Opinion analysis: Justices reject Federal Circuit sanctions on two-party infringement
on Jun 4, 2014 at 1:01 pm
We learned on Monday that the Justices made short shrift of an issue that has preoccupied the Federal Circuit for many years. The case involves the vexing problem of two-party infringement: a patent extends to a method, and no individual defendant executes all the steps of the method, though the activities of two businesses as a whole do execute all steps of the method. The Court’s unanimous opinion in Limelight Networks v. Akamai Technologies rejected the Federal Circuit holding that one in a group of such parties can be liable for “inducing” infringement by the other; infringement occurs in that setting only when the parties are so closely connected that they can be treated as a single actor.
If that summary sounds unduly abstract, consider the facts of this particular case. Limelight markets a service under which Limelight and its customers (allegedly) take all the steps to implement a method patented by Akamai; neither party, standing alone, takes all of those steps. The Federal Circuit sitting en banc held Limelight responsible under Section 271(b) of the Patent Act for inducing infringement by its customers, even though neither Limelight nor its customers (considered separately) had directly infringed the patent under Section 271(a). Apparently responding to the difficulty the topic has posed for the Federal Circuit, the Supreme Court granted review and reversed.
Justice Alito’s opinion for the Court presents the case with syllogistic certainty. First, there can be no liability for inducing infringement unless there is in fact infringement. Second, the Federal Circuit has held (and the Court accepts) that the steps of a method “have not all been performed . . . unless they are all attributable to the same defendant, either because the defendant actually performed those steps or because he directed or controlled others who performed them.” Circling back to the first point, there can be no inducing infringement if there is not actual infringement. Accordingly, there can in this case be no liability for inducing infringement.
To be sure, that analysis has a certain ipse dixit quality, as it sidesteps entirely Akamai’s contention that the method in fact is performed if all of its steps are performed, whether this is done by one person or multiple persons. Perhaps implicitly recognizing the weakness of the statutory reasoning, the Court’s opinion offered two other arguments to support the decision. First, it would deprive the statute of “ascertainable standards.” The reasoning here is also somewhat obscure because the Court does not engage the idea that one party might induce another party to complete infringement of a method initiated by the first party; if the test requires actual inducement, and execution of the entire method, it really does not seem particularly standardless. Hard to take that criticism from the Court that issued Nautilus v. Biosig the same day.
The second reason is textual, relying on Section 271(f)(1) of the Patent Act. That provision imposes liability on a party in the United States who supplies the components of a patented invention so as to actively induce the combination of the components outside the United States in a way that would infringe if the combination occurred in the United States. In the Court’s view, this showed that Congress could have dealt with this more clearly: “[W]hen Congress wishes to impose liability for inducing activity that does not itself constitute direct infringement, it knows precisely how to do so.”
And with that the Court is done. A few pages brushing aside as irrelevant the arguments by analogy presented by Akamai, and the opinion comes to an end.
For future purposes, one of the most important attributes of the opinion is what it does not decide – the correctness of the Federal Circuit’s analysis of when the actions of multiple parties can be combined to constitute direct infringement under Section 271(a). The Limelight Court repeatedly emphasized that it was taking as a given the absence of liability for direct infringement under Section 271(a) and closed its opinion with the statement that the Federal Circuit “will have the opportunity to revisit the §271(a) question if it so chooses.” Because a number of the amicus briefs (and indeed Akamai itself) suggested that the problem of joint infringement can be handled much more effectively under Section 271(a) (which was not before the Court) than under Section 271(b) (the provision that was before the Court), this at least suggests the possibility that the same factors which motivated the Federal Circuit’s creative interpretation of Section 271(b) at this stage of the litigation will lead to a similarly revisionist application of Section 271(a) at the next stage. Perhaps this case will be back in the Court soon!
PLAIN LANGUAGE ANALYSIS: The Court made it harder for the holder of a patent to prove infringement by a group of businesses. If the businesses as a group use the patented method, but if no single business uses the whole method itself, then, the Court said, the holder of the patent has no right to complain, because nobody has infringed the patent. This will make it harder to enforce complicated patents that cover methods, and easier to avoid liability under them.
