©2014. Published in Landslide, Vol. 7, No. 2, November/December 2014, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
As an increasing number of companies turn to the Internet for conducting business online, an increasing number of computer software method patents are being sought for inventions that may be performed through the use of one or more content providers and end users. For example, a content provider may provide software for download over the Internet that requires a consumer to complete one or more steps to perform a method being executed by the software. Because claims of patent infringement are necessarily divided among multiple parties in such scenarios, proving patent infringement often becomes a murky proposition under the provisions of the U.S. Patent Act. In particular, § 271(a) provides: “Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.”1 Section 271(b) provides: “Whoever actively induces infringement of a patent shall be liable as an infringer.”2 In Limelight Networks, Inc. v. Akamai Technologies, Inc., the U.S. Supreme Court recently addressed the applicability of § 271 with respect to divided infringement for a patent that claims a method of delivering electronic data using a “content delivery network” (CDN).3 The claimed method requires a tagging process serving the embedded object from the identified content server.
Akamai Technologies Inc. (Akamai) operates a CDN and, as the exclusive licensee of U.S. Patent No. 6,108,703 (the ’703 patent), contracts with multiple proprietors of websites (known as “content providers”) to deliver designated content (e.g., large video or music files) to individual Internet users. The ’703 patent provides for a “tagging” process by which designated content is stored on Akamai’s servers (instead of on the content providers’ servers). As a result of this “tagging” process, the data demands of multiple content providers in multiple locations with differing peak usage patterns may be aggregated, thereby enabling Akamai to increase the speed with which Internet users access the content of its contracted customer’s websites.4 A relevant claim at issue from the ’703 patent is reproduced below:
A content delivery method, comprising:
distributing a set of page objects across a network of content servers managed by a domain other than a content provider domain, wherein the network of content servers are organized into a set of regions;
for a given page normally served from the content provider domain, tagging at least some of the embedded objects of the page so that requests for the objects resolve to the domain instead of the content provider domain;
in response to a client request for an embedded object of the page:
resolving the client request as a function of a location of the client machine making the request and current Internet traffic conditions to identify a given region; and
returning to the client an IP address of a given one of the content servers within the given region that is likely to host the embedded object and that is not overloaded.5
Limelight Networks Inc. (Limelight) also operates a CDN but, in contrast to the methods claimed in the ’703 patent licensed by Akamai (in which Akamai tags the components of its customers’ websites that it intends to store on its servers), Limelight requires its customers to do their own tagging.6 Nevertheless, Akamai sued for patent infringement and received an adverse decision by the United States District Court for the District of Massachusetts that Limelight could not be held liable for direct infringement because Limelight did not exercise control or direction over its customers’ performance of the steps of the patented method that Limelight itself did not perform.7 Following the district court decision, Akamai appealed to the Federal Circuit, which concluded, following an en banc review resulting in a reversal of an earlier panel decision affirming the lower court decision,8 that the evidence could support a judgment in Akamai’s favor on a theory of induced infringement under § 271(b).9 The reasoning provided by the court was that § 271(b) liability arises when a defendant carries out some steps constituting a method patent and encourages others to carry out the remaining steps—even if in such circumstances no one would be liable as a direct infringer because those who performed the remaining steps would not be agents of, or under the control of, the defendant.10
Following the Federal Circuit en banc decision, Limelight appealed to the U.S. Supreme Court, which found, as an initial proposition based on prior case law, that inducement liability may arise only if there is direct infringement.11 In particular, the Court rejected the reasoning seemingly purported by the Federal Circuit that a defendant can be liable for inducing infringement under § 271(b), even if no one has committed direct infringement within the terms of § 271(a) (or any other provision of the patent laws). In disputing the Federal Circuit’s reasoning, the Court relied on the Federal Circuit’s previous decision in Muniauction, Inc. v. Thompson Corp.,12 in which the court started from the proposition that direct infringement requires a single party to perform every step of a claimed method and that steps performed by multiple parties satisfy this requirement when a single defendant exercises control or direction over the entire process such that every step is attributable to the controlling party.13 The Court further held that to accept the Federal Circuit’s contrary view would deprive § 271(b) of applicable standards, as a defendant could be held liable under § 271(b) for inducing conduct that does not satisfy direct infringement, thereby requiring courts to develop two parallel bodies of infringement law: one for liability for direct infringement, and one for liability for inducement.14
The Court’s decision in Limelight v. Akamai may be seen as particularly instructive for software patent holders seeking to assert infringement claims against methods performed by multiple parties. As an initial proposition, the Court clearly stated that there may be no inducement liability under § 271(b) without first establishing direct infringement under § 271(a). Thus, patent holders wishing to establish infringement by inducement under § 271(b) are necessarily required to first establish direct infringement under § 271(a). Moreover, when multiple parties are involved, a patent holder must either establish that a single party representing an alleged infringer exercises control or direction over method steps not directly performed by the alleged infringer, or identify a single direct infringer. As noted by the Court, control or direction does not include actions determined to be voluntarily taken by another party (e.g., the tagging of large files by an individual user of an Internet website) that would constitute the performance of a patented method. In contrast, a patent holder could establish control or direction by establishing an agency relationship or a contractual obligation between the alleged infringer and the other party.
