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Article: September 2014 Patent Litigation Update

Business Litigation Reports

Supreme Court Raises the Bar for Establishing Induced Infringement in Limelight Networks, Inc. v. Akamai Technologies. In Limelight Networks, Inc. v. Akamai Techs, Inc., __ U.S. __, 134 S.Ct. 2111 (2014), theSupreme Court unanimously reversed an en banc Federal Circuit decision that lowered the bar for establishing induced infringement. Specifically, the Supreme Court reversed the Federal Circuit’s ruling that inducement may be found where there was no single, direct infringer. The Court instead reaffirmed the Federal Circuit’s earlier reasoning that inducement may be found only when thereis a single, direct infringer.

Akamai Technologies is the exclusive licensee of a patent on a method of content delivery that requires a content delivery network (“CDN”) to “tag” content to be stored on its own servers. Limelight Networks, the defendant in Akamai, operates a CDN but does not tag content stored on its servers. Instead, Limelight asks its users to tag their own content to be stored on its servers. Limelight performs each step of Akamai’s patent except for tagging. At trial, the jury found Limelight liable for inducement and awarded $40 million in damages.

Soon after the jury’s verdict, the Federal Circuit decided Muniacuction, Inc. v. Thomson Corp., 352 F.3d 1318 (Fed. Cir. 2008), in which it found that inducement required an act of direct infringement and, further, that direct infringement “requires a single party to perform every step of a claimed method.” Id. at 1329. Limelight moved for reconsideration of the jury’s verdict in light of Muniauction, and the district court granted Limelight’s motion. The Federal Circuit affirmed, explaining that a defendant (such as Limelight) that does not perform all the steps of a claimed method may only be liable for direct infringement if it directed or controlled the actions of other participating parties, or “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.” Akamai Tech. v. Limelight Networks, 692 F.3d 1301, 1320 (Fed. Cir. 2012). Since there was no evidence of an agency relationship or contractual obligation, there was no direct infringement and Limelight therefore could not have induced infringement.

Akamai sought rehearing en banc, which the Federal Circuit granted. The en banc court reversed, finding Limelight liable for induced infringement. It found that even though there was no single direct infringer, inducement could still be established if there was proof that multiple parties committed all the acts necessary to constitute infringement and a single party could have infringed: “[r]equiring proof that there has been direct infringement . . . is not the same as requiring proof that a single party would be liable as a direct infringer.” Id. at 1308-09 (emphasis added). Thus, the Federal Circuit reasoned that a defendant can be liable for inducing infringement under §271(b) even if no one has committed direct infringement within the terms of §271(a).

The Supreme Court reversed the Federal Circuit, holding that, under the Federal Circuit’s precedent, Limelight’s conduct could not induce infringement under §271(b) because no direct infringement under §271(a) had occurred. The Court started with the well-established principle that “inducement liability may arise ‘if, but only if [there is] . . . direct infringement,’” commenting that “[o]ne might think that this simple truth is enough to dispose of this appeal.” Akamai, 134 S. Ct. at 2117. The Court continued, finding that “Limelight cannot be liable for inducing infringement that never came to pass.” Id. at 2118. Notably, the Court’s holding is limited to inducement actions where no one party’s conduct has risen to the level of “directing or controlling” the actions of other entities who may perform some method steps. In cases where a central entity “directs or controls” others,direct infringement under §271(a) occurs and §271(b) liability may attach to an inducer.

One issue left open by the Court, however, is whether direct infringement requires an act of direct infringement by a single entity (or more than one entity controlled in some way by the defendant). In remanding the case, the Court specifically invited the Federal Circuit to revisit this question. The Akamai plaintiffs have announced their intention to argue on remand that, notwithstanding the Supreme Court’s new standard for inducement under §271(b), Limelight should be liable for direct infringement under §271(a).

The impact of Akamai has already been seen in the district courts. In Emblaze Ltd. v. Apple Inc., No. 5:11-cv-01078-PSG, 2014 WL 2772731 (N.D. Cal. June 18, 2014), defendants moved for summary judgment for noninfringement of certain claims based on Akamai, arguing that the plaintiff could not prove infringement because those claims required actions by multiple actors. Id. at *2. As there was no proof of any contractual orother control by defendant over the other actors, the court granted summary judgment. Other courts have been more reluctant to grant summary judgment where there is at least some evidence of a relationship between the defendant and other actors that performed some steps of the claims. Digital Reg of Texas, LLC v. Adobe Systems, Inc., No. C-12-1971-CW, 2014 WL 2604324 (N.D. Cal.June 10, 2014).