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Over a Year Later, the Akamai Decision Is Still in the Cross-Hairs

Wednesday, January 29, 2014

By Michael K. Levy and Caroline Sun

Michael K. Levy is a partner at Kenyon & Kenyon LLP, New York. Mr. Levy focuses his practice on patent litigation, client counseling, opinion work, due diligence, portfolio management and patent prosecution in the pharmaceutical, drug delivery, medical device and chemical process fields. He can be reached at mlevy@kenyon.com.

Caroline Sun is an associate in the same office. Ms. Sun focuses her practice on intellectual property litigation, with an emphasis on pharmaceutical patent litigation under the Hatch-Waxman Act. She has handled patent, trade secret, unfair competition, copyright and contract litigation in the pharmaceutical, chemical, biological, entertainment and consumer goods industries. She can be reached at csun@kenyon.com.

On Aug. 31, 2012, the U.S. Court of Appeals for the Federal Circuit issued a 6-5 en banc decision in Akamai v. Limelight that changed the landscape of induced infringement of method claims.1,2 Departing from decades of precedent, patent owners no longer need to prove direct infringement by a single entity to hold a party liable for induced infringement, thus enlarging the scope of potential infringement liability.3

The Supreme Court granted Limelight Network Inc.'s petition for writ of certiorari on Jan. 10.4 This article briefly surveys Akamai's effect on infringement litigation and reports on the path leading up to the Supreme Court's recent decision to hear the case.

Akamai: A New Theory of Infringement

Akamai Technologies Inc. sued Limelight for infringing a patent that claims a method for delivering web content.5 Limelight does not perform all the steps of the claim; it performs some steps and instructs its customers to perform the remaining steps.6

Akamai pursued a theory of joint infringement, arguing that the combined actions of Limelight and its customers infringed the claimed method.7,8 The district court held that because direct infringement required a party to exercise control or direction over a third party who performed some or all of the steps of the claim, there could be no direct infringement because Limelight did not control or direct its customers' actions.9 On appeal, the Federal Circuit affirmed.10 The Federal Circuit then granted Akamai's petition for rehearing en banc.11

The majority en banc opinion sidestepped the question of whether there can be direct infringement when more than one entity performs the steps of a method patent.12 Instead, the court analyzed the case under principles of inducement and created a new test for induced infringement:

Limelight would be liable for inducing infringement if the patentee could show that (1) Limelight knew of Akamai's patent, (2) it performed all but one of the steps of the method claimed in the patent, (3) it induced the content providers to perform the final step of the claimed method, and (4) the content providers in fact performed that final step.13,14

The court held that in order to find induced infringement, a patent holder no longer had to prove a single entity performs all claimed steps of a method patent.15 Although “inducement … requires specific intent to cause infringement,” it “does not require that the induced party be an agent of the inducer or be acting under the inducer's direction or control to such an extent that the act of the induced party can be attributed to the inducer as a direct infringer.”16 In fact, “[i]t is enough that the inducer 'cause[s], urge[s], encourage[s], or aid[s]’ the infringing conduct and that the induced conduct is carried out.”17

The court justified its analysis by determining that Congress's intent for enacting the Patent Act was not to “permit ready evasion of valid method claims” by dividing performance of the steps of a method claim such that no one can be held liable for infringement.18 That is, the court overruled precedent that required inducement liability only attach when there was an underlying direct infringement by a single actor by holding that it need only be shown that all steps of a claimed method were performed. The court also found support for its new rule by referring to the text of the Patent Act, the legislative history of the statute, and analogies to tort law and criminal law.19

In her dissent, Judge Newman criticized the majority for adopting a new theory of patent infringement that allowed for a finding of indirect infringement without direct infringement.20 According to Judge Newman, direct infringement liability under Section 271(a) should attach to joint actors.21 Judge Richard Linn, joined by Judges Timothy B. Dyk, Sharon Prost, and Kathleen O'Malley, also dissented. Calling the majority's view “a sweeping change to the nation's patent policy that is not for this court to make,” Judge Linn criticized the majority for “assum[ing] the mantle of policy maker” and rooting its opinion in “what Congress ought to have done rather than what it did.”22 To address the issue of joint or divided infringement, Judge Linn would apply principles of vicarious liability, such that Limelight would need to exercise control or direction over its customers' actions to be held liable for direct infringement.23 Moreover, Judge Linn suggested that the burden should be on the patentee to draft claims to avoid implicating divided infringement.24

