A while back, we wrote about the Supreme Court’s review of the very long patent battle between Akamai Technologies and Limelight Networks (the prior post on the Supreme Court decision is here). The Supreme Court reversed and remanded the case back to the Court of Appeals for the Federal Circuit, which issued its en banc decision on August 13, 2015 (decision here) and in this week’s decision, the Court addressed lingering issues in the case.
Just to recap, for those unfamiliar with the case, M.I.T. and Akamai (as a licensee of M.I.T.) filed the patent infringement suit against Limelight back in 2006. The patent-in-suit, U.S. Patent No. 6,108.703, covers a method of storing and delivering content electronically via a “content delivery network” or “CDN” for short.
The CDN disclosed in the ‘703 patent comprises a way of designating certain components of a content provider’s website (e.g. video or music files) that are stored on servers where it can be accessed by users. The ‘703 patent refers to this step as “tagging.” The patent also discloses a way to aggregate the data demands of multiple content providers with different peak usage patterns. This aspect of the patent includes methods to serve the content from multiple servers in multiple locations so that content is delivered from servers located in the same geographic area as the users who are accessing the particular content, thus increasing the access speed.
Limelight’s accused CDN method also uses tagged data, but Limelight itself doesn’t do the tagging. Instead, Limelight had required its customers do their own tagging. So, the Limelight case presented a dilemma of sorts. It appeared that the method covered by the ‘703 patent claims was being practiced without authorization, but not by a single actor.
On remand in August, the Federal Circuit emphasized the concept of ‘attribution.’ It determined that, because Limelight directs/controls its customers, the performance of all steps of the patented claims were attributable to Limelight. The Court’s finding was based upon the arrangement that Limelight had with its customers, namely, that a customer’s ability to use the CDN is conditioned upon its agreement to tag its content in the manner and at the times established by Limelight.
All in all, the Court tried to broaden the grounds that will support a finding of direct infringement (35 U.S.C. Section 271(a)), holding that direct infringement is not limited solely to principal-agent relationships, contractual arrangements and joint enterprises.
In this week’s decision (decision here, courtesy of Finnegan), the Federal Circuit addressed residual issues in the case. In particular, the Court addressed Limelight’s challenge to the Court’s construction of two claim terms and Akamai’s lost profits award of 40 million dollars.
With regard to the disputed claim terms, Limelight argued that the district court erred in construing the terms “tagging” and “optimal.” The Court rejected Limelight’s argument for multiple reasons. First, the Court reasoned, the patent specification did not support that the claim term “tagging” was limited to the preferred embodiment. Also, Limelight had stipulated to both the scope and the meaning of the term “tagging” as given to the jury:
Limelight stipulated to the construction of [the claim term] “tagging,” and it is bound by that stipulation.
The Court likewise rejected Limelight’s argument with regard to the claim term, “optimal server.”
Getting to the issue of damages, Limelight had challenged the 40 million dollar damages award, which was based in large part on Akamai’s expert’s testimony. In patent cases, to collect lost profits, a patentee has to show that it would have made the infringer’s sales “but for” the infringing activity. As you might guess, doing so involves a hair-splitting, number crunching dive into the nature of the market at issue and the patentee’s and infringer’s respective businesses. The analysis, however, must have the infringement factored out of the economic picture.
Limelight argued that Akamai had failed to show that there was a causal connection between the infringement and Akamai’s lost profits. In particular, Limelight argued that Akamai’s expert didn’t use “sound economic theory” to calculate Akamai’s potential market share (i.e., the share of Limelight’s customer’s that would have gone to Akamai).
The Court rejected Limelight’s argument, including its claim that the parties’ markets were “segmented” due a large disparity in product pricing:
Limelight’s argument appears to be that the price disparity between Akamai’s and Limelight’s prices necessarily created a market segmentation in which Akamai was separate from Limelight. Limelight’s argument rests on BIC Leisure Prods., Inc. v. Windsurfing International, Inc., 1 F.3d 1214 (Fed. Cir. 1993), where this court determined that lost profits were unavailable because the accused infringer and the patentee serviced different markets based on a 60–80% price disparity. Limelight argues that in the face of a 100% price disparity, lost profits are legally unavailable… …In the instant case, in contrast, Akamai presented evidence that Akamai and Limelight were direct competitors, and the two leaders in the field, with capabilities and infrastructure beyond those of its competitors.
All in all, though, Limelight’s argument showed an interesting degree of audacity. It’s not a stretch to theorize that Limelight had been able to offer its product at half the price of Akamai’s product because Limelight hadn’t been subject to Akamai’s product development risks and costs. To use those potentially pertinent factors to show a ‘segmented’ (and thus non-competitive) market- well, that takes some chops.
As noted, the case is now on its way back to the district court so that the court can reinstate the jury’s initial verdict and damages award. So, it’s the end of a long 9-year road for the parties. The case teaches many lessons, not only for litigants, but for the district courts and the Federal Circuit as well.
What do you think?