Infringing Acts Are Attributable to a Single Entity Who Directs or Controls Third Parties or Forms a Joint Enterprise

Authored by D. Brian Kacedon, Daniel F. Klodowski, and John C. Paul

Abstract

The U.S. Court of Appeals for the Federal Circuit recently held that a single entity may be liable for patent infringement if it directs or controls the performance of others who perform a patented method, or is part of a joint enterprise that performs the method. According to the Court, one way an entity directs or controls the performance of another is by conditioning participation in an activity or the receipt of a benefit upon performance of a step or steps of a patented method and establishing the manner or timing of that performance.

To directly infringe a method claim—a series of steps for performing a function or achieving a result—all of the claimed steps must be performed by, or be attributable to, a single entity. Where multiple actors perform different parts of the claimed method, a single entity must direct or control the performance of the other actors, or be part of a joint enterprise within which the method is performed.

Recently, in Akamai Technologies, Inc. v. Limelight Networks, Inc.,¹ the U.S. Court of Appeals for the Federal Circuit found en banc that one way an entity can direct or control the performance of another is by conditioning participation in an activity or receipt of a benefit upon performance of a step of a patented method and establishing the manner or timing of that performance. The court also stated that parties who enter a joint enterprise can all be charged with the acts of the other, making each liable for the method steps performed by the other.

Background

Akamai Technologies, Inc. (Akamai) sued Limelight Networks, Inc. (Limelight) for patent infringement in 2006, accusing Limelight of infringing claimed methods for delivering content over the Internet. The parties agreed that Limelight’s customers performed certain "tagging" and "serving" steps and that Limelight performed the other steps required by the asserted method claims. The judge instructed the jury that Limelight was responsible for its customers' performance of method steps if Limelight directed or controlled its customers'activities. The jury found that Limelight infringed multiple claims of the method patent.

Limelight later filed a motion seeking to overturn the jury’s verdict after the Federal Circuit’s decision in another case held that direct infringement required a single actor, or a party under its control through an agency or contractual arrangement, to perform each step of a method claim. The district court granted Limelight’s motion and Akamai appealed. The decision was initially affirmed by a panel of three Federal Circuit judges, but subsequently reversed by the entire Federal Circuit sitting en banc, finding that the evidence could support a verdict of induced infringement and that an analysis of direct infringement was therefore unnecessary. The Federal Circuit’s en banc decision was appealed to the Supreme Court. The Supreme Court reversed the Federal Circuit and remanded the case, noting that the Federal Circuit may have too narrowly interpreted the statute governing direct infringement.

The Akamai Decision

On remand from the Supreme Court, the Federal Circuit reversed the district court and reinstated the jury’s verdict of infringement. The Court held that Akamai presented substantial evidence demonstrating that Limelight conditioned its customers'use of its content delivery network on their performance of the tagging and serving steps and that Limelight established the manner or timing of its customers'performance.

To support its holding, the Court observed that Limelight required its customers to sign a standard contract listing the steps they must perform—including the tagging and serving steps—in order to use Limelight’s service. The contract required Limelight’s customers to tag and serve its own content in order to use its products.

As to substantial evidence supporting Limelight’s establishment of the manner or timing of its customers'performance, the Court observed that, upon completing a deal with Limelight, customers received a welcome letter with instructions for using Limelight’s service along with step-by-step instructions that included the claimed tagging step. According to the Court, if customers did not follow the precise steps of the instructions, they were not able to use Limelight’s service. In addition, the Court noted that Limelight’s customer service representatives "continuously engage" with customers performing the claimed method, supporting its conclusion that Limelight established the manner and timing of its customers'performance such that that they could use Limelight’s service only by performing the tagging and serving steps required by the asserted claims.

Strategy and Conclusion

A single entity may be liable for patent infringement if it directs or controls the performance of others who perform a patented method by conditioning participation in an activity or the receipt of a benefit upon performance and establishing the manner or timing of that performance.

Endnotes

¹ The Akamai decision can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2015/Akamai_v_LimelightNetworksInc09-13729-1372Opinion8-11-2015.1.pdf.