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Defending SCOTUS on Limelight Inducement Decision


Written by Gene Quinn (left), Founder of IPWatchdog, Inc.
Lars Smith (right), Professor, Brandeis School of Law
Posted: June 10, 2014 @ 10:47 am

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Justice Samuel Alito, authored the Limelight decision for a unanimous Court.

There are some who are questioning the wisdom and correctness of the Supreme Court’s recent decision, authored by Justice Alito for a unanimous Court, in Limelight Networks, Inc. v. Akamai Technologies, Inc. One particular point of criticism seems to be centered around the fact that the Supreme Court failed to take into consideration the existence of 35 U.S.C. § 271(f). Section 271(f) was enacted by Congress to overrule a 1972 Supreme Court decision that held that supplying parts to be assembled outside the United States could not result in infringement of a U.S. patented combination machine because the assembly occurred outside the territorial reach of the U.S., and therefore beyond the scope of the exclusive rights granted by a U.S. patent.

We recognize that certain Supreme Court patent decisions over the past several generations have legitimately raised questions about the Court’s familiarity with overall patent law concepts. Indeed, the Supreme Court has been criticized, including here on IPWatchdog.com, for muddying patent waters, failing to articulate clearly applicable standards and promulgating rulings that seem internally inconsistent, if not scientifically inaccurate. Any legitimate criticism of Supreme Court patent jurisprudence should, however, be on a case-by-case basis. Further, it is important to recognize that the Supreme Court does from time to time get a patent decision perfectly correct. See Diamond v. Chakrabarty, Diamond v. Diehr, Octane Fitness v. ICON Health & Fitness, Highmark v. Allcare, Gunn v. Minton, Bowman v. Monsanto, i4i v. Microsoft and Kappos v. Hyatt.

This current criticism swirling around Limelight seems misguided. Arguing that the Supreme Court erred by misinterpreting, or failing to apply, 271(f) misses the point entirely. The question presented in the appeal to the Supreme Court was whether there can be infringement under 271(b) if there is no direct infringement under 271(a). Infringement under 271(f)(1) was not at issue in the case, and 271(f)(1) was not relied upon by the Federal Circuit below.

Furthermore, 271(f)(1) deals with shipping components overseas, which are then assembled. This is significant because the patent at issue in Limelight was U.S. Patent No. 6,108,703 (’703 patent), which claims a method of delivering electronic data using a “content delivery network.”

 

Limelight Decision

In the decision appealed to the Supreme Court, the Federal Circuit found inducement where there was no finding of direct infringement. The Federal Circuit even went so far as to specifically point out that they did not reach the question of whether there was direct infringement. In other words, the decision of the Federal Circuit, which was based on 271(b), held that it is possible to be liable for inducing infringement even when there has been no finding of direct infringement under 271(a). All that the Federal Circuit seemed to require was that all of the steps of the method have been performed, regardless of by whom.

However, as the Supreme Court pointed out, the Federal Circuit had previously held in its Muniauction decision that “a method’s steps have not all been performed as claimed by the patent unless they are all attributable to the same defendant,” Limelight slip op. at 5-6. Therefore, no direct infringement of a method patent can occur under the Federal Circuit’s own rule unless the method’s steps are attributable to a single party. Since following the Federal Circuit’s own precedents no direct infringement had been proven in the Limelight case, it was a simple matter to overrule Federal Circuit’s finding of liability for inducement under 271(b). Without proof of direct infringement, the holding violates the Supreme Court’s well established rule in Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S 336 (1961) that there must be direct infringement before there can be liability for inducement under 271(b). As the Supreme Court simply stated, “Limelight cannot be liable for inducing infringement that never came to pass.” Slip op. 9.

 

Section 271(f) and a Brief History

But what about 271(f)? Does this section, as some have claimed, provide a separate justification for the Federal Circuit’s holding in Limelight?

Before proceeding it is worth reviewing the statutory language of 271(f)(1), which is the part of the section that specifically deals with inducement. It says:

“Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.”

Once again, before proceeding, it is probably helpful to discuss a little Supreme Court history. In Deepsouth Packing Co., Inc. v. Laitram Corp., 406 U.S. 518 (1972), the United States Supreme Court held that a manufacturer who shipped unassembled parts of a patented shrimp deveining machine out of the U.S. to be assembled by its customers abroad was not liable for patent infringement. The Supreme Court held that the shipment of unassembled components of the deveining machine did not constitute patent infringement because “it is not an infringement to make or use a patented product outside of the United States.”

