United States: Supreme Court Limits Patent Infringement Liability In Closely Watched Internet Software Case

All Steps of a Method Claim Must be Performed by a Direct Infringer for a Plaintiff to Proceed on a Theory of Induced Infringement

On June 2, 2014, in the decision of Limelight Networks Inc., v. Akamai Technologies, Inc., the US Supreme Court made it more difficult for patentees to prove infringement under the theory of inducement, holding that a party alleging induced infringement of method claims under 35 U.S.C. § 271(b) must predicate the liability on direct infringement by a single actor performing all steps of the claim under § 271(a).

The induced infringement provision of §271(b) provides: "[w]hoever actively induces infringement of a patent shall be liable as an infringer." When an actor intentionally induces another to commit all the elements of infringement, alone or vicariously, the first actor is liable for induced infringement under § 271(b). As a predicate to establishing induced infringement of method claims under § 271(b), there must also be an act of direct infringement of the method under § 271(a), i.e., "whoever...uses...any patented invention, within the United States...infringes the patent." In addition, the inducing party must have knowledge of the patent and specific intent to encourage infringement by another.

This issue has been litigated frequently with patents claiming software or Internet-related methods where some steps are performed by a provider's servers and other steps on a user's client computer, browser, or internal servers.

At issue in this case were Akamai's method claims of US Patent 6,108,703, which claims a method of delivering electronic data using a "content delivery network" (CDN). The claimed method consists of placing some of a content provider's content elements on a set of replicated servers and modifying the content provider's web page to instruct web browsers to retrieve that content from those servers. In its complaint, Akamai alleged both direct and induced infringement against defendant Limelight. Limelight maintains a network of servers and, as in the patented method, it allows for efficient content delivery by placing some content elements on its servers. Limelight, however, does not provide one step of the claim (that is, to modify the content providers' web pages itself). Instead, Limelight instructs its customers on the steps needed to do that modification.

In the district court, Limelight prevailed on a motion for judgment as a matter of law that it did not induce infringement under § 271(b) because no single entity performed all steps of the claimed method as they were split between Limelight and its customers. In an en banc decision, the Federal Circuit reversed the district court and held that induced infringement under 271(b) could be found — even if a single party did not carry out all steps of the method claim — therefore vitiating the "single entity" rule for direct infringement in the context of induced infringement.

The Supreme Court disagreed and returned the law back to its pre-Akamai origins, holding that a defendant is not liable for inducing infringement under §271(b) when no one has directly infringed under §271(a) or any other statutory provision. Therefore, even though Limelight carried out steps of the method claim — and its customer carried out the single remaining step — since there was no single actor performing all steps of the claim, and there could be no direct infringement, there was therefore no inducement.

This decision has profound implications in the heavily litigated software and Internet industry where there is often no single entity, server, or piece of software responsible for carrying out steps of a method. Under the Federal Circuit's previous standard, a provider of software, hardware, or firmware could be liable for infringement of method claims under 271(b), even though its technology did not implement all steps of a method, but did so only in conjunction with its customer's software or additional steps implemented by its customers or third parties. This greatly expanded liability for software, hardware, and content providers because it made it much easier for patent plaintiffs to plead theories of inducement under § 271(b) to cover multiple actors contributing to the steps of a method claim. Now, however, the Supreme Court has made it clear that plaintiffs alleging induced infringement under 271(b) must find a single entity that performs all steps of the claimed method. If there is not a single direct infringer, there can be no inducement.

It should be noted, however, that the Supreme Court did not address the issue of joint infringement, which is a doctrine that holds that a party can be liable for direct infringement if it directs or controls the actions of another party in a contract or direct agency relationship. Therefore, it is still possible for plaintiffs to proceed on a theory of direct infringement when a single actor does not perform all steps of a claim. But in such a scenario, the plaintiff must show that the defendant is asserting direct control over the other party's actions in some closely tied contractual, or agency, relationship. In principle, this could be more difficult to prove than the vicarious liability scenario that could arise under the Federal Circuit's previous split actor inducement rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.