By Dennis Crouch
The Supreme Court heard oral arguments today in Limelight Networks Inc. v. Akamai Technologies, Inc. Limelight is best seen as part of a series of cases considering what it means to be an infringer. In particular, the court has struggled to determine what to do when one party performs a portion of a patented invention and then another party performs the remaining portion. In this setup, the parties are able to collectively benefit from the invention without being labelled infringers under the Federal Circuit’s strict single-entity-infringer rule. See BMC v. Paymentech (Fed. Cir. 2007). The BMC line of cases creates an avenue for avoiding infringement by properly dividing the corporate structure. That pathway is further solidified by our current age of distributed computing that allows for servers and systems to closely interoperate even though controlled by different parties. In this case, the invention is focused on a mechanism for quickly delivering video streams to lots of people over the internet by distributing servers. The patent spells out the entire method and system for accomplishing this result, but the defendant here each only practice a portion of the whole invention but expressly encourages its customers to perform the rest. In an admittedly biased way, the patentee’s attorney Seth Waxman explained the setup as follows:
Mr. Waxman: This case is not complicated. This case involves a four or fivestep method in which Limelight performs all but one or two of the steps and tells its customers, if you want to use our service, you have to perform the other step. Here’s exactly how you do it. We have somebody 24 hours a day, seven days a week assigned to you to help make sure you do it the right way.
In Limelight, the Federal Circuit (sitting en banc) offered one outlet to limit avenues-of-infringement. Here, the appellate court held that an entity can be liable for inducing infringement if that party induces performance of the entire invention, even if no single party performed all of the elements. That holding is a shift in thinking – prior case law required evidence of underlying single-actor direct infringement as a pre-requisite to an inducement finding. The statute for inducement indicates simply that “whoever actively induces infringement of a patent shall be liable as an infringer.” 35 U.S.C. § 271(b). An interesting element of this case is that the Limelight originally indicated that it would reconsider the BMC doctrine regarding direct infringement. However, the en banc panel decided to limit its analysis only to the inducement theory. If Limelight is successful on appeal, the Federal Circuit may then have an opportunity to reconsider the single-actor rule for direct infringement under Section 271(a). More particularly, the Federal Circuit has applied a fairly strict agency doctrine rule, but other areas of law have allowed for a more liberal agency doctrine that would potentially capture the type of joint infringement alleged in this case.
The question presented is:
Whether 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 Section 271(a).
Aaron Panner argued on behalf of the petitioner Limelight (the accused infringer) and shared time with Assistant Solicitor Ginger Anders who filed a brief in support of the petitioner. Seth Waxman argued on behalf of the respondent-patentee Akamai. In the case, the US government took the middle-ground position that the patentee has the best policy argument but that the statute clearly supports reversal.
Focusing first on the policy issues, the court asked whether Limelight is asking for a rule that allows patentees to skirt infringement simply by altering its corporate structure:
CHIEF JUSTICE ROBERTS: Your position makes it pretty easy to to get around patent protection, doesn’t it? All you’ve got to do is find one step in the process and essentially outsource it or make it attractive for someone else to perform that particular step and you’ve essentially invalidated the patent.
MR. PANNER: I don’t think so, Your Honor. In the two following senses.
First of all, empirically speaking, there have not been very many cases in which this has proven to be a problem. It has been a long understood principle of patent claim drafting that method claims should be drafted from the point of view of a potential infringer so that all of the steps can be carried out by that potential infringer. And prospectively, certainly and given that this rule has been clearly articulated by the Federal Circuit now for many years, or at least several years, prospectively, the patent applicant has every incentive to draft claims from the point of view of a single potential infringer.
This the claim that’s at issue here, there’s no dispute. It could have been written in such a way that the steps would have been carried out by a single infringer and, indeed, that may have been the intent. . . .
JUSTICE SCALIA: I’m just arguing about whether the safe haven you have given us for patentees really exists. It doesn’t seem to me you can avoid the problem by simply requiring all the steps to be conducted by one person.
MR. PANNER: Well, Your Honor, in in my experience in in terms of dealing with patents that are written to technologies that do involve interaction, for example, between cellular phones and networks and content providers who are sending content to a phone, for example, it is very common to draft claims from the point of view of someone who’s participating in that process so that all of the steps will be carried out in that by that person. . . .
