The Future of Inducing Infringement Claims after Limelight v. Akamai

In Limelight v. Akamai, the United States Supreme Court reversed the Federal Circuit’s precedent holding that inducing infringement claims did not require a single, direct infringer. This case, and how the district courts implement the Supreme Court’s decision, will have a significant impact on the future of inducing infringement claims, and likely will signal an end to many such claims that are currently pending in the district courts.

In the underlying case, the Massachusetts Institute of Technology exclusively licensed U. S. Patent No. 6,108,703 (“the ’703 patent”) to Akamai Technologies, Inc. (“Akamai”). The ‘703 patent claims a method of delivering electronic data using a “content delivery network,” or “CDN.”

As explained by the Supreme Court, “Akamai maintains many servers distributed in various locations. Proprietors of Web sites, known as ‘content providers,’ contract with Akamai to deliver their Web sites’ content to individual Internet users. The ’703 patent provides for the designation of certain components of a content provider’s Web site (often large files, such as video or music files) to be stored on Akamai’s servers and accessed from those servers by Internet users. The process of designating components to be stored on Akamai’s servers is known as ‘tagging.’ By ‘aggregat[ing] the data demands of multiple content providers with differing peak usage patterns and serv[ing] that content from multiple servers in multiple locations,’ 614 F. Supp. 2d 90, 96 (Mass. 2009), as well as by delivering content from servers located in the same geographic area as the users who are attempting to access it, Akamai is able to increase the speed with which Internet users access the content of its customers’ Web sites.”

Limelight Networks, Inc. (“Limelight”) operates a CDN and carries out several of the steps claimed in the ’703 patent. However, Limelight omits the tagging step and instead requires its customers to do their own tagging. Akamai claimed that Limelight “provides instructions and offers technical assistance” to its customers regarding how to tag, which constituted inducing infringement under Federal Circuit law.

Sitting en banc, the Federal Circuit found that the “evidence could support a judgment in [respondents’] favor on a theory of induced infringement” under §271(b), 692 F. 3d 1301, 1319 (2012) (per curiam). Section 271(b) provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer.”

The Federal Circuit reached this conclusion by reasoning that “§271(b) liability arises when a defendant carries out some steps constituting a method patent and encourages others to carry out the remaining steps—even if no one would be liable as a direct infringer in such circumstances, because those who performed the remaining steps did not act as agents of, or under the direction or control of, the defendant.”

The Supreme Court sharply disagreed with the Federal Circuit’s analysis. “The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out. See, e.g., Aro, supra, at 344 (a ‘patent covers only the totality of the elements in the claim and . . . no element, separately viewed, is within the grant’). This principle follows ineluctably from what a patent is: the conferral of rights in a particular claimed set of elements. ‘Each element contained in a patent claim is deemed material to defining the scope of the patented invention,’ Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17, 29 (1997), and a patentee’s rights extend only to the claimed combination of elements, and no further.”

The Supreme Court further found that “[t]he Federal Circuit’s contrary view would deprive §271(b) of ascertainable standards. If a defendant can be held liable under §271(b) for inducing conduct that does not constitute infringement, then how can a court assess when a patent holder’s rights have been invaded? What if a defendant pays another to perform just one step of a 12-step process, and no one performs the other steps, but that one step can be viewed as the most important step in the process? In that case the defendant has not encouraged infringement, but no principled reason prevents him from being held liable for inducement under the Federal Circuit’s reasoning, which permits inducement liability when fewer than all of a method’s steps have been performed within the meaning of the patent. The decision below would require the courts to develop two parallel bodies of infringement law: one for liability for direct infringement, and one for liability for inducement.”

The Supreme Court also concluded that “[s]ection 271(f)(1) reinforces our reading of §271(b). That subsection imposes liability on a party who ‘supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States’ (emphasis added). As this provision illustrates, when Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so. The courts should not create liability for inducement of non-infringing conduct where Congress has elected not to extend that concept.”

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The district courts quickly followed the Supreme Court’s direction and have eliminated a number of inducing claims since the Supreme Court issued its decision.

For example, in In re Katz Interactive Call Processing Patent Litigation, Case No. MDL 2:07-ML-1816-B-RGK (C.D. Cal. Aug. 6, 2014), the defendant, FedEx, moved for reconsideration of the district court’s pre- Limelight denial of its motion for summary judgment of no inducement.

