Marathon Patent Group

Appeals Court Defines “Direct Infringement” In a Way Favorable to Patent Owners

September 24, 2015

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Appeals Court Defines “Direct Infringement” In a Way Favorable to Patent Owners

The federal court system has been in a tug-of-war over the case of Limelight Networks v. Akamai. The case has gone all the way to the US Supreme Court and back down again.

The final ruling is a win for both Akamai (to the tune of $45 million) and for patent owners generally.

The issue in Limelight is a very important one for patent owners: does one party have to perform each and every step of any given method or process claim in order to infringe that patent?

Sounds like a simple question – but as this case shows, it’s not.

The Court of Appeals for the Federal Circuit, the court that hears all appeals in patent cases, issued a final ruling that expands the circumstances under which two different parties could be considered as one for purposes of direct patent infringement. The ruling helps close a loophole whereby companies could avoid patent infringement by splitting up the steps involved.

To understand the ruling, we first have to explain two principles: direct infringement and induced infringement.

There are a variety of ways to infringe a patent. The two that are relevant here are part of the Patent Act and can be found in U.S.C. 35 271(a) and 271(b).

  • 271 (a) covers direct infringement: A person directly infringes a patent by making, using, offering to sell, selling, or importing into the US any patented invention, without authority, during the term of the patent.
  • 271(b) covers induced infringement, described by Chisum on Patents as “situations where one actively induces the infringement of a patent by encouraging, aiding, or otherwise causing another person or entity to infringe a patent. A potential inducer must actually be aware of the patent and intend for their actions to result in a third party infringing that patent.”

The dispute involves US Patent 6,108,703, “Global hosting system,” technology that was developed at MIT and assigned to Akamai. The patent provides a way to speed up delivery of “rich” content on the internet by hosting the basic website page on the content provider’s server, but hosting “embedded objects” (typically pictures or videos) on servers that are closer to users. Technology covered by the asserted claims of the ‘703 patent require assigning tags to such embedded objects. According to the patent, such tags help ensure that the objects are fetched from the server closer to the user.

Marathon Patent Group’s Opus software gives the ‘703 patent the highest possible “Alpha Score:” 100. This indicates that it’s a very important patent.

Limelight Networks and Akamai are competitors; both companies provide “content delivery networks.” Nearly a decade ago Akamai sued Limelight for infringing the ‘703 patent.

In the original trial Limelight and Akamai agreed that Limelight’s customers perform the crucial “tagging” step. Akamai charged that Limelight was inducing its customers to infringe the patent and should thus be held liable.

The case worked its way up to the US Supreme Court, which ruled that there can be no induced infringement under 271(b) unless there was one party responsible for direct infringement, performing all of the steps. The Supreme Court sent the case back to the Federal Circuit to determine whether there was a single direct infringer.

An initial panel at the Federal Circuit held there was no direct infringement under the current understanding of direct infringement. It said that since there was no agency relationship between Limelight and its customers, no one party could be found to have directly infringed the patent.

Akamai appealed for an en banc ruling (a ruling of all the judges on the Federal Circuit). The court sitting en banc overturned the previous panel and found that there was, in fact, direct infringement. In the process, the court expanded the definition of what constitutes a “single party” for direct infringement.

Prior to this ruling, one party could be held responsible for direct infringement in one of three ways:

  1. It performed all the steps itself.
  2. It had an “agency relationship” with the party that performed some of the steps.
  3. It had a contract with another party to perform one or more steps of the patent.

The en banc ruling added two more ways.

One is a two-part mechanism. The court ruled that direct infringement exists

when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance. (Emphasis added.) 

Since Limelight conditioned use of its service on participation in the infringing activity and directed the manner and timing in which its clients performed the tagging step, it was found to be responsible for direct infringement.

The second new way to find direct infringement is via evidence of a “joint enterprise.” The ruling defined a “joint enterprise” for purposes of patent infringement as when there is:

  • an agreement, express or implied, among the members of the group;
  • a common purpose to be carried out by the group;
  • a community of pecuniary interest in that purpose, among the members; and
  • an equal right to a voice in the direction of the enterprise, which gives an equal right of control.

This ruling is an important win for patent owners as it expands the definition used in defining “direct infringement” in a way that makes it harder for companies to get around method or process claims of a patent by dividing up the steps. Additionally, and more importantly, since direct infringement does not have to meet the “knowledge” and “intent” requirements (as in induced infringement), infringing companies would also be liable for back-damages.