By: Jaconda Wagner, Esq.

In the 1990s, several issues threatened the stability of the internet. Researchers, including those who invented the patents-in-suit, set about devising a solution. Dr. Tom Leighton, a theoretical mathematics professor at MIT, and his graduate student, Danny Lewin, conceived of a solution that relied on a “content delivery network.” In 1998, the inventors founded Akamai to develop their inventions which were assigned to MIT and exclusively licensed to their company. Akamai soon established itself in the marketplace, acquiring Apple and the US Government as customers.

 

Limelight, a direct competitor, began offering its content delivery services in late 2001. In the spring of 2004, Akamai and Limelight began discussions concerning the possible acquisition of Limelight by Akamai. In the fall of 2004, Akamai choose not to proceed and terminated discussions. The discussions resumed in early 2006, but were terminated by Limelight in June, 2006, after it found funding. On September 5, 2006, Akamai filed suit in Massachusetts against Limelight alleging patent infringement under both 35 U.S.C. § 271(a) (direct) and § 271(b) (inducement).[1]

On February 28, 2008, a jury found that Limelight infringed independent claims 19 and 34 and dependent claims 20-21 of US Pat. No. 6, 108,703 (the ‘703 Patent), which issued on August 22, 2000. The jury also found that none of the infringed claims were invalid due to anticipation, obviousness, indefiniteness, lack of enablement or written description. The jury awarded Akamai damages of $40.1 million in lost profits and $1.4 million in reasonable royalties from April 2005 through December 31, 2007, plus prejudgment interest, along with price erosion damages in the amount of $4M for a total award of $45.5 million.

 

The two independent claims, 19 and 34, covered methods that required tagging some of the embedded objects in a content provider’s web page so that requests for those objects resolve to a domain name other than the content provider’s domain name. Claim 19 also required serving the requested web page from the content provider’s domain. It was undisputed that Limelight did not itself perform every step of the asserted claims, specifically the tagging. However, Limelight provided the information necessary for its customers, the content providers, to modify their web pages or internet address routing information to use the Limelight service. The divided process was explicitly set forth in Limelight’s standard customer contract.

 

At issue was whether Limelight induced it customers to infringe Akamai’s patents. As Limelight did not perform all the steps, Akamai presented a theory of joint liability, relying on the reasoning expressed by the Federal Circuit in BMC Resources, Inc. v. Paymentech, L.P., 498 F. 3d 1373, 1378-80 (Fed. Cir. 2007) (citation omitted). BMS Resources held “[i]nfringement requires, as it always has, a showing that a defendant has practiced each and every element of the claimed invention,” and joint liability may be found when one party “control[s] or direct[s]” the activities of another party.[2] Id. The jury ruled in favor of Akamai. Following the verdict, Limelight moved for judgment as a matter of law (JMOL) of noninfringement on the ground that substantial evidence did not support the verdict that Limelight directs or controls all the steps in the asserted claims.

Initially, the district court denied the motion “because, unlike in BMC Resources, here there was evidence that not only was there a contractual relationship between Limelight and its customers, but that it provided those customers with instructions explaining how to utilize its content delivery service.” Akamai Techs., Inc. v. Limelight Networks, Inc., 614 F. Supp. 2d 90, 119 (D. Mass. 2009) (“JMOL Opinion”).

Subsequently, the Federal Circuit issued its decision in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), applying BMC Resources, and holding that an accused infringer’s control over its customers’ access to an online system, coupled with instructions on how to use that system, was not enough to establish direct infringement. Id. at 1328-30. Limelight filed a motion for reconsideration, which the district court granted finding: 1) there was “no material difference between Limelight’s customers deciding what content, if any, they choose to have delivered by Limelight’s CDN and only then perform the “tagging” and “serving” steps; and 2) the form contract does not obligate Limelight’s customers to perform any of the method steps. Akamai appealed.

The Federal Circuit, starting from the proposition that “direct infringement requires a single party to perform every step of a claimed method,” went onto explain that the requirement is satisfied even though the steps are undertaken by multiple parties if a single defendant “exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party.” The Federal Circuit also stated, “mere ‘arms-length cooperation’ will not give rise to direct infringement by any party” and affirmed the district courts’ grant of the JMOL. Akamai Techs., Inc. v. Limelight Networks, Inc., 629 F.3d 1313, (Fed. Cir., 2011). Akamai appealed.

The Federal Circuit granted en banc review,[3] and vacated the panel’s decision. In doing so, the court indicated that it was unnecessary to revisit its § 271 (a) analysis as the issues could be resolved through an analysis of the induced infringement doctrine. In resolving the issue via induced infringement, the court reconsidered and overruled its 2007 decision in BMC Resources and held that “all the steps of a claimed method must be performed in order to find induced infringement, but that it is not necessary to prove that all the steps were committed by a single entity.” Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F. 3d 1301, 1319 (Fed. Cir., 2012) (per curiam). The court concluded that the “evidence could support a judgment in [Akamai’s] favor on a theory of induced infringement” under § 271 (b). 692 F. 3d at 1319 1319 (2012). Limelight sought certiorari, which the Supreme Court granted. The question before it was “whether a defendant may be liable for inducing infringement of a patent under 35 U.S.C. § 271 (b) when no one has directly infringed the patent under § 271 (a) or any other statutory provision. The Court answered no.

