In August of 2015, the federal circuit met en banc in Akamai v. Limelight to settle a long-standing issue: When multiple parties perform all the steps to a patented method, but no one party performs every step, when is the patent infringed, and by whom? The decision they handed down set a new standard for divided infringement defenses. Like any legal standard, the details would need to be fleshed out by subsequent litigation in the district courts and the federal circuit, but the case marked an important step towards capturing intentional infringers exploiting an over-narrow standard.

A patent is directly infringed when one “without authority makes, uses, offers to sell, or sells any patented invention.” 35 U.S.C. § 271(a). A method (or process) patent claim is a series of steps for accomplishing a certain result. Because infringement of a claim requires meeting all the limitations of that claim, infringing a method claim requires performing every step of the method. From this requirement arises the divided infringement defense: all the steps of a claimed method were performed, but the alleged infringer only performed some of them, while other parties performed the rest. But, of course, it wouldn’t be right if alleged infringers could get away with performing almost all of a patented method and contracting out a couple of the steps. In its first crack at Akamai in 2010, the federal circuit explained the existing law on that issue, stating, “the performance of a method step may be attributed to an accused infringer when the relationship between the accused infringer and another party performing a method step is that of principal and agent, applying generally accepted principles of the law of agency as explicated by the Supreme Court and the Restatement of Agency.” If a principal-agent relationship seems too narrow to you, you’re not alone. But that’s just the beginning of Akamai’s journey through the appellate courts. After the initial decision by the federal circuit was rendered, they met en banc and held that it wasn’t even right to consider whether there was direct infringement in the case, because there was evidence instead of induced infringement and as per 35 U.S.C. § 271(b), “Whoever actively induces infringement of a patent shall be liable as an infringer.” The Supreme Court did not like that. It took the case on appeal, and, as it generally does when taking federal circuit cases, reversed. The key holding was that there can be no induced infringement without direct infringement. The Supreme Court remanded the case to the federal circuit, stating that they may revisit whether there was direct infringement. A panel issued a ruling that was, once again, reviewed en banc.

All of that brings us to the Federal circuit’s en banc decision. The court had a problem: The principal-agent requirement for overcoming divided infringement seemed too narrow to hold many potential infringers liable, but they couldn’t broaden the scope of liability with induced infringement because the Supreme Court held that there must be actual infringement for inducement. They also couldn’t impart a mental element because patent infringement is a strict liability tort. The court’s solution was the following:

Where more than one actor is involved in practicing the steps, a court must determine whether the acts of one are attributable to the other such that a single entity is responsible for the infringement. We will hold an entity responsible for others’ performance of method steps in two sets of circumstances: (1) where that entity directs or controls others’ performance, and (2) where the actors form a joint enterprise.

Akamai Techs., Inc. v. Limelight Networks, Inc. was an elegant solution. The court expanded liability for infringement in divided infringement cases while avoiding imparting a mental element into a strict liability tort.

So the issue is settled, right? Of course not, it’s patent law. There’s still the matter of defining the terms “directs or controls others’ performance” and “joint enterprise.” The court in Akamai explicitly adhered to the general principles of vicarious liability.  It found that, in addition to being the principal in a principal-agent relationship, an entity is responsible for another’s performance if “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.”  The court also found that a joint enterprise required proof of four elements. First, an agreement, express or implied, among the group members. Second, a common purpose to be carried out. Third, a community of pecuniary interest in that there is a common purpose among the members. And Fourth, an equal right among all members to a voice in the direction of the enterprise, giving equal right to control.

The Akamai decision is barely a year old, so the body of case law built on this new standard is small. Just two days after the Akamai decision, the southern district of Indiana held in Eli Lilly v. Teva that physicians directed or controlled their patients’ performance when they told them to take folic acid. In this case, the benefit to the patient was treatment with a specific drug, and the physician was conditioning the administration of that drug upon the taking of folic acid, which was the final step to a method claim. In another, very recent case, Travel Sentry, Inc. v. Tropp, the eastern district of New York found that a memorandum of understanding between Travel Sentry and the TSA to be insufficient direction and control to overcome a divided infringement defense. The TSA agreed to make a good faith effort to test Travel Sentry’s keys, and to use Travel Sentry’s master keys to open locks, which would be the last step in the patented method, if Travel Sentry provided the keys for free. In this case, the court held that such an agreement did not involve Travel Sentry controlling the timing or performance of the method. The TSA merely took guidance and acted independently, which was a hypothetical contemplated in Akamai in which there would be no direction and control.

There are sure to be many more cases challenging and exploring the standard for divided infringement set out in Akamai, but it seems for now the federal circuit’s holding has the support of the district courts. Who knows, Akamai may not last long as the standard in the rapidly-changing world of patent law. For now, however, the court appears to have struck a nice balance between a standard that would let malicious infringers off the hook, and one that would hold innocent parties liable.

 

Thomas Loy is a J.D. candidate, 2018, at NYU School of Law.