En Banc Federal Circuit Defines The Rule Of Divided Infringement
On August 13, 2015, the Federal Circuit rendered what is now its second en banc ruling in Akamai Techs., Inc. v. Limelight Networks, Inc., expanding on the scope of what constitutes divided infringement under 35 U.S.C. § 271(a) of patented method claims (i.e., where direct infringement involves the performance of the various steps of a method by different actors). This case was previously heard en banc in 2012 and has already been to the Supreme Court and back in 2014. In May 2015, a Federal Circuit panel had decided on remand that Limelight was not liable for infringement of Akamai’s method patent because two of the claimed steps were performed by Limelight’s customers, who did not perform those steps as Limelight’s agents or under contractual obligation. Akamai Techs., Inc. v. Limelight Networks, Inc., 786 F.3d 899, 908-909, 914-915 (Fed. Cir. 2015). The August 13 en banc decision reversed course, holding that there was in fact sufficient evidence to attribute infringement to Limelight given the nature of its customer contracts and relations.
The appellate decisions leading up to this latest en banc ruling reflect the difficulty the Federal Circuit has encountered in answering the question at the heart of this dispute: what circumstances give rise to liability for divided infringement? Although Akamai had brought allegations of direct infringement against Limelight under § 271(a), the Federal Circuit’s initial en banc opinion determined the case could be analyzed in terms of induced infringement under § 271(b) and that the predicate act of infringement for such inducement did not need to qualify as direct infringement under § 271(a). The majority overruled prior case law that had required all of the claimed steps to first be performed by or attributed to another single entity (i.e., the single-entity rule). In so doing, it stated that while all claimed method steps must be performed in order to find inducement, it was not necessary to prove that those steps were committed by a single entity. The Supreme Court reversed, ruling that a party can be liable for induced infringement under § 271(b) only when one party has committed direct infringement under § 271(a), and recognized the “single-entity rule” applies to such direct infringement. On remand, the Federal Circuit panel addressed direct infringement under § 271(a), holding that under principles of vicarious liability, such direct infringement occurs only when the single-entity rule is met. It explained that includes principal-agent relationships, contractual arrangements beyond those typically found in arms-length seller-customer agreements, and joint enterprises.
The recent en banc ruling unanimously sets forth the rule of divided infringement. It held that a single entity will be responsible for another’s performance of method steps under at least two circumstances: (1) where it directs or controls the other’s performance, or (2) where the actors form a joint enterprise. Akamai Techs., Inc. v. Limelight Networks, Inc., Nos. 2009-1372, 2009-1380, 2009-1416, 2009-1417 (Fed. Cir. Aug. 13, 2015), slip op. at 4. It explained that the direction or control test could be met if an entity acts through an agent, contracts with another to perform steps of the claimed method, or conditions participation in an activity on the performance of those steps and establishes the manner or timing of that performance. The court, however, rejected the notion that § 271(a) liability is limited to principal-agent relationships, contractual arrangements and joint enterprise, stating that other factual scenarios may warrant attributing performance of method steps by another to a single actor depending on the unique facts presented.
Applying this rule to the facts of the case, the court examined Limelight’s customer contracts and ongoing customer relationships to hold there was substantial evidence from which a jury could find Limelight directed or controlled customer performance of the necessary method steps. First, the court held that Limelight’s standard contract conditioned the use of Limelight’s system on customer performance of two steps. Id. at 8. Second, it held that Limelight established the manner and timing of its customers’ performance of those steps by providing a welcome letter, step-by-step instructions, installation guidelines, and making its engineers available to troubleshoot any problems. Id. at 8-9. From this, the court concluded that the evidence supported the jury’s verdict of infringement, which underlies a $45.5 million damages award. The case was remanded to the panel for resolution of all residual issues.
Although Judges Taranto, Chen, and Stoll did not participate in this per curium decision, the decision does provide a unified voice from the Federal Circuit as to what constitutes divided infringement. The prior en banc and remand decisions in this case, in contrast, had dissents that reflected significant differences of opinion among members of the bench. That said, the court’s statement that there may be other factual scenarios in the future under which liability can be found still leaves the application of § 271(a) open to interpretation going forward by litigants and courts alike. Moreover, this decision and future decisions interpreting its contours will likely also have important implications for strategically developing and managing one’s own patent portfolio.
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