Liability for Induced Infringement Requires a Direct Infringer

Today, a unanimous Supreme Court reversed the Federal Circuit and held that induced infringement of a method claim cannot be found in the absence of direct infringement by a single party under §271(a). Limelight Networks, Inc. v. Akamai Technologies, Inc., 572 U.S. __(June 2, 2014).

The claims at issue in the underlying Limelight action were methods for delivering information over the Internet, including some steps performed by the defendant Limelight’s “content delivery networks” and others performed by “content providers” (i.e., Limelight’s customers). Akamai Technologies v. Limelight Networks, 692 F.3d 1301 (Fed. Cir. 2012). The majority of the 6-5 en banc decision of the Federal Circuit maintained that there must be direct infringement as a predicate to a finding of induced infringement, but noted that “[r]equiring proof that there has been direct infringement as a predicate to induced infringement is not the same as requiring proof that a single party would be liable as a direct infringer.” 692 F.3d at 1308-09 (emphasis in original). The majority also noted that “[a]n important limitation on the scope of induced infringement is that inducement gives rise to liability only if the inducement leads to actual infringement.” Id. Moreover, the majority defined “actual” infringement for a §271(b) analysis as a distinct form of infringement apart from that which is defined as “direct” infringement under §271(a).

The Supreme Court identified this reasoning as fundamentally flawed. The Supreme Court began its analysis by noting that “our case law leaves no doubt that inducement liability may arise ‘if, but only if [there is] . . . direct infringement.’” Slip op., at p. 5 (citing Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 336, 341 (1961)). Next, the Court considered the requirements to directly infringe a method claim, which the Federal Circuit itself had decided in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). In Muniauction, the Federal Circuit held that direct infringement of a method claim can only be found where performance of all of the method steps is attributable to the same defendant — either because it performed each step, or because it directed or controlled the others that did. 532 F.3d, at 1329-30.

Based on this precedent, the Supreme Court concluded that the direct infringement required to show inducement cannot exist independently of a direct infringer. This result flows primarily from the standard for direct infringement of a method claim as set forth by the Federal Circuit in Muniauction. Slip op., at p. 6.

The Supreme Court also found problematic the Federal Circuit’s view that “the steps that Limelight and its customers perform would infringe [the patent] if all the steps were performed by the same person.” Slip op., at 7. In fact, a seminal Supreme Court case, Deepsouth Packing Co. v. Laitram Corp., squarely rejected the principle that noninfringing conduct (there, the manufacture of machines outside of the United States) which would have been a direct infringement under different conditions (i.e., if manufactured in the United States) could form the basis for contributory infringement. Id. (citing 406 U.S. 518 (1972)). The Supreme Court found no reason to deviate from this rule for induced infringement. Id.

The Supreme Court agreed with the Federal Circuit that this approach could create a loophole for a “would-be infringer to evade liability by dividing performance [of a method claim] with another whom the defendant neither controls nor directs.” Slip op., at p. 10. That “anomaly,” according to the Supreme Court, is attributable to Muniauction. “A desire to avoid Muniauction’s natural consequences does not justify fundamentally altering the rules of inducement liability ….” Id. Because the petition for certiorari did not properly place this question before the Court, however, it declined Akamai’s request to review the direct infringement standard set forth by Muniauction. Id.

As a result of this holding, the Supreme Court reversed the judgment of the Federal Circuit, and remanded the case for further proceedings.

The state of infringement by inducement continues to evolve. Other inducement cases, such as Commil USA, LLC v. Cisco Systems, Inc. (dealing with whether good faith reliance on invalidity can serve as a defense to a charge of inducement), and Suprema, Inc. v. ITC (dealing with whether inducement to infringe can be a basis for an exclusion order when no direct infringement occurs until post-importation), continue to develop.

If you have questions about this decision or wish to discuss its impact on your business, please do not hesitate to contact your RatnerPrestia relationship attorney, or Jonathan H. Spadt, Esq., or Benjamin E. Leace, Esq.