After determining that reconsideration was appropriate, the district court analyzed the merits of FedEx’s position and found that summary judgment should be granted in view of Limelight. In so doing, the district court rejected a new inducement theory raised by the plaintiff. “Katz now says that its inducement theory is that ‘FedEx induced its customers (callers) and corporate subsidiaries to directly infringe.’ A review of the underlying summary judgment briefs reveals that Katz did not raise this argument previously. Rather, Katz advanced two other arguments: 1) that FedEx directly infringed itself; and 2) that Katz relied only upon the conduct of FedEx, AT&T, and XO in combination. Since Katz, in the underlying brief, did not raise the possibility that FedEx induced customers, this Court will not consider the customer infringement theory now.”

The district court also found that the new theory would not be viable even if it were allowed. “The first argument with respect to FedEx’s own direct infringement does not support a finding of inducement. Rather, it relates only to charges of direct infringement, which remain in this case. The second argument concerns multiple parties and is no longer viable after Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. Ct. 2111 (2014). In Limelight, the Supreme Court held that a defendant cannot be liable for inducing infringement under § 271(b) when there is no predicate act of direct infringement. Id. at 2115. Here, there is no such accusation in the underlying record.”

Accordingly, the district court granted the motion for summary judgment in light of the Limelight decision.

More recently, in Ultratec, Inc. v. CaptionCall, LLC, Case No. 3:13-cv-00346-bbc (D. Wisc. Oct. 1, 2014), a district court issued a sua sponte order requiring plaintiff to show why its inducing infringement claims should not be dismissed as a matter of law. After addressing the United States Supreme Court’s recent decision in Limelight, the district court noted that no single party performed all of the steps of the method in the patent-in-suit.

As noted by the district court, “[e]ach of the method claims presented by the ‘835 and ‘740 patents specifies that some method steps are to be performed by the ‘assisted user,’ while other steps are to be performed ‘at the relay.’ Conceding that no single party actually performs every step of the claimed methods, plaintiffs seek to establish that defendants’ customers (the ‘assisted users’) direct and control defendants in performing those steps to be performed ‘at the relay’ such that the performance of all of the steps of the method can be attributed to the assisted users.”

The district court explained that the plaintiffs alleged that each customer was a direct infringer and relied on an inducement theory “to make defendants liable for the acts of direct infringement, asserting that defendants induced the assisted users to become direct infringers by encouraging and instructing them to initiate captioned calls.”

The district court then found that the plaintiffs lacked sufficient evidence to raise a triable issue of fact regarding the assisted users’ control over defendants. “Plaintiffs’ theory of ‘direction and control’ is that CaptionCall’s relay system is designed in such a way as to ‘always and automatically’ generate and transmit captions whenever any new call is initiated by a user. That the defendants allegedly lack control to decline to provide captioning to incoming calls, however, is not the same as showing that assisted users exercise the necessary control or direction over the performance of the method steps such that ‘every step is attributable to [the users].’ Notably, plaintiffs do not allege that the assisted users control CaptionCall’s servers or have any influence over the operation of its call centers. They do not allege that the assisted users provide any instructions or directions to CaptionCall about how it should generate captions and they do not allege that the assisted users receive any portion of the payments received by CaptionCall for providing its relay service. In fact, plaintiffs do not even allege that the customers have any knowledge whatsoever of where, how or by whom captions are generated. The assisted users, in other words, are clueless masterminds.”

Therefore, the district court concluded that there was no evidence in this case that the assisted users exercised any control over how defendants provide captioning service, “much less that they know how the captioning service works. Under this scenario, there is simply no basis on which to find that the law would traditionally hold the [assisted users] vicariously liable for the acts committed.”

Accordingly, the district court dismissed the inducing infringement claims.

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The Supreme Court’s decision in Limelight has had a direct and significant impact in the district courts, resulting in the dismissal of several lawsuits. It is likely that this impact will continue and that inducing infringement claims will be increasingly difficult to maintain.

In view of Limelight and its district-court aftermath, accused infringers should consider moving to dismiss inducement claims at the earliest possible stages of litigation. In pending cases, accused infringers should file motions for judgment on the pleadings to eliminate such claims if the patent owner’s allegations of inducement run afoul of the stricter standards set forth in Limelight. Further, even if such inducement claims survive a motion to dismiss, accused infringers still can marshal the necessary evidence and arguments to eliminate those claims on summary judgment.