On June 2, the Supreme Court took the Court of Appeals for the Federal Circuit out to the proverbial woodshed in its unanimous decision in Limelight Networks, Inc. v. Akamai (decision here). The Supreme Court’s thrashing in Limelight centered on the Federal Circuit’s prior decision (on en banc review) in the Muniauction case (Fed. Circuit decision here) where it considered whether the plaintiff’s method claims had been infringed. The method claims were found not to be infringed because no one party had performed all of the steps of the asserted claim(s) and the court found that the defendant did not control the party who performed the remaining claim steps.
The Muniauction decision caused much discussion and wringing of hands among patent owners. Without getting too much into the details of the defendant’s relationship with its customer (who performed the last step of the patent claims), suffice it to say that the Federal Circuit’s decision in Muniauction seemed to unduly narrow the possible scenarios that might constitute direct patent infringement of a method claim. That narrow definition from Muniauction, understandably, must have caused the Federal Circuit some consternation later in the Limelight case. To many following the case, the Federal Circuit’s decision in Limelight seemed to be a contortion to get the “right” result, notwithstanding that its decision in Limelight was inconsistent with its decision in Muniauction.
Not surprisingly, the Supreme Court reversed the Federal Circuit’s decision in Limelight. The Court pointed out that its review of Limelight was simple and straight forward. That is, the single issue was whether infringement had occurred under an inducement theory of infringement (35 U.S.C. section 271(b)), i.e., had Limelight induced another to infringe Akamai’s patent?
However, Akamai and the Federal Circuit conceded that Limelight hadn’t, nor had any other party, directly infringed the patent-in-suit. In other words, no one party had performed all of the steps of the claimed method at issue. Since there was no direct infringement, the Supreme Court reasoned, there could be no inducement to infringe under Section 271(b) of the Patent Act.
Simple, or so it should be. However, the Muniauction and Limelight cases leave a glaring enforcement problem for owners of method patents. As noted in Alice Juvon Abn’s February 2014 article (link here), when an accused infringer performs some, but not all of the claim steps and another party performs the remaining steps, infringement is only found if the other party is “controlled” by the accused infringer. Providing instructions to the other party for completing the steps of a patented method isn’t enough to satisfy the ‘control’ requirement under Muniauction. For example, as Abn notes, it seems that infringement cannot be found under Muniauction where one company performs some of the patented steps and then provides instructions to its customers to perform the last step(s). Infringement cannot be found unless the ‘control’ exerted by the accused infringer amounts to an agency relationship with the other party performing the remaining steps of the claim.
Getting back to Limelight, the Supreme Court held:
But the possibility that the Federal Circuit erred by too narrowly circumscribing the scope of 271(a)[the direct infringement section of the patent statute] is no reason for this Court to err a second time by misconstruing 271(b)[the inducing infringement section of the patent statute] to impose liability for inducing infringement where no infringement has occurred.
The Court went on to acknowledge the concern that accused infringers might be able to evade liability by simply instructing their customers to perform the last step of a patented process. The Court didn’t mince words. It blamed the Federal Circuit’s Muniauction decision for that unfair scenario.
Finally the Court pointed out that its decision in Limelight necessitates remand to the Federal Circuit and that the Federal Circuit might want to revisit its findings on the direct infringement issue at that time. So, will the Federal Circuit finally be able to bring order to the ‘inducement’ chaos? Let’s hope so.