With respect to an agency relationship, the Federal Circuit panel decision relied on the Restatement (Second) of Agency and determined that a principal-agent relationship demands not only control (or the right to direct or control) but also “the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.”15 The court also stated that there is no indication that an agency relationship arises when one party simply provides direction, no matter how explicit, to another party.16
With respect to a contractual obligation, the Federal Circuit panel decision found contractual evidence between Limelight and its customers by Limelight’s instructing said customers to tag the components they wished to be stored on Limelight’s CDN. However, the panel, determined that the contracts did not give Limelight control over its customers and, therefore, the customers’ tagging could not be attributed to Limelight.17 In particular, the Federal Circuit found that the contracts between Limelight and its customers allowed Limelight’s customers to decide what content, if any, Limelight’s CDN would deliver, and only then would the customers perform the “tagging” and “serving” steps. Thus, the Federal Circuit concluded that the contracts did not obligate Limelight’s customers to perform any of the steps of the patented method but rather merely explained that the customer would have to perform the steps if he or she decided to take advantage of Limelight’s service.18
Based on the foregoing discussion, it would appear that an agency relationship for establishing direction and control for proving direct infringement by multiple parties must include directing a party to perform an act on behalf of the principal and consent by the party to perform the act. It would further appear that the mere existence of a contract is not sufficient to establish direction and control for proving direct infringement by multiple parties. Instead, it appears that a contract between multiple parties required for performing a patented method would need to mandate one or more steps the contracting party must perform to avoid breach. Thus, if a party (e.g., a customer) has the option of whether or not to perform one or more steps of a patented method while not being in breach of the contract, then there is no direction or control with respect to establishing a direct infringement claim.
Of further note, the Court acknowledged that absent direction or control (i.e., the existence of an agency relationship or contractual obligation), under the current interpretation of § 271(a) pursuant to Muniauction, a would-be infringer could evade liability by dividing performance of a method patent’s steps with another whom the defendant neither directs nor controls.19 In the face of such a strategy, the Court noted that on remand the Federal Circuit will have the opportunity to review § 271(a) and revisit the Muniauction rule if it so chooses.20
Many software patents in existence today protect methods for steps that are divided among multiple parties, which may raise potential divided infringement issues. For example, in addition to the CDNs discussed above, patents that involve the exchange of data between multiple users (i.e., via client-server or peer-to-peer computing networks) often require multiple actors to perform various tasks such as software updates and/or installation. To the extent that the performance of a patented method does not require a defined agency relationship or contractual obligation, it would appear to be a relatively straightforward proposition to evade infringement liability under current case law. However, it should be noted that this current reprieve for would-be infringers may be short lived should the Federal Circuit readdress § 271(a) and the Muniauction rule on remand from the Court.
In the interim, patent practitioners should consider drafting “single-actor” method claims so as to avoid multiple actors performing various method steps. Patent practitioners should also consider drafting multiple claim types (e.g., system and/or apparatus claims) to protect their clients’ inventions so as to avoid an adverse interpretation of method claims based on divided infringement. In addition, to the extent that method claims do require one or more additional actors (e.g., customers) for carrying out various steps, careful consideration should be given to the establishment of agency relationships that include consent to perform one or more method steps so that a direct infringement claim may be adequately supported. Similarly, careful consideration should be given to the drafting of contracts that limit the options available to customers with respect to performing one or more method steps. For example, as evidenced by the Limelight decision, contracts that provide customers with the option to choose whether or not to perform the “tagging” or “serving” steps of the patented method are insufficient. Therefore, it is suggested that customer contracts be drafted that limit customer options and clearly require the performance of required method steps in order for the customer to not be in breach.
1. 35 U.S.C. § 271(a).
2. Id. § 271(b).
3. 134 S. Ct. 2111 (2014).
4. Id. at 2115.
5. U.S. Patent No. 6,108,703 col.20 ll.32–52 (filed May 19, 1999).
6. Limelight, 134 S. Ct. at 2115.
7. Akamai Techs., Inc. v. Limelight Networks, Inc., 614 F. Supp. 2d 90 (D. Mass. 2009).
8. Akamai Techs., Inc. v. Limelight Networks, Inc., 629 F.3d 1311 (Fed. Cir. 2010).
9. Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F.3d 1301, 1319 (Fed. Cir. 2012) (per curiam).
10. Id. at 1308–09.
11. Limelight, 134 S. Ct. at 2117–18.
12. 532 F.3d 1318 (2008).
13. Limelight, 134 S. Ct. at 2116.
14. Id. at 2117–18.
15. Akamai Techs., Inc. v. Limelight Networks, Inc., 629 F.3d 1311, 1321 (Fed. Cir. 2010) (quoting Restatement (Second) of Agency § 1(1)).
19. Limelight, 134 S. Ct. at 2120.