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Supreme Court Changes the Rules for Induced Infringement

In the long-awaited decision in Limelight Networks, Inc. v. Akamai Techs., Inc., the Supreme Court once again reversed the Federal Circuit. This time, the Court’s reversal involved the issue of indirect infringement. Specifically, the Court held that an accused infringer cannot be liable for inducing infringement under §271(b) where no one has directly infringed under §271(a) or any other statutory provision.

By way of background, Akamai Technologies, Inc., (“Akamai”) is the exclusive licensee of a patent that claims a method of delivering electronic data using a content delivery network (“CDN”). Limelight Networks, Inc., (“Limelight”) also operates a CDN and carries out several of the claimed steps in the patent. But, its customers, rather than Limelight itself, perform a claimed step of the patent known as “tagging.”

Under Federal Circuit case law, most recently refined in Miniauction, Inc. v. Thomson Corp., liability for direct infringement of a method patent requires performance of all steps to be attributable to a single party. The District Court concluded that Limelight could not have directly infringed the patent at issue because performance of the “tagging” step could not be attributed to Limelight. In an en banc decision, the Federal Circuit reversed, holding that a defendant who performed some steps of a method patent and encouraged others to perform the rest could be liable for inducement of infringement even if no single entity was liable for direct infringement.

The Supreme Court disagreed. The Court began its analysis by setting forth what it called “a simple truth”–liability for inducement must be predicated on direct infringement. The court then held that, assuming the Federal Circuit’s holding in Miniauction is correct, Akamai’s claimed method has not been infringed because the performance of all of its steps is not attributable to any one person. And because direct infringement has not occurred, there can be no inducement of infringement under §271(b).

In the Court’s view, the Federal Circuit’s view would deprive §271(b) of ascertainable standards and require the courts to develop two parallel bodies of infringement law: one for direct infringement and another for indirect infringement. Further, the Court’s reading of §271(b) was reinforced by §271(f)(1), which, in the Court’s opinion, illustrates that Congress knows how to impose inducement liability predicated on noninfringing conduct when it wishes to do so.

In rejecting Akamai’s arguments, the Court held that although a would-be infringer could evade liability by dividing performance of a method patent’s steps with another whose conduct cannot be attributed to the defendant, that merely would be a result of the Federal Circuit’s interpretation of §271(a). Moreover, a desire to avoid this consequence does not justify fundamentally altering the rules of inducement liability expressly required by the text of the Patent Act.

The Court concluded its decision by expressly stating a point that was obviously implied in its analysis: it will not determine whether the rule in Miniauction is correct. That is because the question presented here is clearly focused on §271(b) and presupposes that Limelight has not committed direct infringement under §271(a). The Court did say, however, that the Federal Circuit is free to revisit the Miniauction rule on remand.

Whether the Federal Circuit will now change its holding in Miniauction is the subject of debate. While many in the patent bar believe it should be reversed, those that do not think it will be (at least not any time soon) can rely on a few points for support. First, several Federal Circuit judges, including Judges Linn, Dyk, Prost, O’Malley, and Plager, have arguably endorsed the Miniauction holding in various opinions they have authored or joined over the years. Second, the rule in Miniauction and other, similar decisions has stood for several years without any real hint by Congress that it disapproves of the rule or plans to change it.

In the meantime, what seems certain is that litigants will have to consider the Court’s ruling when developing, or attacking, infringement theories. Also, patentees likely will want to consider the ruling when drafting claims that may involve direct infringement by more than one actor.