Akamai's Effect on Federal Circuit and District Court Decisions

As Judge Newman predicted, the Akamai opinion has generated significant “turmoil”25 in the litigation landscape. Cases once thought resolved have been resuscitated as courts have allowed claims of induced infringement to be revived or added, prolonging litigation and increasing costs. For example, on more than one occasion, the Federal Circuit has affirmed a lower court's grant of summary judgment of no direct infringement, only to remand to determine whether there is induced infringement under the Akamai standard.26 In three cases involving joint infringement, the district court granted summary judgment of non-infringement because a single entity did not perform all the steps of asserted method claims.27 On appeal, the Federal Circuit determined that although the lower courts correctly analyzed under the direct infringement standard, the cases required remand to examine whether there was induced infringement under Akamai.28

District courts similarly have had to revisit their prior decisions based on Akamai. A district court granted a patent holder's motion to reconsider a grant of summary judgment of non-infringement.29 The court found that there were genuine disputes of material fact whether an accused infringer “caused, urged, encouraged, or aided the infringing conduct” and intended for a third party to infringe the patent.30 The proper inquiry was now whether the accused infringer, along with third party software providers who were not named as defendants, carried out the infringing conduct.31

Litigation also has been prolonged because courts have granted leave to amend complaints based on Akamai.32 A district court granted leave to amend a complaint less than four months before trial to allow a patent holder to add new allegations of induced infringement.33 The court held that, to meet the standard of a well-pled complaint, it was enough for a patent holder to allege that service of a complaint and continuing to engage in alleged infringing activities constituted intent to induce infringement.34 The court also allowed further motion practice as to the induced infringement issue.35

Other district courts have denied dispositive motions to dismiss claims of induced infringement.36 In one case, a court found that studying a patent, distinguishing it from an alleged infringer's patent application, and providing customers with an online form constituted intent to induce infringement sufficient to survive a motion to dismiss.37 In another case, it was enough for a patent holder to allege intent to induce infringement via an alleged infringer's press releases about the availability of a product.38

Efforts to Have the Supreme Court Review Akamai

In its petition for a writ of certiorari, Limelight closely mirrored the arguments of the Linn dissent. The question presented is “[w]hether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. §271(b) even though no one has committed direct infringement under §271(a).”39 Limelight has asserted that the Federal Circuit's position conflicts with the Patent Act and Supreme Court precedent such that it “undermine[s] important pillars of patent doctrine.”40 The Supreme Court repeatedly has held that there cannot be indirect infringement in the absence of direct infringement.41 Moreover, Section 271(a) of the Patent Act defines acts that constitute direct infringement. Since Akamai created a new definition of infringement that is not encompassed in any of the acts defined in Section 271(a), the majority's position directly conflicts with the text of the Patent Act.42,43 Limelight concluded that it was Congress's role, not the court's, to enact such a sweeping change to patent policy.44

Three amici curiae briefs were filed in support of Limelight's petition.45 Amici, representing the information technology industry, the wireless communications industry and industry leaders in various other technology fields, expressed dismay that the Akamai decision exposed them to possible liability for inducing infringement.46 For example, vendors and service providers now shoulder the burden of predicting when the actions of third party purchasers transform non-infringing goods and services into potential liability for induced infringement.47 Information technology companies whose products and services are designed for maximum compatibility with downstream users are faced with the impossible task of considering “whether any permutation permitted or facilitated by their platforms could be interpreted to perform all the steps of any asserted claim.”48 Wireless network providers who have no control over third party downstream users and are the means by which different entities are connected fear that the Akamai decision has “flung open the courthouse doors” to substantial amounts of costly litigation.49

Amici noted that the scienter component of the Akamai decision is an illusory shield against frivolous litigation.50 Although the majority opinion recognized that inducement requires knowledge of the patent and specific intent to induce infringement,51 amici pointed out that pre-Akamai cases have held that service of a complaint provided sufficient knowledge of a patent.52 Moreover, issues of knowledge and intent “commonly survive dispositive motions, clogging the courts and burying companies in needless and expensive litigation over multitudes of claims that are ultimately destined to fail.”53 The amici briefs also agreed with Judge Linn that patentees are in the best position to draft claims to avoid issues of divided infringement.54

