The provisions of 35 U.S.C. § 271 provide for three types of infringement. Direct infringement occurs under § 271(a) when a person makes, uses, offers to sell, sells, or imports a patented invention. Induced infringement occurs under § 271(b) when a person "actively induces" another person to infringe a patent. Contributory infringement occurs under § 271(c) when a person offers to sell, sells, or imports a component that is a material part of, and especially made for use in, a product that infringes a patent.
The issue presented to the Supreme Court in the Limelight case was whether a defendant may be liable for inducing infringement of a method claim when no one has directly infringed the claim.
The patent at issue in Limelight Networks (U.S. Patent No. 6,108,703) claimed a method for delivering electronic data to Internet users by way of a "content delivery network" or "CDN." The patented method required performance of several steps, including the designation ("tagging") of portions of a Web site (e.g., video or music files) to be hosted on servers accessible to Internet users. Defendant Limelight operated a CDN and performed several steps of the patented method. Limelight, however, did not "tag" the content to be hosted on its servers. Rather, Limelight's customers (proprietors of Web sites) designated the content that they wished to have stored on Limelight's servers.
Although, Limelight provided instructions and technical assistance to its customers regarding how to tag content, Limelight did not direct or control the tagging under the Federal Circuit's decision in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), where the court decided that a person can only be liable for direct infringement of a method claim if the person performs each and every step of the method or exercises direction or control over a third party that performs the steps. Thus, where the steps of a patented method are independently performed by two or more parties, there is no direct infringement under § 271(a). As a result, the Federal Circuit held that there was no direct infringement under § 271(a). Despite finding that neither Limelight nor its customers directly infringed the '703 patent, an en banc panel of the Federal Circuit held that Limelight could nonetheless be liable for induced infringement under § 271(b). The Federal Circuit reasoned that even if a single party cannot be held liable for direct infringement, courts may still hold that a predicate act of direct infringement occurred (i.e., though the combined actions of multiple parties) for the purposes of induced infringement under § 271(b).
In a unanimous decision delivered by Justice Alito, the Supreme Court reversed the Federal Circuit's en banc decision. The Supreme Court made clear that a party cannot be liable for induced infringement in the absence of direct infringement. "[I]n this case, performance of all the claimed steps cannot be attributed to a single person, so direct infringement never occurred. Limelight cannot be liable for inducing infringement that never came to pass." The Supreme Court also refused to accept the Federal Circuit's attempt to create "two parallel bodies of infringement law" that would have separated the analysis of liability for direct infringement under § 271(a) from the analysis of the existence of a predicate act of direct infringement for the purposes of § 271(b). The Supreme Court explained that the test is the same in both circumstances: "the reason Limelight could not have induced infringement under § 271(b) is not that no third party is liable for direct infringement; the problem, instead, is that no direct infringement was committed."
Perhaps the most interesting portions of the Supreme Court's decision in Limelight Networks were the repeated references to the "direction and control" standard for direct infringement under Muniauction. The Supreme Court noted that it was "[a]ssuming without deciding that the Federal Circuit's holding in Muniauction is correct." The Court, however, also noted that the Muniauction decision gives rise to an "anomaly" that could "permit[] a would-be infringer to evade liability by dividing performance of a method patent's steps with another whom the defendant neither directs nor controls." The Court "acknowledge[d]" the concern and noted that "on remand, the Federal Circuit will have the opportunity to revisit the § 271(a) question if it so chooses."
It is unclear whether the Federal Circuit will take the Supreme Court's comments concerning Muniauction as an invitation to weaken the "direction and control" standard, thereby making it easier to find direct infringement based on the combined actions of multiple parties. If so, Limelight's victory may be short-lived.
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