 

The Court noted that ‘neither the Federal Circuit nor the respondents dispute the proposition that liability for inducement must be predicated on the direct infringement.’ Limelight Networks, Inc. v Akamai Technologies, Inc., 572 U.S. ______ (2014) (slip op., at 4-5.). Justice Alito, who delivered the Court’s unanimous opinion, indicated that it is for good reason as the case law leaves no doubt that inducement liability may arise only with direct infringement (citing Aro Mfg. Co v Convertible Top Replacement Co., 365 U.S. 336, 341 (1961). Justice Alito went onto to observe that “one might think that this simple truth is enough to dispose of this appeal[,] [b]ut the Federal Circuit reasoned that a defendant can be liable for inducing infringement under § 271 (b) even if no one has committed direct infringement within the terms of § 271 (a) (or any other provision of the patent laws).” (See 692 F. 3d at 1314). Justice Alito stated that “[t]he Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.” Slip. Op. at 5.

Again observing that a patent is not infringed unless all the steps are carried out, Justice Alito states, “[t]his principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements.” Id. Citing to Warner-Jenkinson Co. v. Hilton Davis Chemi­cal Co., 520 U. S. 17, 29 (1997), the Court reaffirms that “a patentee’s rights extend only to the claimed combination of elements, and no further.” The Court stated, “[t]he Federal Circuit’s contrary view would deprive §271(b) of ascertainable standards.” Slip op. 6. Justice Alito goes on to query situations where the court would be pressed to ascertain what constitutes infringement, finds support in its reading of the statute in § 271 (f) (1) and indicates Congress can modify the statute for other instances of infringement if it so chooses. The Court leaves no doubt that a patent is not infringed unless all the steps are carried out, even in divided infringement cases, which typically cover method patents. Given the Court’s definitiveness on the issue, and the Federal Circuit’s apparent misreading, one must ask what precipitated the confusion. The backstory.

Akamai had filed a number of infringement suits seeking to protect its market share by enforcing its patent rights. This enforcement has served to disrupt the content delivery network marketplace. This is evidenced in the number of tech industry giants, including Google, Cisco, eBay, Facebook, and Oracle, who petitioned the Supreme Court in favor of Limelight. Apparently, the tech companies believed that “divided infringement” would encourage suits by “patent trolls.”[4] Large life sciences companies, like Johnson and Johnson, filed a brief in support of Akamai through the Pharmaceutical Research and Manufacturers of America.

 

The court spent a couple of paragraphs discussing whether a party might avoid liability for infringement by dividing performance of a method patent’s steps with an entity that it neither directs or controls. It commented that the Federal Circuits interpretation of § 271 (a) in Muniauction would engender this issue, not its holding in the present case, and maintained that an alteration of the patent law to avoid such acts was not justified and would be unwieldy. Despite its observation regarding Muniauction, the court declined to review its merits stating that the Muniauction was based upon § 271 (a) and the question before it focused on § 271 (b). The matter was remanded for further proceedings that were not inconsistent with the Court’s holding. Whether “patent troll” activity increases remains to be seen, but one should expect a number of reconsiderations in cases that relied on the Federal Circuit’s en banc holding.

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WAGNER LAW is a full service IP practice that prepares and prosecutes domestic and foreign patent applications, particularly in the medical device, biotechnology, chemical and pharmaceutical areas, registers trademarks, conducts due diligence and clearance studies, and advises on copyrights, unfair competition, trade secrets, and technology transfer.

Jaconda Wagner, principal of WAGNER LAW, has 20 years of legal experience. Her primary practice, intellectual property, includes drafting and prosecuting patent applications, strategically developing IP portfolios, conducting due diligence and FTO analyses, drafting opinions and supporting IP litigators in the development of enforcement and defense strategies, and drafting IP agreements. Ms. Wagner has a breadth of experience, which was obtained in academia, government, corporate, and law firm environments, that enables Ms. Wagner to evaluate and approach projects in a broad, efficient and effective manner. Ms. Wagner has a keen interest in social justices and devotes a portion of the practice to civil rights, consumer fraud and civil remedies for victims of crimes.

 

[1] Akamai ultimately withdrew its § 271 (b) induced infringement argument and tried its case under joint infringement pursuant to § 271 (a).

[2] Note that the trial court originally instructed the jury that joint liability required a showing that a party “control[s] and direct[s]” the activities. A correction was sent to the jury changing “and” to “or”.

 

[3] It also heard McKesson Technologies v. Epic Systems Corporation.

[4] It is interesting to note that the owner of the Akamai patents is a university – MIT. Many who seek to regulate “patent trolls” would make an exception for universities and government agencies that obtain patent positions.