Amici also noted that the Akamai rule permits patentees with “new opportunities to add steps, including known prior art steps, … and artificially expand the scope of their claims beyond the inventive elements.”55 For example, a software company may now be held liable for inducing infringement by providing software, which is encompassed within the prior art, that is incorporated by a downstream user who performs the point of novelty in a claimed method.56

Akamai cross-petitioned for a writ of certiorari conditioned on the Supreme Court granting Limelight's petition.57 The question presented in Akamai's conditional cross-petition is “[w]hether a party may be liable for infringement under either 35 U.S.C. §271(a) or §271(b) where two or more entities join together to perform all of the steps of a process claim.”58 Briefly, Akamai argues that its question is “inextricably intertwined” with that raised by Limelight in that direct and indirect infringement issues are closely related.59 Akamai also advocates for a ruling that separate actors may be collectively liable for direct patent infringement.60

On Dec. 10, 2013, the solicitor general filed an amicus curiae brief recommending that the court grant Limelight's petition for a writ of certiorari and deny Akamai's conditional cross-petition.61 According to the solicitor general, the Federal Circuit's holding that a party may be liable for induced infringement when no one has directly infringed a patent represents a “significant anomaly” that is “inconsistent with the most straightforward reading of the statutory text and unsupported by background legal principles.”62 The solicitor general found fault with the Federal Circuit's interpretation of the Patent Act and its justifications for altering the law of induced infringement based on legal precedent, tort and criminal law principles and the legislative history of the Patent Act.63

While the solicitor general understood the Federal Circuit's motivation for curing a perceived injustice that allows parties to avoid infringement liability in cases such as this, he noted that “the authority and responsibility for filling any perceived statutory gap belongs to Congress rather than the courts.”64 The Federal Circuit's interpretation subjected “[c]ompanies in a wide range of industries--including the information technology, financial services, biotechnology, and wireless network industries” to increased liability for patent infringement.65 Thus, the court's review is necessary “to avert a significant expansion of the scope of inducement liability (and a corresponding increase in burdensome litigation).”66

The solicitor general recommended that the court deny Akamai's conditional cross-petition because the Federal Circuit expressly avoided ruling on direct infringement.67 He expressed approval for the Federal Circuit's general approach to joint infringement based on traditional vicarious liability principles and invited the court to refine its jurisprudence with regard to the issue.68

On Dec. 23, 2013, Akamai filed a supplemental brief responding to the solicitor general's position.69 Akamai criticized the solicitor general for “parrot[ing]” Limelight's arguments while failing to consider Akamai's, and argued that the Federal Circuit should be allowed to correct and refine its jurisprudence regarding divided infringement.70 Akamai also asserted that the court should grant its cross-petition because direct infringement was litigated at the district court level and “there is uncertainty about direct infringement because the en banc court failed to resolve it.”71

On Jan. 10, the Supreme Court granted Limelight's petition for a writ of certiorari.72 No decision was reported regarding Akamai's conditional cross-petition. Commentators expect the court to hear arguments in April with a decision by June 2014.73

The question of who may be held liable for inducing infringement of method claims is an important one given that today's interactive technologies almost always involve multiple actors. Since the Supreme Court historically follows the view of the solicitor general,74 commentators believe the court is likely to reverse the Federal Circuit's stance on induced infringement.

The court is expected to hold that liability for direct infringement is a necessary predicate for indirect infringement. For the cases following Akamai, the Supreme Court's reversal undoubtedly would entail more motion practice to restore the cases to their pre-Akamai status.

1Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 2012 BL 225248, 104 U.S.P.Q.2d 1799 (Fed. Cir. 2012) (en banc) (173 PTD, 9/7/12).

2 The en banc Federal Circuit opinion concurrently addressed the Akamai case and that of McKesson Technologies Inc. v. Epic Systems Corp. Both Akamai and McKesson addressed the issue of liability for induced infringement in joint infringement cases; they differed in whether the defendant performed any of the claimed steps. 692 F.3d at 1305. The McKesson case settled and its petition for certiorari was dismissed on March 11, 2013. Brief in Opposition at 10, n.3, Limelight Networks, Inc. v. Akamai Techs., Inc., No. 12-786 (U.S. filed April 3, 2013).

