Two Wrongs Don’t Make a Right: Supreme Court Declines to Expand the Scope of Indirect Infringement Liability in View of Federal Circuit’s Muniauction Ruling

The United Supreme Court has been a “hot bench” for patent cases. On the same day, it issued two unanimous decisions reversing the Federal Circuit relating to claim definiteness and inducement infringement, the former of which we previously discussed. In the latter, Limelight Networks v. Akamai Tech. No. 12-786, 572 U.S. ___ (2014), the U.S. Supreme Court held that a party cannot be liable for inducing infringement under 35 U.S.C. §271(b) unless there is direct infringement in 35 U.S.C. §271(a). The Court in dicta also suggested that the Federal Circuit may wish to reconsider its prior decision, Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (2008), which held that a party–who does not perform all the method steps–cannot be liable for direct infringement in §271(a) unless it controls or directs another party to complete the other steps.

The Limelight case dates back to 2006, when Akamai accused Limelight of infringing its patent directed to tagging a website’s components (e.g., video and audio files) to be stored on a server for access by Internet users. Limelight, though, required that its customers perform the tagging step and thus escaped liability at the district court level under §271(a) based on the Muniauction standard. A Federal Circuit panel affirmed the §271(a) analysis, but an en banc court reversed under §271(b), reasoning that a party can be liable for inducement when a party practices certain steps and encourages another to practice the remaining steps. Limelight petitioned the Supreme Court, and it reversed.

The Supreme Court reasoned that the Federal Circuit’s standard would create “for §271(b) purposes some free-floating concept of ‘infringement’ both untethered to the statutory text and difficult for the lower courts to apply consistently” resulting in the development of two sets of infringement law, one for direct and another for inducement of infringement. In the Court’s view, this reading of §271(b) was reinforced based on its prior decision rejecting contributory infringement where no direct infringement existed and §271(f) which shows that Congress knows how “to impose liability for inducing activity that does not itself constitute direct infringement” and “courts should not create liability for inducement . . . where Congress has elected not to extend that concept.”

Much of the Court’s opinion in responding to Akamai’s arguments involved several citations to Muniauction with the Court stating, “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.” In closing the Court advised that “the Federal Circuit will have the opportunity to revisit the §271(a) question if it so chooses.”

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