Federal Circuit Broadens Test for Direct Infringement

On August 13, 2015, the Court of Appeals for the Federal Circuit issued an en banc decision in the long standing patent dispute between Limelight Networks, Inc. and Akamai Technologies, Inc. The dispute is centered on an interpretation of what constitutes direct infringement under 35 U.S.C. § 271(a). Traditionally, direct infringement under 35 U.S.C. § 271(a) occurs when all steps of a claimed method are performed by or attributable to a single entity, and that, where more than one actor is involved in practicing the steps, a court must determine whether the acts of one are attributable to the other such that a single entity is responsible for the infringement.

Limelight Networks, Inc. operates a content delivery network and carries out several of the steps claimed in the patent. But instead of performing one of the claimed steps, i.e., tagging components of its customers' websites that it intends to store on its servers, Limelight requires its customers to do their own tagging. Thus, a combination of the steps performed by Limelight and the step performed by its customers was required to meet all the steps of the claim.

In an April 2014 decision, Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S.Ct. 2111 (2014), the U.S. Supreme Court held that a defendant is not liable for inducing infringement under 35 U.S.C. § 271(b) when no single party has directly infringed under 35 U.S.C. § 271(a) or any other statutory provision.

This Supreme Court decision overruled the Federal Circuit’s earlier holding that, because Limelight Networks, Inc. performed some steps of the plaintiff’s method patent and encouraged others to perform the rest, Limelight could be liable for inducement of infringement even though no single party was liable for direct infringement. The Supreme Court also remanded the case back to the Federal Circuit for further proceeding.

In the August 13, 2015 decision, the Federal Circuit set forth an expansive view of when the acts of one can be attributable to another in a direct infringement inquiry. In broadening the recognized conditions for when two separate entities can be found liable for direct infringement, the Federal Circuit overruled previous Federal Circuit decisions, holding that Section 271(a) is not limited solely to principal-agent relationships, contractual arrangements and joint enterprises.

The Federal Circuit enunciated two sets of circumstances in which an entity can be held responsible for others’ performance of method steps:

1. where that entity directs or controls others’ performance; or
2. where the actors form a joint enterprise.

With regard to the first set of circumstances, determining if a single entity directs or controls the acts of another, the Court continues to consider general principles of vicarious liability. In expanding upon previously recognized conditions for vicarious liability, the Federal Circuit found that the steps performed by Limelight’s customers were attributable to Limelight itself based on the vendor/customer relationship. Limelight was thus held liable as a direct infringer. In particular, the Federal Circuit found as follows.

“We conclude, on the facts of this case, that liability under § 271(a) can also be found when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance [by a third party] of a step or steps of a patented method and establishes the manner or timing of that performance. Cf. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005) (stating that an actor “infringes vicariously by profiting from direct infringement” if that actor has the right and ability to stop or limit the infringement). In those instances, the third party’s actions are attributed to the alleged infringer such that the alleged infringer becomes the single actor chargeable with direct infringement.”

Furthermore, with regard to the second set of circumstances, the Court enunciated the required elements in order to prove that a joint enterprise exists:

1. an agreement, express or implied, among the members of the group;
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.

To summarize, the Federal Circuit’s decision makes explicit that direct infringement (and, by extension, inducement of infringement) of a method claim can arise where one party performs some of the steps, and the remaining steps are performed by another party. However, the steps performed by the other party must be directed or controlled by one party or stem from a joint enterprise.