’s services, there was nothing to indicate that Limelight’s customers were acting as agents for Limelight. 629 F.3d 1311, 1320 (Fed. Cir. 2010).  The panel further reasoned that Limelight’s customers chose which content, if any, to have delivered by Limelight’s process and performed the “tagging” and “serving” steps accordingly.  Id. at 1321.  Finally, the panel stated that the standard contract did not obligate Limelight’s customers to perform any of the steps.  Id.  Thus, finding insufficient evidence to show that Limelight exercised “control or direction” over the entire process, the panel affirmed the district court’s decision as a matter of law based on Muniauction.  Id. at 1322.

After granting en banc review, the Federal Circuit subsequently reversed the panel’s decision on different grounds, concluding that there was evidence of infringement, albeit under a theory of § 271(b) indirect infringement (inducement) rather than direct infringement under § 271(a).  692 F.3d 1301, 1319 (Fed. Cir. 2012) (en banc).  Limelight challenged this decision by seeking certiorari review in the Supreme Court.

The Supreme Court reversed the Federal Circuit’s decision on induced infringement. 134 S. Ct. 2111 (2014).  First, the Supreme Court stated that inducement liability may arise “if, but only if,” there is direct infringement.  Id. at 2117.  Then, the Court stated that, “[a]ssuming without deciding that the Federal Circuit’s holding in Muniauction is correct, there has simply been no infringement of the [claimed] method, because the performance of all the patent’s steps is not attributable to any one person.”  Id.  The Supreme Court thus reversed the Federal Circuit’s holding regarding inducement, but also stated that “on remand, the Federal Circuit will have the opportunity to revisit the § 271(a) [direct infringement] question if it so chooses.”  Id. at 2021.

On remand, after a preliminary panel review that reaffirmed the original holding against Akamai, 786 F.3d 899 (Fed. Cir. 2015), the Federal Circuit en banc reconsidered the law of direct infringement and held that in a case of direct, but divided, infringement, one entity could be found liable under two sets of circumstances: (1) where one entity directs or controls the other entity’s performance, or (2) where the entities form a joint enterprise.

Regarding the first category, the Federal Circuit held that an actor would be liable if it acts through an agent or contracts with another to perform one or more steps of the claimed method.  But the Federal Circuit further held that such liability can also be found “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.”   797 F.3d 1020, 1020 (Fed. Cir. 2015) (en bank).  In explaining a joint enterprise theory, the Federal Circuit analogized to the Second Restatement of Torts, which states that “[t]he law considers that each is the agent or servant of the others, and that the act of any one within the scope of the enterprise is to be charged vicariously against the rest.”   Id. (quoting Restatement (Second) of Torts § 491 cmt. b).  Thus, the Federal Circuit explained that in patent law, two or more actors can each be liable for the steps performed by the other as if each were a single actor.  The Federal Circuit noted that joint enterprise requires proof of four elements: (1) an expressed or implied agreement between the actors; (2) a common purpose to be carried out by the group; (3) a community of pecuniary interest in that purpose among the members; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control.

The Federal Circuit then reviewed the facts of the case and held that Limelight was liable for direct infringement because it directed or controlled its customers’ performance.  As noted above, the jury heard substantial evidence at trial that Limelight directed or controlled its customers to perform two method steps, namely, “tagging” and “serving,” and Limelight’s standard contract, which customers were required to sign, conditioned the use of its service on the customers performing the tagging and serving steps.  In addition, the Federal Circuit held that Limelight established the manner or timing of its customers’ performance by, among other things, providing step-by-step instructions telling customers how to use its services and continuously engaging with its customers’ activities.  The Federal Circuit stated, “In sum, Lime-light’s customers do not merely take Limelight’s guidance and act independently on their own. Rather, Limelight establishes the manner and timing of its customers’ performance so that customers can only avail themselves of the service upon their performance of the method steps.”  Id.

Akamai has significantly expanded the scope of direct infringement and provided meaningful additional theories to prove direct infringement in divided infringement fact scenarios.  The arsenal of weapons available to the patent owner seeking to enforce its patent against divided infringers can be reinforced by patent prosecutors.  For example, those drafting claims should consider drafting method claims that could be performed by a single actor, where possible.  Prosecutors could focus claim steps from the point of view of a single actor or entity and draft multiple claim sets, each focusing on a single, but different actor from a different perspective.  In addition, prosecutors could continue to draft as many different types of claims as possible, including apparatus, system, and method claims.  Finally, prosecutors should recite interactions or relationships with other unclaimed components or actors, if needed for patentability, rather than explicitly reciting them as part of the claimed combination.  

¹ Judges Taranto, Chen, and Stoll did not participate in this opinion.