3 692 F.3d at 1328, 1337-47.

4Limelight Networks Inc. v. Akamai Techs. Inc., No. 13-786 (U.S., cert. granted Jan. 10, 2013) (08 PTD, 1/13/14).

5 Petition for a Writ of Certiorari at 3, No. 12-786 (U.S., filed Dec. 28, 2012) (05 PTD, 1/8/13). “The claimed method consists of 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.” 692 F.3d at 1306.

6 Limelight places a content provider's content elements on its servers but does not modify the content provider's web page. Instead, it instructs its customers to perform that step. 692 F.3d at 1306.

7 Petition, supra note 5, at 6-7.

8 Joint infringement historically has been assessed under 35 U.S.C. §271(a), which defines direct infringement. See 692 F.3d at 1307.

9See Petition, supra note 5, at 7-9.

10Id.

11Id.

12 692 F.3d at 1306. (“Much of the briefing in these cases has been directed to the question whether direct infringement can be found when no single entity performs all of the claimed steps of the patent. It is not necessary for us 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.”).

13Id. at 1318.

14 In McKesson, where McKesson alleged that Epic induced its customers to perform all steps of a method patent, the Federal Circuit held that Epic would be liable for inducing infringement if “(1) it knew of McKesson's patent, (2) it induced the performance of the steps of the method claimed in the patent, and (3) those steps were performed.” Id. at 1306, 1318.

15Id. at 1306. The court expressly overruled the “single-entity rule” of BMC Resources Inc. v. Paymentech LP, 498 F.3d 1373, 84 USPQ2d 1545 (Fed. Cir. 2007) (185 PTD, 9/25/07). In BMC, the court “ruled that in order to support a finding of induced infringement, not only must the inducement give rise to direct infringement, but in addition the direct infringement must be committed by a single actor.” 692 F.3d at 1306, 1308.

16 692 F.3d at 1308-1309, n.1.

17Id. at 1308 (quoting Arris Grp., Inc. v. British Telecomms. PLC, 639 F.3d 1368, 1379 n.13, 2011 BL 133287, 98 U.S.P.Q.2d 1812 (Fed. Cir. 2011) (99 PTD, 5/23/11)(alterations in original). Judge Pauline Newman, in her dissent, criticized these “loose criteria for inducement” as “ill defined, and open-ended.” 692 F.3d at 1320, 1329.

18 692 F.3d at 1318.

19Id. at 1307-18.

20Id. at 1319, 1328.

21Id. at 1322-26.

22Id.

23See id. at 1348-51.

24See id. (“[T]he claim drafter is the least cost avoider of the problem of unenforceable patents due to joint infringement.”).

25Id. at 1321.

26SeeAristocrat Techs. Austl. Pty Ltd. v. Int'l Game Tech., 709 F.3d 1348, 1362-64, 2013 BL 65397, 106 U.S.P.Q.2d 1100 (Fed. Cir. 2013) (52 PTD, 3/18/13); Move Inc. v. Real Estate Alliance Ltd., 709 F.3d 1117, 2013 BL 57435, 105 U.S.P.Q.2d 1948, 1951-52 (Fed. Cir. 2013); Travel Sentry, Inc. v. Tropp, 497 F. App'x 958, 963-67, 2012 BL 289364 (Fed. Cir. 2012).

27Id.

28Id.

29SeeCivix-DDI, LLC v. Hotels.com, LP, 904 F. Supp. 2d 864, 868-69, 2012 BL 288012 (N.D. Ill. 2012).

30Id.

31Id.

32SeePrism Techs., LLC v. McAfee, Inc., No. 8:10CV220, 2012 BL 286992 (D. Neb. Nov. 1, 2012); Smartwater, Ltd. v. Applied DNA Scis., Inc., No. 12-CV-5731, 2013 BL 264091 (E.D.N.Y. Sept. 27, 2013).

33SeePrism, supra note 32.

34Id.

35Id.

