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Akamai Tech. v. Limelight Networks

The Federal Circuit Overrules BMC Resources and Overturns the Single-Entity Rule for Induced Infringement

September 06, 2012

The Federal Circuit has issued a long-awaited opinion on the standard for induced infringement of method claims by multiple actors, reversing the rule under BMC Resources that infringement can occur only if a single party practices all of the steps of a claimed method. Clients and practitioners should expect induced infringement to be asserted more frequently in patent litigation, as the available defenses (and non-infringement strategies) against it have now narrowed.

Factual and Procedural Background

The decision involved two cases: Akamai Technologies, Inc., v. Limelight Networks, Inc., and McKesson Technologies, Inc., v. Epic Systems Corp. In Akamai, the patent holder (Akamai) alleged that Limelight directly and indirectly (by inducement) infringed a patent that covers a method for “efficient delivery of web content.” The patent’s method claims required “placing some of a content provider’s content elements on a set of replicated servers and modifying the content provider’s web page to instruct web browsers to retrieve that content from those servers.” Limelight maintained a network of servers and placed some content elements on its servers. However, Limelight did not modify the content providers’ Web pages; instead, it taught its customers how to do that.

In McKesson, the patent holder (McKesson) alleged that Epic induced infringement of a patent covering “a method of electronic communication between healthcare providers and their patients.” Epic licensed its accused software — which permitted healthcare providers to communicate electronically with patients — to healthcare organizations. The steps of the method claims were thus “divided between patients, who initiate communications, and healthcare providers, who perform the remainder of the steps.” Epic did not perform any of the required steps.

The district courts found in both Akamai and McKesson that the defendants did not infringe the asserted patents because they neither performed all of the claimed steps themselves nor exhibited the necessary control over the other parties that did perform the claimed steps, relying on the Federal Circuit’s decisions in BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) (holding that, for a party to be liable for induced infringement, some other single entity must be liable for direct infringement), and Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008) (concluding that there can be no infringement unless one party exercises “control or direction” over the entire process). Although the Federal Circuit initially upheld the district courts, it granted en banc rehearing for both cases to reconsider the existing legal framework.

Expansion of the Induced Infringement Standard

On Aug. 31, 2012, the Federal Circuit issued a per curiam opinion for both the Akamai and McKesson cases. Although the en banc rehearing and accompanying briefing of the parties and amici curiae were directed to the question of whether direct infringement can be found when no single entity performs all of the claimed steps of the patent, the court concluded that it was not necessary “to resolve that issue today because we find that these cases and cases like them can be resolved through an application of the doctrine of induced infringement.” The court instead “address[ed] the question whether a defendant may be held liable for induced infringement if the defendant has performed some of the steps of a claimed method and has induced other parties to commit the remaining steps (as in the Akamai case), or if the defendant has induced other parties to collectively perform all the steps of the claimed method, but no single party has performed all of the steps itself (as in the McKesson case).”

In sum, the six-to-five majority held that, for induced infringement, a single actor is not required to perform all of the infringing steps. Under Akamai, liability for induced infringement exists where the accused infringer (1) knows of the patent; (2) induces performance of the steps of the patented method by causing, urging, encouraging or aiding the performance of such steps; and (3) those steps are actually performed. It is no longer necessary for the accused infringer to “control or direct” the actors who perform the steps of the method.

In adopting this more expansive standard independent from the number of actors required to commit the infringing acts, the Federal Circuit was “persuaded that Congress did not intend to create a regime in which parties could knowingly sidestep infringement liability simply by arranging to divide the steps of a method claim between them.” The court reasoned that “[i]f a party has knowingly induced others to commit the acts necessary to infringe the plaintiff’s patent and those others commit those acts, there is no reason to immunize the inducer from liability for indirect infringement simply because the parties have structured their conduct so that no single defendant has committed all the acts necessary to give rise to liability for direct infringement.”

Notably, the Court was careful to limit its holding to cases of alleged induced infringement, stating that the law with respect to divided infringement as it applies to liability for direct infringement remains untouched.

Implications and Next Steps

Although the law of divided infringement may remain unsettled in the wake of Akamai, the decision may have some immediate effects:

  1. The law of divided infringement may continue to evolve: Given the closeness of the en banc decision, a petition for certiorari may be on the way. In addition, Akamai leaves open the issue on which the court agreed to hear both cases en banc: whether direct infringement can be found when no single entity performs all of the claimed steps of the patent. The per curiam decision purports, on the one hand, not to alter the rule that “inducement gives rise to liability only if the inducement leads to actual infringement,” while on the other hand perpetuating a standard for inducement that differs critically from the standard for direct infringement.
  2. Clients may wish to revisit Pre-Akamai/freedom-to-operate analyses: As inducement theories become more attractive to patent holders, defensive business strategies should be adapted to take account of the Akamai standard. In particular, freedom-to-operate analyses obtained prior to Akamai that rely primarily upon the “single entity” rule should be revisited.
  3. Patent applicants may pursue claims that will not be directly infringed, but claim drafting practice in general should not change: Akamai opens the door to successful assertion of infringement claims based on the activities of multiple unrelated parties, and method claims that might have been unenforceable under the BMC Resources standard may now be worth a second look. That being said, it remains a good strategy to draft claims that recite method steps that can be fully conducted by a single entity. After all, Akamai does not change the law of direct infringement requiring that each step of a method claim be practiced by a single defendant, and nothing in Akamai prevents a patentee who is able to make a winning direct infringement claim from successfully asserting inducement as well.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Frank-Steven

This article was originally published by Bingham McCutchen LLP.