US Supreme Court in the Limelight, casts shadow over patent inducement liability

Forget for a minute topics as such quality patents, mechanisms for examination and grant, patent prosecution highways and all that stuff: it's the quality of relief for patent infringement which is the motor that drives the entire patent system.  If there is no effective relief for infringement, or if it is too narrow, expensive or slow, justification for filing for patent protection diminishes and the system loses its functionality: it will fail to keep infringers off the market and will offer no incentive to negotiate a licence. However, wishful thinking alone will not expand the scope of patent protection nor enhance the ability of a patent owner to bend others to his will.  This is the province of the legislature, aided and abetted by the intervention of the competition authorities where necessary. In this context it's good to take a look at Limelight Networks v Akamai Technologies Inc et al., a keenly-awaited dispute that has now been decided by the US Supreme Court (No. 12–786. Argued April 30, 2014—Decided June 2, 2014). You can read it in full here (katpat to Chris Torrero for forwarding the link).  It's a neat little decision on the balance between two elements of 35 USC §271 (the US patent statute):

271(a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

271(b) Whoever actively induces infringement of a patent shall be liable as an infringer.

Now for some facts. Akamai was the exclusive licensee of a patent for a method of delivering electronic data using a content delivery network (CDN).  One of the steps claimed for this patent was called "tagging".  Limelight Networks ran a CDN that, as luck would have it, performed several of the steps claimed in the patent -- but the "tagging" was done by its customers, not by Limelight itself.  Under Federal Circuit case law, liability for direct infringement under 35 USC. §271(a) requires performance of all steps of a method patent to be attributable to a single party -- a position that was most recently refined in Muniauction, Inc. v Thomson Corp., 532 F. 3d 1318. which drew a contrast between defendants who "masterminded" an infringement carried out between different entities and those whose involvement was of the "arm's-length" variety.

The District Court held that Limelight didn't directly infringe the patent because the "tagging" could not be attributed to it. The en banc Federal Circuit thought otherwise: in its view, a defendant who performed some steps of a method patent and encouraged others to perform the rest could be liable for inducing infringement even if no one was liable for direct infringement -- and on the evidence Limelight could be held liable on an inducement theory. The action was then remanded for further proceedings.

The Supreme Court disagreed, reversing and remanding the action and holding that a defendant was not liable for inducing infringement under §271(b) when no one had directly infringed under §271(a) or any other statutory provision.

As to liability for inducement, this must itself be predicated on direct infringement, said the Supreme Court, adding that its reading of §271(b) was reinforced by §271(f)(1):

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

This illustrates that Congress knows how to impose inducement liability predicated on non-infringing conduct when it wishes to do so. The notion that conduct which would be infringing in altered circumstances can form the basis for contributory infringement has been rejected -- and there is no reason to apply a different rule for inducement.

Patent litigation is only war
carried out by other means ...

The arguments based on general principles of tort law and criminal aiding and abetting doctrine, as well as patent law principles in existence before the 1952 Patent Act, might be read as supporting the Federal Circuit’s reading of the statute, but those arguments were unpersuasive.Though a would-be infringer could evade liability by dividing performance of a method patent’s steps with another whose conduct could not be attributed to the defendant, that was merely a result of the Federal Circuit’s interpretation of §271(a). However, a desire to avoid this consequence does not justify fundamentally altering the rules of inducement liability which have been explicitly laid down in the Patent Act.

Since the question before the Supreme Court was clearly focused on §271(b) and presupposed that Limelight has not committed direct infringement under §271(a), the Court declined to address whether the Federal Circuit’s decision in Muniauction was correct.

This Kat is reluctant to pass comment on matters of US law, which he views with a level of interest that runs higher than his level of knowledge. It seems to him however that the US Supreme Court's reading of §271 is coherent and makes good business sense too. He also supposes, without expert knowledge, that the patentee would have had an opportunity to claim an invention comprising a CDN system in which the "tagging" was performed by a third party.  He however welcomes comments from those more familiar with the US law as to how this ruling will affect existing understanding and business practice.

Limelight here
Limeys here
Harry Lime here
Harry Lime theme here (earworm warning)