If a firm that performs steps A, B, and C of a "method" patent induces the firm's customers to take step D -- the final one -- does the firm infringe the patent?
The question -- which a two-judge majority on a Federal Circuit panel answered no -- produced 62 pages of opinions and a sharp dissent. See Akamai Technologies, Inc. v. Limelight Networks, Inc., No. 09-1327 (Fed. Cir. May 13, 2015).
The ruling doesn't settle the issue; the court sitting en banc or the Supreme Court will have to do that.
But, to a surprising extent, the majority explicitly echoed the arguments by organizations that went to make patents harder to get and patent lawsuits more difficult for plaintiffs to win.
Akamai sued Limelight Networks for infringing Akamai's patent on a process for fetching online content. (The technology related to a method for easing access to data during "peak usage" by making segments of content available on multiple servers in more than one location.) A jury found that Limelight and its customers committed acts that together would have infringed the Akamai patent if a single entity had engaged in the conduct and awarded Akamai $40 million.
After much appellate review, the case landed again before a three-judge panel.
But "[f]or method patent claims, direct infringement only occurs when a single party or a joint enterprise performs all of the steps of the process." Akamai, slip op. at 7 (citing cases). Although performed all but one of the steps in Akamai's content-fetching process, the fact that users of Limelight's "content delivery network" did the final step ("tagging" the content they wanted) triggered the bar of the single-entity rule.
In spite of the existence of behavior constituting infringement, the majority held, no one infringed.
But the words of the statute and logic alone did not produce the outcome.
The majority stressed "concern" in Congress and state legislatures "about the vulnerability of innocent customers to charges of patent infringement". Akamai, slip op. at 23. Citing the contentions of infringement defendants and their champions, it went on (per Judge Richard Linn):
Several amici, the White House, and other commentators identify numerous instances where patentees have sent demand letters to or sued dozens, hundreds, or, in some cases, even thousands of unsophisticated downstream users. If the law were expanded to impose joint and several liability on users of a single prior art method step, it would subject swathes of innocent actors across diverse industries to these practices. Using real patents as examples, amici warn that individuals could be liable for patent infringement for so little as initiating communication with a doctor or swiping a debit card. Another amici [sic] explains that “the hundreds if not thousands of contracts in a technology company’s supply chain could expose each actor in that supply chain to potential patent infringement liability . . . .” Cisco Br. at 5.
Id. at 24-25 (footnotes omitted).
Judge Kimberly Moore summarized her reasons for dissent as follows:
Today the majority holds that the actions of multiple parties can only result in direct infringement of a method claim in three circumstances: in a principal-agent relationship, in a contractual arrangement, or in a joint enterprise functioning as a form of mutual agency. It divorces patent law from mainstream legal principles by refusing to accept that § 271(a) includes joint tortfeasor liability. The majority’s rule creates a gaping hole in what for centuries has been recognized as an actionable form of infringement. It claims that this result is mandated by the statute. I do not agree.
The single entity rule promulgated in BMC [Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007)] and Muniauction[, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008)] is a recent judicial creation inconsistent with statute, common law, and common sense. For centuries, the concerted actions of multiple parties to infringe a patent gave rise to liability. The plain language of § 271(a) codified this joint infringement. To construe that language otherwise would permit identical language in the statute to have inconsistent meanings. Congress meant to and did codify liability for joint infringement. It did not, as the majority suggests, purposefully do away with a broad swath of recognized forms of liability for infringement. I respectfully dissent from the majority’s decision to interpret § 271(a) in a manner that condones the infringing conduct in this case.
Akamai, slip op. at 1-2 (dissent).
Blawgletter expects that further review will probably ensue from the panel decision. The Supreme Court looked at the case last year (ruling that "inducement" liability for patent infringement requires proof of "direct" infringement, at least in method patent cases) after an en banc decision by the Federal Circuit. Another rehearing by the full court of appeals and another trip to the Supreme Court both seem plausible.
In the meantime, what effect will the panel's 2-1 ruling have? It will at the least prompt defendants in cases involving method patents to claim that someone else performs at least one step in the patent's process. It will also encourage method-patent plaintiffs to try fit their cases within the principal-agent, contract, and joint enterprise exceptions that the panel recognized to the single-entity rule.