Litigation Alert: Federal Circuit Expands Liability for Divided Patent Infringement

On August 13, 2015, the Federal Circuit in Akamai Technologies, Inc. v. Limelight Networks, Inc. changed the law regarding liability for direct infringement of a method patent involving more than one actor (divided infringement), after the Supreme Court invited it to revisit its interpretation of 35 U.S.C. § 271(a).

In 2007, the Federal Circuit held that in order for liability for direct infringement of a method patent to lie under § 271(a), a single party must carry out every step of the claimed process, either on its own or by “directing or controlling” another to perform some of the steps. BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1379–81 (Fed. Cir. 2007). This holding was reiterated and clarified in Muniauction, Inc. v. Thomson Corp., in which the Federal Circuit announced that “where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party, i.e., the ‘mastermind.’” 532 F.3d 1318, 1329 (Fed. Cir. 2008). There, the court held an auctioneer not liable for infringement where it performed the majority of steps of the claimed method but a bidder performed the step of “inputting data” regarding a bid into the auctioneer’s system. Under Muniauction, a company that both 1) controls access to the system where the additional steps are carried out; and 2) instructs the user on how to carry out those steps, does not “direct or control.” Id. Rather, liability for joint infringement only existed “in situations where the law would traditionally hold the accused direct infringer vicariously liable” for the third party’s actions of completing the steps. Id.

Thus, under Muniauction, a party could avoid liability for infringing a method patent simply by instructing its customers to carry out one of the steps, or even by agreeing with another company to split the infringement. In fact, the Federal Circuit subsequently held that there was no direct infringement when two companies formed a partnership to enable their software programs to work together and sold them as a unit, when that unit met every element of a claim, because there was no “control or direction” over the entire process and no single “mastermind.” Golden Hour Data Sys., Inc. v. emsCharts, Inc., 614 F.3d 1367, 1371 & 1380–81 (Fed. Cir. 2010).

Akamai sued Limelight in 2006 for infringing a patent on a method of delivering electronic content from content providers. Limelight performed all of the steps of the claimed methods except for “tagging” and “serving.” Its customers, the content providers, performed those two steps. The jury found Limelight liable for infringement, but the district court entered judgment as a matter of law for Limelight in light of Muniauction, which had been decided shortly after the jury verdict.

On appeal, a Federal Circuit panel affirmed the district court’s ruling, but the en banc court reversed without addressing direct infringement, finding instead liability for induced infringement under 35 U.S.C. § 271(b). The Supreme Court rejected the Federal Circuit’s interpretation of induced infringement under § 271(b), holding that there is no liability for induced infringement “when no one has directly infringed under § 271(a) or any other statutory provision.” Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111, 2113 (2014). The Supreme Court also suggested that “the Federal Circuit erred by too narrowly circumscribing the scope of § 271(a)” in Muniauction...