The issue of “divided infringement” — where multiple parties “share” infringement by performing different steps of a method claim — has vexed the courts of late, with the Federal Circuit see-sawing between two very different interpretations of the patent law. The Supreme Court has recently entered the fray, unanimously delivering the blunt criticism that the Federal Circuit, which handles all patent infringement appeals, “fundamentally misunderstands what it means to infringe a method patent.”
The bottom line from the Supreme Court, in Limelight Networks v. Akamai Technologies, is that there is no infringement, direct or by inducement, unless one party performs every step of the method, either itself or through control of another, such as by contract.
The patent asserted in Limelight claims a method for delivering electronic data using a content delivery network (CDN). The patent calls for, among other things, certain components of a website, like music or video files, to be “tagged” for storage on certain servers within the CDN. This increases the speed of accessing files.
The alleged infringer, Limelight, operated a CDN and performed all but one step of the patented method. It left to its customers, however, the task of tagging the files they wanted placed on Limelight’s servers. The claimed method was performed in its entirety, but no one actor performed all the steps.
There is good precedent for rejecting the idea that Limelight could be charged with direct infringement. The Federal Circuit held in 2007 and 2008, in BMC Resources. v. Paymentech and Muniauction v. Thomason, that there is no direct infringer unless a single actor performs all the method steps himself, or all the steps are performed on his behalf by another who is controlled by the alleged infringer.
The question in Limelight was whether Limelight might be guilty of inducing infringement, even in the absence of a direct infringer, because it encouraged or instructed the customer to perform the missing step, thereby ensuring every method step would be performed, albeit not by a single actor. Both BMC Resources and Muniauction answered no — to have inducement, you must first have a direct infringer.
In 2011, as we reported when Akamai’s case against Limelight first came before the Federal Circuit, a three-judge panel of that court further tightened the standard, making clear that mere directions or instructions to another entity — absent a legal obligation of that entity to perform the steps — is insufficient to establish direct infringement, and without that, there could be no inducement.
Akamai v. Limelight went up to an en banc review, where the court did a complete about-face. By a 6-5 margin, the court made new law in holding that when multiple entities collectively practice all steps of a patented method, that is sufficient infringement to support a claim of inducement. In doing so, the court explicitly overruled BMC Resources. The language-parsing was byzantine, with the Federal Circuit seeming more intent on justifying a result than finding the law.
The majority opinion did not go unanswered. Judge Linn, writing for four of the dissenting judges, asserted that the “single actor” rule of BMC Resources is the correct rule. Linn, who had written the panel decision in Akamai endorsing the “single actor” rule, was joined in dissent by Judge Prost, who had also voted for that rule in Muniauction, BMC Resources, and the Akamai panel decision, and by Judges Dyk and O’Malley.
Judge Linn proved to be right, at least from the Supreme Court’s perspective. A unanimous Court held that there could be no inducement without a direct infringer. It assumed without deciding, as the Federal Circuit had below, that Muniauction was correct in holding that there can be no direct infringer unless a single actor performs or controls the performance of each step in the patented method.
The Court acknowledged the Federal Circuit’s concern that “a would-be infringer” could “evade liability by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls,” but put the blame for that squarely on the Federal Circuit: “Any such anomaly, however, would result from the Federal Circuit’s interpretation of [direct infringement] in Muniauction.”
The Court declined to review the merits of Muniauction and the standard for direct infringement, stating that “on remand, the Federal Circuit will have the opportunity to revisit” the direct infringement question “if it so chooses.”
The Court’s ruling restores the rule for divided infringement to what it was in 2007, forcing patent practitioners to make sure that different types of claims are used to protect inventions and to think twice about whether more than one actor is required to make or use the entire claimed invention.
This will be especially true for method claims involving distributed computer and telecommunications systems used by multiple actors. Patent attorneys may have to focus on drafting claims for only the parts of such systems that are used by a single actor.
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