JUSTICE KAGAN: [N]otwithstanding what you said about 10 of 11 judges, it was clear that the judges thought that there was a real problem here in terms of an end run, and that they looked at this and said, well we could do it under 271(a) or we could do it under 271(b), and 271(b) seems a lot more natural and better for various reasons. But your sense in reading the opinion that all those judges who did it under 271(b) are just going to go back and do the exact same thing under 271(a).
Panner’s argument here does not seem like one that the judges would truly support – that the patentee wins or loses here based upon whether it correctly followed the proper claim-drafting trick.
Responding to the same issues, the US Government lawyer (Anders) recognized the “end run” problem as legitimate.
MS. ANDERS: I think the Federal Circuit was understandably concerned about allowing inducers to perform some stops of a process themselves to escape liability, but this Court has twice held in both Microsoft v. AT&T and before that Deep South v. Laitram that judicial concerns about gaps in 271′s coverage should not drive the Court’s interpretation of that provision. That is because any time that you close a gap in 271, expanding patent rights, you are invariably implicating competing concerns and it’s for Congress to resolve those concerns.
When his turn to speak, Waxman hit home the policy concerns:
MR. WAXMAN: Please make no mistake about what Limelight is asking you to do. Under Limelight’s theory, two or more people can divide up and perform the steps of any method claim, however drafted, without liability. . . . Let’s assume that there is disclosure and patenting of a cure for cancer or a novel treatment for cancer that involves, as they often do, the administration of different drugs sequentially. And two parties get together and say, I’ll administer Drug 1, you administer Drug 2, and we can take advantage of this marvelous patented process without paying anything giving anything whatsoever to the company that spent a billion dollars and 25 years developing.
Several of the Justices rightly recognized the potential notice problems of joint liability in a strict liability scenario. However, those fears are greatly reduced in the inducement context because liability requires knowledge that the acts being induced would constitute infringement. Waxman attempted to also allay those fears by referencing a common law knowledge requirement implied into joint-concert liability.
When the Federal Circuit decided this case, it appeared to be a new rule regarding inducement liability. In his appealing way, Waxman argued that it is not really new but rather it is a return to the common law notions that were disrupted by the Federal Circuit’s unnatural limitations on 271(a) joint liability that began in 2008.
JUSTICE SOTOMAYOR: [Is] this is a new rule by the Federal Circuit?
MR. WAXMAN: The answer is no. What is new is the 2008 beginning in 2008 jurisprudence in the Federal Circuit on 271(a) that unnaturally limited the common law attribution rules.
Very little time was spent on statutory construction – what is meant by the term “infringement” in 271(b)? Waxman does lay out his textual argument that infringement in 271(b) is not limited to “direct infringement under 271(a).” but rather offers the following notion:
MR. WAXMAN: A patentholder has the exclusive right to make, 15 sell, use, or offer to sell his invention during the term of the patent. That’s what sets out the metes and bounds of the property right. And any encroachment on that property right is an infringement. . . .
JUSTICE GINSBURG: An infringement without an infringer?
MR. WAXMAN: You can certainly have infringement without an actionable infringer, absolutely. Under anybody’s rule you can do that. The whole debate we have with the other side on the (a) question is how what attribution rules do or don’t apply. . . . .
JUSTICE SCALIA: What does what does (b) require? Does it require inducing an infringement or inducing an infringer?
MR. WAXMAN: Inducing an infringement. And I’ll give you a concrete example. Let’s say that there’s a fivestep patented method that I know about, and I convince I induce Mr. Panner to do steps 1, 2, and 3 and Ms. Anders to do steps 4 and 5. If I’m doing that because I know about the patent and I want to take advantage of their otherwise innocent performance collectively of the steps, at common law and at patent law, it was uncontroversial that I was liable. I was responsible.
Overall the oral arguments here are difficult to follow and thus the outcome is difficult to predict. The justices are rightly concerned that the their decision on 271(b) is dependent upon the meaning of joint infringement 271(a), but that may only be decided on remand.
JUSTICE ALITO: It’s it’s a good reason to think that the question before us really has no significance that I can think of unless the the Court of Appeals unless the Federal Circuit is right about [the limited scope of 271](a). . . . So you’re asking us to decide a question to assume the answer to the question on (a) and then decide a question on (b) that is of no value no significant maybe I don’t understand some other I don’t see some other situations where it would apply, and no significance unless the ruling on (a) stands, unless Muniauction is correct?
Waxman expressly suggested that the court go ahead and rule on the 271(a) issue (as it had suggested in a cross petition for certiorari) or simply remand the case to the Federal Circuit to decide the underlying 271(a) issue.