June 02, 2014

Supreme Court Decides Limelight Networks, Inc. v. Akamai Technologies, Inc.

On June 2, 2014, the United States Supreme Court decided Limelight Networks, Inc. v. Akamai Technologies, Inc., No. 12-789, holding that a defendant is not liable for inducing infringement of a patent where no one has directly infringed the patent.

Akamai Technologies is the exclusive licensee of a patent claiming a method of delivering electronic data using a "content delivery network" (CDN). Specifically, that patent covers methods by which website proprietors store and tag content on servers to facilitate access to that content by site users. Limelight Networks also operates a CDN that uses tagged content, but it does not perform the tagging operations; rather the users themselves tag the content.

Akamai sued Limelight alleging patent infringement in violation of 35 U.S.C. § 271(a). A jury awarded more than $40 million in damages. Shortly after, the Federal Circuit decided Muniauction, Inc. v. Thomson Corp., 532 F. 3d 1318 (2008), holding that direct infringement of a method claim where no single party performs all the steps occurs only when a single party exercises control or direction over the entire process. In light of the Muniauction decision, the district court granted Limelight's motion for reconsideration and held that Limelight did not directly infringe the patent because it did not perform or control its customers' tagging (and therefore did not perform all the steps constituting infringement). A panel of the Federal Circuit affirmed. The Federal Circuit granted en banc review, and a divided court held that Limelight could be liable for inducing infringement, in violation of 15 U.S.C. § 271(b), because it carried out some steps in the method and encouraged others to carry out the remaining steps.

The Supreme Court reversed, holding that Limelight could not be liable for inducing infringement under § 271(b) where no one directly infringed under § 271(a). First, the Court reasoned that without actual infringement of a claimed method, there can be no inducement of infringement. Second, the Court noted that Congress knows how to impose inducement liability separate from direct liability, as it did in § 271(f)(1). That section imposes liability on a party who supplies the components of a patented invention to actively induce conduct outside the United States that would have constituted infringement if performed within the United States.

The Court also rejected Akamai's arguments in support of its position. First, analogies to tort principles, which hold a defendant liable for harming another through a third party or hold two defendants liable for joint action, were inapposite because, under Muniauction, no direct infringement had occurred and thus the patentee's rights had not been violated. Second, analogies to the criminal aiding and abetting statute failed because that statute must be considered in light of criminal common law, which Congress likely did not consider in enacting the Patent Act of 1952. Third, the notion that Muniauction contradicts pre-1952 patent principles was not reason "to err a second time" by imposing liability for inducement when no infringement had occurred. Finally, the fact that someone could evade liability by dividing the steps of a method patent with another did not justify allowing inducement liability without direct infringement to avoid the consequences of Muniauction.

In its opinion, the Court assumed, without deciding, that the Federal Circuit's holding in Muniauction was correct. The Court declined to consider the merits of Muniauction and whether it "too narrowly circumscribed the scope of § 271(a)" as not properly before the Court, but noted that the Federal Circuit could revisit the issue on remand.

Faegre Baker Daniels LLP filed an amicus brief supporting Limelight on behalf of Cargill, Inc., The Coca-Cola Company, General Mills, Inc., and Hormel Foods Corp.

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