Akamai Technologies, Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015),Akamai Techs., Inc. v. Limelight Networks, Inc., is a 2015 en banc decision of the United States Court of Appeals for the Federal Circuit, on remand from a 2014 decision of the U.S. Supreme Court reversing a previous Federal Circuit decision in the case. This is the most recent in a string of decisions in the case that concern the proper legal standard for determining patent infringement liability when multiple actors are involved in carrying out the claimed infringement of a method patent and no single accused infringer has performed all of the steps (so-called divided infringement). In the 2015 remand decision, the Federal Circuit expanded the scope of vicarious liability in such cases, holding that one actor could be held liable for the acts of another actor "when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance." In addition, the court held that where multiple "actors form a joint enterprise, all can be charged with the acts of the other[s], rendering each liable for the steps performed by the other[s] as if each is a single actor."
Background The invention The named inventors in U.S. Pat. No. 6,108,703 are Professor Tom Leighton of the Massachusetts Institute of Technology (MIT) and his student Danny Lewin (now deceased), a PhD candidate at MIT. They assigned their rights in the patent to MIT, which granted an exclusive license to Akamai Technologies, Inc., a company that the inventors formed in 1998.See Company History: How Akamai got its start.
The patent claims a method of delivering electronic data using a “content delivery network,” or “CDN.” Proprietors of Internet Web sites, known as “content providers,” contract with Akamai to deliver their Web sites’ content to individual Internet users. The patent provides for the designation of certain components of a content provider's Web site (often large files, such as video or music files) to be stored on Akamai's servers and accessed from those servers by Internet users. The process of designating Web site components to be stored on Akamai's servers is known as “tagging.” By aggregating the data demands of multiple content providers with differing peak usage patterns and serving that content from multiple servers in multiple locations, Akamai is able to increase the speed with which Internet users access the content from Web sites.
The relevant claim of the patent provides as follows, where the italicized step can be performed by the customer rather than by the CDN operator (as it was by the defendant's customers involved in the lawsuit):
The conduct of Limelight Limelight Networks, Inc., also operates a CDN and carries out several of the steps claimed in the patent. But instead of tagging those components of its customers’ Web sites that it intends to store on its servers (a step included in the asserted claim of the patent), Limelight requires its customers to do their own tagging. Akamai and MIT claim that Limelight “provides instructions and offers technical assistance” to its customers regarding how to tag, but the record is undisputed that Limelight does not itself tag the components to be stored on its servers. (See italicized part of claim 34, above.)
Prior history In 2006, Akamai and MIT sued Limelight in the United States District Court for the District of Massachusetts, claiming patent infringement. The case was tried to a jury, which found that Limelight infringed the patent and it found Limelight liable for more than $40 million.
But while the case was still pending, the Federal Circuit decided a case in which it held that to find direct infringement a single party must perform every step of a claimed method or else must exercise "control or direction" over the entire process so that "every step is attributable to the controlling party." In that case the Federal Circuit rejected a claim that the defendant directly infringed the patent. The defendant performed some of the steps of the patented method, and its customers, to whom the defendant gave instructions on the use of the system, performed the remaining steps. The court held that the defendant in Muniauction was not liable for direct infringement because it did not exercise control or direction over its customers’ performance of those steps of the patent that the defendant itself did not perform. 532 F.3d at 1330. Limelight therefore moved that the court grant it judgment as a matter of law (JMOL), and the court agreed with it, because infringement of MIT's patent required tagging and Limelight did not control or direct its customers’ tagging.
2012 Federal Circuit ruling A panel of the Federal Circuit affirmed the JMOL, explaining that a defendant that does not itself perform all of a patent's steps can be liable for direct infringement only when there is an agency relationship between the parties who perform the other method steps or when one party is contractually obligated to the other to perform the steps.Akamai Techs., Inc. v. Limelight Networks, Inc.,
But the Federal Circuit then granted en banc review and reversed. The en banc court found it unnecessary to consider direct infringement under 35 U.S.C. § 271(a) because it concluded that the evidence could support a judgment in Akamai's favor on a theory of induced infringement under 35 U.S.C. § 271(b). This was true, the court explained, because liability for induced infringement arises when a defendant carries out some steps constituting a method patent and encourages others to carry out the remaining steps—even if those who performed the remaining steps did not act as agents of, or under the direction or control of, the defendant, and therefore no one would be liable as a direct infringer.
