Law360, New York (April 30, 2014, 8:45 PM ET) — On Wednesday, April 30, 2014, the U.S. Supreme Court heard oral arguments in Limelight Networks Inc. v. Akamai Technologies Inc. (No. 12-786), a case expected to address whether a party can be held liable for inducing infringement of a patent under 35 U.S.C. § 271(b) when no single entity has committed direct infringement under 35 U.S.C. § 271(a). As explained below, the Supreme Court struggled with whether it can answer that Section 271(b) issue without also addressing an underlying joint infringement issue of Section 271(a). The court also raised a number of policy concerns and questioned whether those are best left for Congress to address.
Akamai sued Limelight for patent infringement in 2006. The claims of the asserted patent are directed to methods involving redirecting requests for Internet content and selecting optimal servers. Limelight did not itself carry out all of the steps of the claimed methods. It instead provided instructions and support to its customers to perform the remaining steps. The district court rendered a judgment of noninfringement under Section 271(a), which was affirmed by a panel of judges at the Federal Circuit, because Limelight by itself did not infringe the claims nor did it direct and control the actions of its customers under the theory of joint, direct infringement.
The Federal Circuit then overruled prior precedent in a sharply divided en banc decision. Section 271(b) states that “whoever actively induces infringement of a patent shall be liable as an infringer.” In setting the requirements for inducement under that statute, prior Federal Circuit precedent followed the so-called “single-entity rule.” That is to say, inducement requires both (1) the act of knowing inducement to infringe, which requires knowledge of the patent, and (2) a single party committing direct infringement under Section 271(a) by performing all of the claimed acts. BMC Resources Inc. v. Paymentech LP, 498 F.3d 1373 (Fed. Cir. 2007).
The Federal Circuit en banc panel expressly overruled BMC. It held that indirect infringement under Section 271(b) can occur if all of the steps of the method were actually performed regardless of the number of entities performing the steps, i.e., when no single entity directly infringes a patent under Section 271(a).
After the en banc decision, inducement liability can exist when an alleged infringer (1) knew of the patent, (2) performed some of the claimed steps, (3) induced performance of the remaining steps by another entity, and (4) those steps were actually performed. The en banc court remanded the case to determine if Limelight is liable for inducing infringement upon a showing that those requirements are met. Limelight, however, asked the Supreme Court to step in.
Confusion Over the Question: The Interplay Between Sections 271(a) and 271(b)
Limelight petitioned the Supreme Court to consider the question of whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under Section 271(b) even though no one has committed direct infringement under Section 271(a). Akamai cross-petitioned the court to determine whether a defendant is liable for direct infringement under Section 271(a), where the defendant performs some steps of a patented method and directs, controls, or acts in concert with another who performs the remaining steps, i.e., joint infringement.
While the justices acknowledged that they granted cert on Limelight’s question, they did not focus on inducement under Section 271(b). The justices instead repeatedly turned to questions directed to infringement under Section 271(a), which Akamai counsel vigorously asked the court to address. However, Limelight counsel deflected questions regarding Section 271(a), stating that the “issue [was] not properly before the Court … because it was the subject of a cross-petition that [had] not been granted.”
Justice Samuel Alito indicated that he may have a problem with Limelight’s lack of addressing Section 271(a). He asked why Limelight was simply asking the court “to assume the answer on [Section 271](a) and then decide a question on [Section 271](b).” Indeed, Justice Sonia Sotomayor asked Limelight’s counsel if the Section 271(a) joint infringement question was still open at the Federal Circuit. Moreover, both Justices Alito and Elena Kagan raised concerns that the Section 271(b) question would be a nullity unless the Section 271(a) question was resolved. Specifically, Justice Kagan stated that she could not “think of a way in which [the court’s] decision on the 271(b) question would be relevant for any case if the Federal Circuit on remand goes the opposite way on the 271(a) question.”
However, Justice Kagan expressed concerns that if Akamai’s Section 271(a) question was discussed in the hearing, then Limelight would be “sandbag[ged],” as “Limelight did not brief [that question] until [Akamai] brief[ed] it.” Even Justice Ruth Bader Ginsburg had questions about direct infringement when she asked the solicitor general’s opinion on infringement under Section 271(a). In reply, Assistant Solicitor General Ginger Anders, arguing on behalf of the United States, suggested further briefing on what constituted infringement under that section.
One of the few times that requirements of infringement under Section 271(b) were discussed was when Justice Antonin Scalia asked Akamai’s counsel whether Section 271(b) requires “inducing an infringement or inducing an infringer.” Akamai’s counsel replied “[i]nducing an infringement” and explained that the infringement can be done by one or more parties. There was little discussion from Akamai’s counsel on what he thought constituted an “infringement” under Section 271(b), which Akamai asserted in its brief was not limited to a direct infringement under Section 271(a).
