United States: Supreme Court Issues Significant Decisions In The Limelight Networks And Nautilus Cases Unanimously Overturning The Federal Circuit

The Supreme Court recently issued two unanimous decisions concerning the standards governing claims for induced infringement and indefiniteness. A summary of the decisions follows.

Limelight Networks, Inc. v. Akamai Technologies, Inc.

In Limelight Networks, the Supreme Court decided that a party could not be liable for inducing another party to infringe a patent when there was no direct infringement.

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 (US 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., through 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.

Nautilus, Inc. v. Biosig Instruments, Inc.

The recent trend of the US Supreme Court overturning the nation's patent appeal court continued with the Nautilus decision. In Nautilus, the Supreme Court threw out the Federal Circuit's "insolubly ambiguous" standard for determining whether claims are invalid for indefiniteness.

Under 35 U.S.C. § 112 ¶ 2, patent claims must "particularly point[] out and distinctly claim[] the subject matter which the inventor or a joint inventor regards as the invention." This is referred to as the "definiteness" standard. A claim that fails to satisfy the definiteness standard is invalid and may not be enforced.

The Federal Circuit has held that claims are indefinite under § 112 ¶ 2 when they are "not amenable to construction" or are "insolubly ambiguous." In 2013, the Federal Circuit applied this standard in the case of Biosig Instruments, Inc. v. Nautilus, Inc. The claim at issue in Nautilus concerned a heart rate monitor for exercise equipment that used two electrodes in a "spaced relationship" with each other. In prior ex parte reexamination proceedings, the patent owner argued that the "spaced relationship" was a key limitation that distinguished the claimed invention from dual-electrode monitors found in the prior art. In the District Court proceedings, however, the patent owner argued that a "spaced relationship" could be any "defined relationship" between the electrodes. Based on that construction, the US District Court for the Southern District of New York found that the "spaced relationship" limitation was indefinite under § 112 ¶ 2 because it would not disclose the bounds of the claimed invention to someone of skill in the art. The Federal Circuit reversed, holding that it was possible to assign a meaning to "spaced relationship" and therefore the limitation was not indefinite. In particular, the Federal Circuit held that the "spaced relationship" would necessarily be close enough so that the electrodes could fit within a person's hand. The Federal Circuit also noted that a person of skill in the art could perform testing to determine the ideal spaced relationship.

In a unanimous decision delivered by Justice Ginsburg, the Supreme Court rejected the "insolubly ambiguous" and "amenable to construction" tests that the Federal Circuit applied in Biosig. The Court noted that those standards "lack the precision that § 112 ¶ 2 demands" and therefore "can breed lower court confusion." The Court also explained that "[i]t cannot be sufficient [under § 112 ¶ 2] that a court can ascribe some meaning to a patent's claims." Instead, the Court held that § 112 ¶ 2 "require[s] that a patent's claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty." The Court noted that this standard "mandates clarity, while recognizing that absolute precision is unattainable."

The Supreme Court declined to determine whether the underlying "spaced relationship" limitation at issue in Nautilus satisfied the newly articulated standard. Instead, the Court remanded the case so that the Federal Circuit could determine whether a person of skill in the art would have understood the scope of the invention with "reasonable certainty." Given the new standard, it is likely that patent defendants will more frequently seek to invalidate patents using the lower indefiniteness standard.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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