Supreme Court Overturns Federal Circuit's Inducement Standard But Defers on Divided Infringement

Only a month after hearing oral argument, the United States Supreme Court unanimously struck down the Federal Circuit's attempt to expand the induced infringement doctrine under 35 U.S.C. § 271(b). The Court held that a defendant cannot be liable for inducing infringement under Section 271(b) absent a finding of direct infringement under Section 271(a). Limelight Networks, Inc. v. Akamai Technologies, Inc., No. 12-786, slip op. at 1 (June 2, 2014). The Court's holding overturned Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012), a divided en banc decision holding that induced infringement of a method claim could be established by showing that all the steps of the claim are performed even though no single entity is liable for direct infringement, so long as the knowledge and intent otherwise required for inducement are present. Although a good portion of the oral argument and opinion discussed when a single entity is liable for direct infringement of a method claim under Section 271(a), the Court chose not to expound on that issue, instead inviting the Federal Circuit to revisit its Section 271(a) standard and current precedent, Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), on remand. Limelight, slip op. at 10. 

Akamai is the exclusive licensee of a patent that claims a method for reducing congestion on the Internet involving a content delivery network (CDN). The claims at issue require a number of steps, including a step of "tagging" embedded objects on a web page. Limelight operates a CDN, but its content provider customers perform the "tagging" step. Akamai sued Limelight and a jury found that Limelight directly infringed the asserted claims. The district court granted judgment as a matter of law to Limelight, however, because it found that Limelight did not direct or control its customers to perform the tagging step, as required to prove so-called "divided" direct infringement under Muniauction, 532 F.3d at 1329. Akamai Technologies, Inc. v. Limelight Networks, Inc., 614 F. Supp. 2d 90, 123 (D. Mass. 2009).

A Federal Circuit panel first affirmed, holding there could be no divided infringement because Limelight's customers did not perform the "tagging" step as "Limelight's agents," nor were the customers "contractually obligated" to perform the step. Akamai Technologies, Inc. v. Limelight Networks, Inc., 629 F.3d 1311, 1321 (Fed. Cir. 2010). Sitting en banc, the Federal Circuit in a per curiam opinion ultimately did not clarify the law on divided infringement and instead held that even if no single party is liable for direct infringement, a party can still be liable for inducing infringement. In so holding, the Court overruled prior precedent holding that inducement can only be found if direct infringement is present. Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 1306 (Fed. Cir. 2012) (overruling BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007)).

Justice Alito, writing for the unanimous Court, chastised the Federal Circuit's rule, even going so far as to say that under the Akamai rule a defendant could be liable for inducement even though only 1 step of a 12-step method claim is performed by anyone. Limelight, slip op. at 6. The Court also noted that it was up to Congress, not the Federal Circuit, to close any loopholes in the inducement statute, 35 U.S.C. § 271(b). The Court noted that Congress did exactly that in drafting Section 271(f) after the Court's holding in Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 (1972), which allowed a manufacturer to ship an apparatus in a number of pieces and then have it assembled abroad where the apparatus would infringe a patent if assembled in the United States. Id. But the Court chose not to address divided infringement, stating multiple times throughout the opinion that it was assuming, but not deciding, that the Muniauction holding is correct. Instead, the Court invited, but did not require, the Federal Circuit to revisit its decision in Muniauction. Id.at 10.