36SeeTransunion Intelligence LLC v. Search Am., Inc., No. 11-cv-1075, 2013 BL 48707 (D. Minn. Feb. 22, 2013); Driessen v. Sony Music Entm't, 904 F. Supp. 2d 1196, 1201-05, 2012 BL 277292 (D. Utah 2012), vacated-in-part on other grounds by No. 2:09-cv-0140, 2013 BL 224009 (D. Utah, Aug. 22, 2013); Cassidian Commc'ns, Inc. v. microDATA GIS, Inc., No. 2:12-cv-00162, 2013 BL 341064 (E.D. Tex. Dec. 10, 2013).

37Transunion, supra note 36.

38Driessen, supra note 36.

39 Petition, supra note 5. 35 U.S.C. §271(a) codifies acts that constitute direct infringement. Induced infringement is codified at 35 U.S.C. §271(b).

40Id. at 15-16.

41Id. at 16-21.

42 692 F.3d at 1314 (“[N]othing in the text of either subsection suggests that the act of 'infringement’ required for inducement under section 271(b) must qualify as an act that would make a person liable as an infringer under section 271(a).”).

43 Petition, supra note 5, at 21-26.

44Id. at 34.

45 Brief of Amici Curiae Altera Corp., HTC Corp., HTC America Inc., SmugMug Inc. and Weatherford Int'l in Support of Petitioners, supra note 5 (filed Feb. 1, 2013) (“Altera Brief”); Brief of Google Inc., Cisco Systems Inc., Oracle Corp., Red Hat Inc., SAP America Inc., Symantec Corp., Xilinx Inc. as Amici Curiae in Support of Petitioner, supra note 5, (filed Feb. 1, 2013) (“Google Brief”); Brief of CTIA - The Wireless Ass'n, Consumer Elecs. Ass'n, and MetroPCS Wireless Inc. as Amici Curiae in Support of Petitioners, supra note 5 (filed Feb. 1, 2013) (“CTIA Brief”).

46Id.

47 Altera Brief, supra note 45, at 7-9.

48 Google Brief, supra note 45, at 12-14.

49 CTIA Brief, supra note 45, at 8-11.

50See Altera Brief, supra note 45, at 10-14; Google Brief, supra note 45, at 18-19; CTIA Brief, supra note 45, at 16-20.

51 692 F.3d at 1308.

52See Altera Brief, supra note 45, at 11.

53 CTIA Brief, supra note 45, at 19.

54 Altera Brief, supra note 45, at 9-10; Google Brief, supra note 45, at 20-24; CTIA Brief, supra note 45, at 21-23.

55 Google Brief, supra note 45, at 24-25.

56See id.

57 Conditional Cross-Petition for a Writ of Certiorari, Akamai Techs., Inc. v. Limelight Networks, Inc., No. 12-960 (U.S. Feb. 1, 2013).

58Id.

59Id. at 18-20.

60Id. at 21-24.

61 Brief for the United States as Amicus Curiae at 1, Nos. 12-786, 12-960 (U.S. Dec. 10, 2013) (240 PTD, 12/13/13). The Supreme Court had requested the government's views on June 24, 2013. No. 12-786, http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-786.htm (last visited Jan. 2, 2014); No. 12-960, http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-960.htm (last visited Jan. 2, 2014).

62 Brief, supra note 61, at 7-20.

63Id.

64Id.

65Id.

66Id. The solicitor general noted that the scienter requirement of 35 U.S.C. §271(b) did not provide an adequate shield against frivolous litigation, “as the question of the defendant's knowledge may not be susceptible to pre-trial resolution.” See id. at 19-20, n.7.

67Id. at 21-23. See supra note 12.

68Id.

69 Supplemental Brief of Akamai Technologies Inc. and the Massachusetts Institute of Technology, Nos. 12-786, 12-960 (U.S. Dec. 23, 2013).

70Id. at 2-5.

71Id. at 5-12.

72See supra note 4.

73See, e.g., Lyle Denniston, “Court Grants Eight Cases,” SCOTUSblog(Jan. 10, 2014, 2:48 pm), http://www.scotusblog.com/2014/01/court-grants-eight-cases-2; “Supreme Court on Intellectual Property,” Patently-O Blog (Jan. 10, 2014), http://www.patentlyo.com/patent/2014/01/supreme-court-on-intellectual-property.html.

74 Lisa McElroy, “'CVSGs' in Plain English,” SCOTUSblog (Feb. 10, 2010, 10:15 am), http://www.scotusblog.com/2010/02/last-week-in-plain-english-2 (last visited Jan. 2, 2014).

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