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IP Alert
IP Alert: Multi-Party Direct Infringement Analyzed Under Principles of Vicarious Liability

May 18, 2015

On May 13, 2015, the Court of Appeals for the Federal Circuit issued a decision in Akamai Technologies v. Limelight Networks, Inc. that clarifies what is required to establish infringement in a multi-party context. In a case on remand from the U.S. Supreme Court, the Federal Circuit held that a defendant may be liable for direct infringement only under the principles of vicarious liability where third parties perform some of the patented elements.

As discussed in our previous alerts on this case here and here, in the underlying litigation, defendant Limelight was found to have performed all but one of the steps of Akamai’s claimed method of delivering web content. The last step was performed by Limelight’s customers, who performed this step pursuant to Limelight’s instructions. In a 2012 en banc decision, a narrow majority of the Federal Circuit held a patentee need not show that a single actor performed all steps of a claimed method to prove inducement of infringement. Instead, the Federal Circuit held, an accused infringer may be liable for inducement of infringement by inducing one or more actors to collectively perform the steps of a patented method. The Supreme Court, in a unanimous 2014 decision, reversed, holding that a party may not establish liability for inducing infringement in the absence of a direct infringer. The Court remanded the case for a determination of whether Limelight could be liable as a direct infringer.

On remand, the Federal Circuit concluded that Limelight was not a direct infringer. The court held that principles of vicarious liability apply, such that an accused direct infringer may be vicariously liable for the acts committed by another party if the other party operated under the control of the accused infringer. Such control or direction may be found, for example, in a principal-agent relationship, in a contractual arrangement, or in a joint enterprise.

Applying this reasoning to the facts before the court, the Federal Circuit found “nothing to indicate that Limelight’s customers are performing any of the claimed method steps as agents for Limelight, or in any other way vicariously on behalf of Limelight.” The court reasoned, “Limelight’s customers do not become Limelight’s agents simply because Limelight provides its customers a written manual explaining how to operate Limelight’s product.” In so holding, the majority rejected Akamai’s theory that two or more parties may be jointly liable as direct infringers: “Encouraging or instructing others to perform an act is not the same as performing the act oneself and does not result in direct infringement.”

This Akamai decision reflects the Federal Circuit’s efforts to clarify the law on multiple actor infringement. The decision is significant to parties alleging and defending against claims of patent infringement, and it should be kept in mind for parties drafting patent claims.

For more information, please contact Fitch Even partner Allen E. Hoover.

--Written by Fitch Even attorney Brett J. Smith

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