Divided Federal Circuit Panel Stands by the Single Entity Rule for Direct Patent Infringement

Divided Federal Circuit Panel Stands by the Single Entity Rule for Direct Patent Infringement

On May 13, 2015, in Akamai Technologies, Inc. v. Limelight Networks, Inc., a divided Federal Circuit panel again concluded that direct infringement liability of a method claim exists only "when all of the steps of the claim are performed by or attributed to a single entity." Judge Moore dissented, contending that the majority strayed from "centuries" of patent law preceding the Federal Circuit's decisions 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). Although this latest chapter in the dispute between Akamai and Limelight may not be the last, the May 13 opinions draw the battle lines in the ongoing fight over divided infringement liability.

In Muniauction, the Federal Circuit held that "direct infringement requires a single party to perform every step of a claimed method." Muniauction, 532 F.3d at 1329. Where "multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises 'control or direction' over the entire process such that every step is attributable to the controlling party, i.e., the 'mastermind.'" Id. (quoting BMC, 498 F.3d at 1380-81). In its 2010 Akamai panel decision authored by Judge Linn and joined by then-Chief Judge Rader and then-Judge Prost, the Federal Circuit held that Muniauction and BMC controlled whether Limelight directly infringed Akamai's method claims directed to delivering content over the internet, and held that Limelight did not directly infringe. In 2012, the en banc court did not disturb the ruling of no direct infringement under 35 U.S.C. § 271(a), but held that a defendant may be liable for induced infringement of a method claim under § 271(b) if the defendant "knowingly induces others to engage in acts that collectively practice the steps of the patented method" or "performs some of the steps itself and induces another to perform the remaining steps that constitute infringement." Akamai Technologies, Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 1309 (Fed. Cir. 2012). Granting review only on § 271(b) liability, the U.S. Supreme Court reversed, holding that liability for induced infringement requires underlying direct infringement. In the process, the Court noted "the possibility that the Federal Circuit erred by too narrowly circumscribing the scope of § 271(a)." Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111, 2119 (2014).

The panel's May 13 decision follows the Supreme Court's remand, which allowed the court of appeals to reconsider its view of the scope of § 271(a). In the majority opinion, Judge Linn, joined by now-Chief Judge Prost, concluded that BMC and Muniauction were correctly decided, and that there could be no liability for infringement of a method claim under § 271(a) unless all of the claim's steps are performed by or can be attributed to a single entity, as in a principal–agent relationship, a contractual arrangement, or a joint enterprise. The majority supported its decision by citing the statutory scheme of § 271, traditional vicarious liability principles, and the incongruity between § 271(a) and joint tortfeasor's law. Further, from a policy standpoint, the majority emphasized that if § 271(a) were expanded, customers who perform a single step of a patented method by using a product as intended would be "significantly more vulnerable" to charges of patent infringement. Finally, the majority concluded that the drafters of the patent-in-suit could have avoided the divided infringement problem by drafting claims that did not require actions by both the content-delivery service provider and its customers to establish infringement.

In dissent, Judge Moore, who under Federal Circuit internal operating procedures was selected to replace former Chief Judge Rader on the panel, contended that the majority had "create[d] a gaping hole in what for centuries has been recognized as an actionable form of infringement." Arguing that the holdings in BMC and Muniauction were unsupported by the text of § 271(a), Judge Moore contended that an interpretation of the statute allowing for joint infringement was consistent with the Patent Act more generally, which addresses joint inventorship using similar language. Judge Moore also drew support from common law predating the 1952 Patent Act and general tort principles of joint liability. In responding to the majority, Judge Moore contended that the policy concerns with suits by patent "trolls" against customers were unwarranted and that the proliferation of method claims requiring multiple actors undercut the majority's conclusion that there was "a long-standing single entity requirement for direct infringement."

While acknowledging that her position conflicted with BMC and Muniauction, Judge Moore contended that the majority's position that a "joint enterprise" would suffice to establish single entity liability conflicted with the holding of Golden Hour Data Systems, Inc. v. emsCharts, Inc., 614 F.3d 1367 (Fed. Cir. 2010), and thus en banc action would be necessary to reconcile either position with circuit precedent. Without addressing this critique, the majority stated that it was not expressly adopting joint enterprise liability. Nonetheless, the majority's repeated references to joint enterprise liability evidence further tension within the Federal Circuit's precedents.

Given the history of this case—including the Supreme Court's commentary in Limelight and Judge Moore's call for en banc review—the May 13 opinion may not be the last word on liability for divided infringement; the potential for further consideration of the issue by the en banc Federal Circuit or the Supreme Court, either in this case or another, remains. In the meantime, patent litigators may attempt to frame divided infringement issues to maximize their arguments in light of the potential flux in the state of the law, while patent prosecutors should be wary of method claims drafted to require the participation of multiple actors.

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