United States: Federal Circuit Panel Expands Reach Of §271(a) Liability For Divided Infringement

Last Updated: August 19 2015
Article by Monte Cooper and James C. Brooks

​On remand from the U.S. Supreme Court, a unanimous en banc Federal Circuit panel in Akamai Technologies, Inc. v. Limelight Network, Inc., Nos. 2009-1372, -1380,  -1416, -1417 (August 13, 2015) this week revised its standard for determining direct infringement under 35 U.S.C. § 271(a) for a method claim, where more than one actor is involved in performing the method. Such a situation raises the issue of "divided infringement," also known as "joint infringement."  In a per curiam opinion, the Court held that one actor can be responsible for another's performance of patented method steps in two circumstances: (1) where the first actor directs or controls the other's performance; and (2) where that first actor and the other form a joint enterprise.

To determine whether a single entity directs or controls the acts of another, the Federal Circuit reaffirmed its general principles of vicarious liability set forth in prior cases, e.g., BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1379-81 (Fed. Cir. 2007). Accordingly, an actor is liable for infringement under § 271(a) if it acts through an agent (as determined under traditional agency principles) or contracts with another to perform one or more steps of a claimed method. In the context of the facts of the Akamai case, the Federal Circuit found that liability under § 271(a) also attaches when the first actor (i) conditions either participation in an activity or receipt of some benefit upon performance of a step or steps of a patented method, and (ii) also establishes the manner or timing of that performance, even though the performance is carried out by a third party. If one of these circumstances is present, the third party's actions can be attributed to the first actor, whereby the first actor becomes the single entity chargeable with direct infringement. Whether a single entity directed or controlled the acts of one or more third parties in a manner sufficient to constitute direct infringement under § 271(a) is a question of fact.

Alternatively, where two or more actors form a joint enterprise, each can be charged with the acts of the other, rendering each liable for the steps performed by the other as if each is a single actor. This principle is codified in the Restatement (Second) of Torts, § 491, comments b & c. A joint enterprise requires proof of the following four elements:

a) an agreement, express or implied, among members of the group;

b) a common purpose to be carried out by the group;

c) a community of pecuniary interest in that purpose, among the members; and

d) an equal right to voice in the direction of the enterprise, which gives an equal right of control.

As with determining direction or control of another's performance, whether actors entered into a joint enterprise is a question of fact.

The new standard enunciated by the Federal Circuit expands the potential for infringement liability flowing from divided activities. Prior precedent suggested that liability for divided infringement was limited to situations involving principal-agent relationships, contractual arrangements, and joint enterprise. Now, to determine direct infringement, courts must more broadly consider whether a single entity can be held accountable for the performance of all steps recited in a method patent. After analyzing the particular facts in Akamai, the Federal Circuit reinstated a jury verdict that the defendant Limelight infringed the method claims at issue, which related to tagging and delivery of online content, notwithstanding the fact that certain key steps in the claimed methods were carried out by Limelight's customers. In reinstating the jury verdict, the Federal Circuit overturned the District Court's grant of judgment as a matter of law that Limelight did not infringe because customers of Limelight, not Limelight itself, performed the key steps. The Federal Circuit instead found that it was reasonable for the jury to have concluded that Limelight, through its content delivery network, was responsible for performance of all of the steps in the claimed methods. Evidence showed that Limelight conditioned its customers' use of Limelight's content delivery network upon their performance of the claimed tagging and serving steps, and that Limelight established the manner or timing of its customers' performance. Limelight required all of its customers to sign a standard contract delineating the steps the customers must perform if they used Limelight's service. Evidence further showed that, upon a customer's completion of a deal with Limelight, Limelight sent the customer a welcome letter instructing the customer how to use Limelight's service. Among other aspects of this arrangement, a Technical Account Manager employed by Limelight led customers in implementing Limelight's services. Limelight additionally provided step-by-step instructions to its customers, telling them how to integrate Limelight's hostname into customer webpages if the customers wanted to act as a content originator.

To be clear, as the Federal Circuit noted, its ruling that the jury could have reasonably concluded Limelight was liable for joint infringement is fact dependent. Thus, going forward, principles of attribution must be considered in the context of the particular facts presented. The ruling nonetheless reflects an important expansion of liability for potential infringers, particularly in the context of content providers, Internet services, and software generally. Only time will tell if, and when, the Supreme Court will address the Federal Circuit's latest divided infringement analysis.

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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