United States: Supreme Court Decision Alert - June 2, 2014

Today (June 2, 2014) the Supreme Court issued two decisions, described below, of interest to the business community.

Patent Act—Inducing Infringement

Limelight Networks, Inc. v. Akamai Techs., Inc., No. 12-786 (described in the January 13, 2014, Docket Report)

Section 271(b) of the Patent Act imposes liability on a party who "actively induces infringement of a patent." 35 U.S.C. § 271(b). Today, the Supreme Court held that a claim for induced infringement is unavailable unless some single person or entity has directly infringed the patent—which, for a method patent, means that one party must have performed all the claimed steps.

Akamai Technologies, Inc., and the Massachusetts Institute of Technology sued Limelight Networks, Inc., for patent infringement based on Limelight's operation of a "content delivery network" that delivers electronic data to Internet users. Akamai and MIT alleged that Limelight carried out several steps of a claimed method patent but required its customers to perform the final step, for which Limelight allegedly provided instructions and offered technical assistance.

After a jury found that Limelight had infringed the patent, the district court granted judgment as a matter of law to Limelight based on the Federal Circuit's intervening decision in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008). The Muniauction decision held that direct infringement of a method patent "requires a single party to perform every step of a claimed method," which may occur when a single defendant "exercise[d] 'control or direction' over the entire process." Id. at 1329. The en banc Federal Circuit reversed the judgment for Limelight, however, holding that a defendant could be liable for inducing infringement under Section 271(b) so long as the defendant carries out some steps constituting a method patent and encourages others to carry out the remaining steps, even if no one person or entity would be liable as a direct infringer. 692 F.3d 1301, 1308-09 (Fed. Cir. 2012).

In a unanimous opinion by Justice Alito, the Supreme Court reversed, holding that there can be no liability for inducement of infringement under Section 271(b) unless there has been direct infringement under Section 271(a) (or some other statutory provision). Because no one had infringed the method patent at issue by performing all its steps or by controlling or directing the performance of all of its steps, "Limelight cannot be liable for inducing infringement that never came to pass." Slip op. 7.

The Court rejected the Federal Circuit's supposition that "direct infringement can exist independently of a violation of the[] statutory provisions" as "fundamentally misunderstand[ing] what it means to infringe a method patent."  Slip op. 5. The Federal Circuit's view would "deprive § 271(b) of ascertainable standards" and would require the development of "two parallel bodies of infringement law: one for liability for direct infringement, and one for liability for inducement." Slip op. 6. Moreover, citing 35 U.S.C. § 271(f)(1)—which imposes liability for supplying components from the U.S. for combination overseas "in a manner that would infringe the patent if such combination occurred within the United States," the Court observed that Congress knows how to impose liability "for inducing activity that does not itself constitute direct infringement," and would presumably have done so in Section 271(b) if that were its intent. Slip op. 7. Having previously "rejected the notion that conduct which would be infringing in altered circumstances can form the basis for contributory infringement," the Court saw "no reason to apply a different rule for inducement." Id. (citing Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 1518 (1972)).

The Supreme Court explicitly rested its decision on the Federal Circuit's interpretation of Section 271(a) in Muniauction. Slip op. 8-10. In particular, the Court held that "the possibility that the Federal Circuit erred by too narrowly circumscribing the scope of § 271(a) is no reason for this Court to err a second time by misconstruing § 271(b) to impose liability for inducing infringement where no infringement has occurred."Slip op. 9-10. Similarly, while the Court acknowledged the concern that would-be infringers could "evad[e] liability by dividing up performance of a method patent's steps with another whom the defendant neither directs nor controls," it concluded that any such result is a natural consequence of Muniauction and "does not justify fundamentally altering the rules of inducement liability." Slip op. 10.

The Court declined to address the merits of Muniauction because the proper construction of Section 271(a) was neither presented by the petition nor addressed in the petitioner's brief on the merits. The Court observed, however, that "on remand, the Federal Circuit will have the opportunity to revisit the § 271(a) question if it chooses to do so." Slip op. 10.  Thus, the divided-infringement question may not be settled just yet.

Patent Act—Claim Construction—Definiteness Requirement

Nautilus, Inc. v. Biosig Instruments, Inc., No. 13-369 (described in the January 13, 2014, Docket Report)

Section 112 of the Patent Act requires a patent specification to "conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as [the] invention." 35 U.S.C. § 112(b). A claim that does not "particularly point[] out and distinctly claim[]" the subject matter of the invention is invalid for lack of sufficient definiteness. Today, the Supreme Court issued a unanimous opinion reversing the Federal Circuit and articulating a new standard for definiteness under the Act.

Respondent Biosig Instruments, which holds a patent for a certain kind of heart-rate monitor, brought a patent-infringement action against petitioner Nautilus. After claim construction, the district court agreed with Nautilus's contention that the asserted claims were invalid as indefinite and therefore granted petitioner's motion for summary judgment. The Federal Circuit reversed; in doing so, the court repeated what had become a boilerplate statement of its indefiniteness test—that a claim is indefinite "only when it is 'not amenable to construction' or 'insolubly ambiguous.'" Slip op. 1. Respondent's claims, it held, survived under this standard.

In a unanimous opinion by Justice Ginsburg, the Supreme Court reversed and remanded. It rejected the Federal Circuit's formulations of the definiteness standard, finding that they "lack the precision" that the statute demands and could "breed lower court confusion." Id. at 12. The Court held that "a patent is invalid for indefiniteness if its claims, read in light of the specification delineating the patent, and the prosecution history, fail to inform, with reasonable certainty, those skilled in the art about the scope of the invention." Id. at 1. The Court emphasized that, under this rule, definiteness must be "measured from the viewpoint of a person skilled in the art at the time the patent was filed." Id. at 8-9 (emphasis omitted).

The definiteness standard, the Court explained, requires a "delicate balance" between "[s]ome modicum of uncertainty," which is the "price of ensuring the appropriate incentives for innovation," and enough precision "to afford clear notice of what is claimed, thereby 'appris[ing] the public of what is still open to them.'" Id. at 9-10. The Court emphasized that the definiteness requirement provides an important check, absent which, "patent applicants face powerful incentives to inject uncertainty into their claims." Id. at 10. And the Court described its standard as one that "mandates clarity, while recognizing that absolute precision is unattainable." Id. at 11.

Biosig had argued that the Federal Circuit in practice applied a definiteness standard resembling the one endorsed by the Supreme Court. But the Supreme Court, pointing to the Federal Circuit's repeated references to the "insolubly ambiguous" test, rejected that contention, stating that "such terminology can leave courts and the patent bar at sea without a reliable compass." Slip op. 13 (footnote omitted).

The Court remanded the case to allow the Federal Circuit to determine whether the asserted claims are sufficiently definite under the proper standard.

This case provides important guidance to businesses that defend patent-infringement suits and to companies with patent portfolios, both as to future claim drafting and as to indefiniteness challenges brought in the course of litigation.

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