Is Congressional Action Needed?
Regardless of the question presented, the justices were concerned with ensuring fairness to the patentee and innocent parties. Some of the justices wanted to know the policy justification for holding Limelight harmless. For example, Chief Justice John Roberts asked whether Limelight’s position “makes it pretty easy [to] get around patent protection.” Justice Scalia further expressed concern that a patentee’s rights could easily be violated by simply having “another person do some of the steps [of the claimed method].”
Limelight counsel responded by noting that “empirically speaking, there have not been very many cases in which this has proven to be a problem,” and that “[i]t has been a long understood principle of patent claim drafting that method claims should be drafted from the point of view of a potential infringer so that all of the steps can be carried out by that potential infringer.”
Assistant Solicitor General Anders, arguing in support of Limelight, expressed the government’s concern about gaps in statutory liability being addressed by the courts, and how such gaps should be filled instead by Congress. Anders recognized that the Federal Circuit may have been “understandably concerned about allowing inducers to perform some steps of a process themselves to escape liability.” Anders pointed out, however, that previous decisions of the Supreme Court held that “judicial concerns about gaps in [Section] 271’s coverage should not drive the Court’s interpretation of that provision … because any time that [the courts] close a gap in [Section] 271, expanding patent rights, [the courts] are invariably implicating competing concerns and [those are] for Congress to resolve.”
Although the government argued in support of Limelight on these facts, Anders could not identify policy to address the concern about a party easily circumventing the patent: “I think if Congress were just considering the traditional active inducer who simply induces a party to perform all the steps of a process, that person compared to someone who performs the rest of the steps, there’s no obvious policy reason to distinguish between those two actors.” Thus, from a policy standpoint, Anders appears to believe that Limelight should be just as liable as a party that induces another to perform all of the steps of a claimed method.
Akamai’s counsel, while arguing to uphold the Federal Circuit’s findings, also set forth various policy considerations. He noted in particular that “[u]nder Limelight’s theory, two or more people can divide up and perform the steps of any method claim, however drafted, without liability.” Perhaps attempting to convey a sympathetic story to its position, Akamai’s counsel posed a hypothetical of a patentee that developed a novel cure for cancer, while two other companies divided the steps of the patented cure to evade liability, to “take advantage of this marvelous patented process without paying anything [or] giving anything whatsoever to the company that spent a billion dollars and 25 years developing [the cure].” However, Akamai’s counsel never addressed the notion that Congress may be better suited than the courts to make these policy decisions.
During rebuttal time, Limelight’s counsel focused on how Congress “adopted a statute that took the development of infringement law largely out of the hands of the courts.” Limelight counsel explained that there is a statute for strict liability in Section 271(a), and two basic indirect infringement statutes — Section 271(b) and Section 271(c). Limelight’s counsel submitted that Congress narrowly crafted Section 271(c) liability to situations when a party provides a component of an invention that will lead to an infringement. Limelight’s counsel then reminded the court why Congress is more suited to make such specific delineations, concluding that “even if you know what you’re selling is going to lead to infringement [under Section 271(c)], if it’s a staple article of commerce, [Congress did not] impose liability in that situation … [T]hat’s the kind of line drawing Congress has done.”
While the arguments touched on a number of issues, the justices were most interested in the policy implications and the interplay between Sections 271(a) and (b) discussed above. As a result, the justices’ decision is difficult to anticipate. In one scenario, the court may rule on the Section 271(a) joint infringement question or remand the case to the Federal Circuit to make a decision on that issue. Alternatively, the court may simply maintain the status quo. Indeed, as Justice Stephen Breyer seemed to hint to his colleagues: “I say okay, let’s go with what we’ve had for 30 years, and if Congress feels they should change it, [they can] change it.”
Notwithstanding the Supreme Court’s holding in this case, prudent claim drafting practice calls for including at least some claims drafted from the point of view of a single actor. For instance, when dealing with claims written to technologies that involve interaction, such as, e.g., cellular phones, networks and content providers, patent applicants should carefully consider the terminology used in their claims. Claim terms such as, e.g., “communication” or “exchanging” (which may tend to involve multiple actors) may predispose the claim to an analysis under Section 271(b), whereas terms such as, e.g., “transmitting” or “receiving” (which may tend to involve a single actor) may limit the infringement analysis to Section 271(a), thereby avoiding the potential complications of an inducement analysis.
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