Supreme Court
Limelight sought review in the Supreme Court, which reversed.Limelight Networks, Inc. v. Akamai Techs., Inc., , 134 S. Ct. 2111 (2014). It held that induced infringement cannot occur without direct infringement.See . The Supreme Court said, "The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent."134 S. Ct. at 2117. The Court insisted that Akamai's view "would deprive § 271(b) of ascertainable standards." The Court explained:
In the course of its ruling, the Supreme Court stated:
The Court added that "on remand, the Federal Circuit will have the opportunity to revisit the § 271(a) question if it so chooses."134 S. Ct. at 2120.
Remand After the 2014 Supreme Court reversal, the case returned to the Federal Circuit. In May 2015, a panel of the Federal Circuit once again addressed the jury verdict and found that Limelight is not liable for direct infringement.Akami Tech., Inc. v. Limelight Networks, The court (2-1) reiterated the prior Federal Circuit rule as to divided infringement: there must be "a principal-agent relationship, a contractual relationship, or in circumstances in which parties work together in a joint enterprise functioning as a form of mutual agency."Akami Tech., 786 F.3d at 905. One judge dissented, arguing that the majority ruling "divorces patent law from mainstream legal principles by refusing to accept that § 271(a) includes joint tortfeasor liability" and it "creates a gaping hole in what for centuries has been recognized as an actionable form of infringement."
A panel of the Federal Circuit does not have the authority to overrule prior Federal Circuit law. For the court to overrule its prior case law, it must operate en banc.See Phillip M. Kannan, The Precedential Force of Panel Law, 76 755 (1993). Under the interpanel doctrine, "No panel can overrule the precedent established by any panel in the same circuit; all panels are bound by prior panel decisions in the same circuit." Id. at 755-56. In this case, after the panel decision was rendered, the Federal Circuit vacated the panel decision and set the case for rehearing en banc.
2015 Federal Circuit ruling
The en banc court characterized the problem as determining, when "more than one actor is involved in practicing the steps" of a method claim of a patent, whether the acts of one actor are attributable to the other actor such that second one is to be held "responsible for the infringement." The court said that it would hold one entity responsible for another's performance of method steps in two sets of circumstances: "where that entity directs or controls others' performance", or "where the actors form a joint enterprise."
In past cases, the court noted that it had held that "an actor is liable for infringement under § 271(a) if it acts through an agent (applying traditional agency principles) or contracts with another to perform one or more steps of a claimed method." To those two circumstances, the court held that it would now add a third:
The court noted that this is copyright law's "vicarious liability" rule as stated in Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.. Further, "Whether a single actor directed or controlled the acts of one or more third parties is a question of fact, reviewable on appeal for substantial evidence, when tried to a jury."
As for the joint enterprise basis for liability, the court instructed that it would follow the rule of the Restatement (Second) of Torts § 491 cmt. b: "The law [...] considers that each is the agent or servant of the others, and that the act of any one within the scope of the enterprise is to be charged vicariously against the rest." This in turn calls for proof of four elements:
This too raises a question of fact, reviewable on appeal for substantial evidence, when tried to a jury.
Turning to the facts of the specific case before it, the court reversed the JMOL and reinstated the jury verdict. The court said that the jury had heard substantial evidence from which it could find that Limelight directed or controlled its customers' performance of each remaining method step that Limelight did not itself perform. such that all steps of the method are attributable to Limelight. For example, "Akamai presented substantial evidence demonstrating that Limelight conditions its customers' use of its content delivery network upon its customers' performance of" the "tagging" and "serving" steps of the patented process, and that "Limelight establishes the manner or timing of its customers' performance." The form contract that Limelight uses provides for the customer to do acts amounting to tagging and serving.
After further proceedings, the Federal Circuit remanded the case to the district court, for it to reinstate the 2008 jury verdict of infringement and the $40 million plus lost profits award.Dennis Crouch, Federal Circuit Finally Sends Akamai Back to District Court with Orders to Finish It, (Nov. 16, 2015). Limelight announced its intention to appeal the judgment to the U.S. Supreme Court,Limelight Networks Announces Intent to File Appeal to the Supreme Court of the United States . and on January 26, 2016, filed a certiorari petition.Petition. The question presented is:
The Supreme Court denied certiorari on April 18, 2016.Limelight Networks, Inc. v. Akamai Techs., Inc.,
The Massachusetts District Court's July 2016 final ruling On July 1, 2016, it was announced that the Massachusetts District Court entered the final judgment in the case, with Limelight paying $51M in total damages to Akamai (to be reflected in Limelight's 2016 Q2 earnings).
Commentary Professor Michael Dzwonczyk wrote that Akamai's patent claim "could easily have been rewritten as a single-actor method claim that would not require the performance of any step by a second actor," and provided a rewritten version.Michael Dzwonczyk Bulletproofing Method Claims for Post-Limelight Enforcement (Feb. 2014).