Supreme Court Reverses Federal Circuit on Induced Infringement in Limelight Networks, Inc. v. Akamai

On June 2, 2014, the Supreme Court issued a unanimous decision in Limelight Networks, Inc. v. Akamai Technologies, Inc., reversing the en banc Federal Circuit decision and holding that there can be no liability for induced infringement under 35 USC § 271(b) when there has been no direct infringement under 35 USC § 271(a). The Court did not dig deeper into the problem of establishing infringement when all of the steps of a method claim are not performed by a single party, and refused to review the Federal Circuit decision in Muniauction because it was not embraced by the petition for certiorari.

The Prior Proceedings

The patent at issue was MIT’s U.S. Patent 6,108,703 (assigned to Akamai), directed to methods of delivering electronic data.  Limelight was accused of infringing the patent, but did not itself carry out each of the method steps. Instead, its customers carried out one of the recited steps.

A jury found Limelight liable for direct infringement, but the district court granted Limelight’s motion for judgment as a matter of law (JMOL) of non-infringement. A panel of the Federal Circuit affirmed the district court decision, but on rehearing the en banc Federal Circuit found Limelight liable for induced infringement. In particular, the court held:

If a party has knowingly induced others to commit the acts necessary to infringe the plaintiff’s patent and those others commit those acts, there is no reason to immunize the inducer from liability for indirect infringement simply because the parties have structured their conduct so that no single defendant has committed all the acts necessary to give rise to liability for direct infringement.

Thus, the court found:

Limelight would be liable for inducing infringement if the patentee could show that (1) Limelight knew of Akamai’s patent, (2) it performed all but one of the steps of the method claimed in the patent, (3) it induced the content providers to perform the final step of the claimed method, and (4) the content providers in fact performed that final step.

The Impact of Muniauction

After the jury verdict but before the district court granted JMOL, the Federal Circuit issued its decision in Muniauction, Inc. v. Thomson Corp., where it held that direct infringement of a method claim under 35 USC § 271(a) arises only when a single party performs every step or exercises “control or direction” over another’s performance, “such that every step is attributable to the controlling party.” Under Muniauction, Limelight could not be liable for direct infringement, because it did not exercise “control or direction” over its customers’ performance of the step at issue.

The Supreme Court Decision

The Supreme Court decision starts with the premise that “liability for inducement must be predicated on direct infringement.” From there, the Supreme Court rejects the rationale behind the Federal Circuit decision that liability for inducement can arise “even if no one has committed direct infringement.” The Supreme Court accepts without deciding that the holding of Muniauction is correct, and then explains that it can reach no other conclusion than that “there has simply been no infringement of the method in which respondents have staked out an interest, because the performance of all the patent’s steps is not attributable to any one person.”

A Disrespectful Decision?

The Supreme Court decision comes close to being openly disrespectful to the Federal Circuit. Early in its analysis, the Supreme Court accuses the Federal Circuit of “fundamentally misunderstand[ing]” basic principles of patent law:

The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out.

Surely, the Supreme Court does not really believe that the Federal Circuit is that ignorant!

While the Supreme Court refused to review the merits of Muniauction, it did not refrain from placing the blame for the method claim morass at the Federal Circuit’s doorstep:

A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability that the text and structure of the Patent Act clearly require—an alteration that would result in its own serious and problematic consequences, namely, creating for §271(b) purposes some free-floating concept of “infringement” both untethered to the statutory text and difficult for the lower courts to apply consistently.

Impact on Personalized Medicine Claims

While the claims at issue in this case related to computer systems, the decision is important to patents in the personalized medicine space. As I wrote previously, certain aspects of the Prometheus decision encourage method steps that would be carried out by different actors, such as one or more doctors, a testing laboratory, and/or the patient. While it is possible that an agency relationship could link those parties under Muniauction, the holding in Akamai may make it harder to successfully assert such patents. Applicants who are facing rejections under the USPTO’s new Subject Matter Eligibility Guidance should be cautious about adding additional method steps to their claims in order to overcome the new § 101 rejections, especially if it is likely that such steps would be carried out by different actors.