Displeased with the Supreme Court ruling in Deepsouth, Congress flexed their muscle, as they are Constitutionally allowed to do, and passed 35 U.S.C. 271(f) for the express purpose of overruling the Supreme Court’s Deepsouth decision. See Patent Law Amendments of 1984, S. Rep. No. 98-663, pp 2-3 (1984) (describing Section 271(f) as a response to the “Deepsouth decision which interpreted the patent law not to make it infringement where the final assembly and sale is abroad”). The Supreme Court acknowledged the overruling of Deepsouth in its decision in Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 444 & n.3 (2007).

 

Federal Circuit en banc on 271(f) and Methods

In 2009, in Cardiac Pacemakers, Inc. v. Mirowski Family Ventures, LLC, the Federal Circuit sitting en banc had an opportunity to discuss 271(f) and whether the statute is applicable to a method.

Cardiac argued that the use of the term “patented invention” in 271(f) indicated Congress’s intent to include all classes of invention within that statute’s reach. The Federal Circuit disagreed, saying that they could simply not ignore “language of that section, which… makes it clear that it does not extend to method patents.” Specifically, the Federal Circuit focused on the fact that method steps do not constitute physical components used in performance of the method. Thus, the Federal Circuit concluded that 271(f) does not reach the infringement of a method.

 

Conclusion

Not only was 271(f) not at issue in the case, not only was the specific question accepted for appeal by the Supreme Court related to inducement under 271(b), but it is not possible to infringe a method claim under 271(f).

Therefore, whatever 271(f)(1) may say about inducement being possible without direct infringement when components are shipped overseas, we fail to see how that is applicable to a 271(b) case that relates to a method claim.

 


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Posted in: Gene Quinn, Government, IP News, IPWatchdog.com Articles, Patent Litigation, Patents, US Supreme Court

About the Authors

is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had many millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, USA Today, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.


Professor Lars Smith holds the Samuel J. Stallings Chair in Law at the University of Louisville's Louis D. Brandeis School of Law. Smith's teaches in the areas of intellectual property, business and commercial law. In 2012 Professor Smith received a Fulbright Scholarship Award to teach at Zhongnan University of Economics and Law in Wuhan, China, where he taught Chinese Masters of Law students about U.S. intellectual property law. Professor Smith is also the faculty advisor to the Law School's Entrepreneurship Clinic, and was the initial Interim Director to the law school's first law clinic. His scholarship focuses on issues related to intellectual property, commercial law and technology.




3 comments
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  1. “Arguing that the Supreme Court erred by misinterpreting, or failing to apply, 271(f) misses the point entirely.”

    Gene,

    The point is bigger than just what 271(f) says; it goes to Congress’ intent in enacting 271(f) which rebukes/overturns two different rationales for the Deepsouth Packing holding, a narrow 5-4 decision with a vociferous dissent by Justice Blackmun about letting the accused infringer get off on a “technicality” while at the same appropriating the benefits of the claimed invention. In other words, the “bigger picture” is that Congress said don’t let “technicalities” like happened in Deepsouth Packing be used to excuse infringement liability.

    Also such an egregious gaffe as factually mischaracterizing the Federal Circuit’s per curiam majority ruling is enough to undermine any credibility in Alito’s opinion. Sorry, but Alito’s opinion remains ABYSMAL in my eyes.

  2. Yes 271(f) has a basis in “components” as the term used in describing Deep South. But common sense here says effectively – without embracing the “bigger picture” as commented above – if I as a patent infringe want to infringe a method patent for ABCD, I can essentially do this by forming two unrelated shell companies. One that does AB and another that does CD. Or even to muddy the waters more – Corporate Entity 1 does AB, ships to Corporate Entity 2 who applies C and adds the final elements to a box with the article of the method for an end user to complete. As no “single entity” is directly infringing my method ABCD- be it annealing metals, producing a bateria, or managing data – with this interpretation, without the single, direct infringer violating all my steps I cannot be sued, neither of the companies can be sued, nor can the final user. Is that a good result? Essentially a criminal conspiracy to rip off a patented method could be easily envisioned. Its more of a stretch in the case of annealing and the bacteria examples, as the steps would necessarily be more complicated – but in computer inventions anything that can does manipulate data now. It would be hard set to argue that the spirit of 271(f) should not at least be looked at.

    As noted above by the first poster, this is the big picture if you will that a mere technicality simply changing the legal “doer” of the infringement so as to cheat the system would not result in avoidance of liability. I believe that is directly what created 271(f) in the first place, and though it may not have been created specifically for the method patents out there – it has a place in the argument. To say otherwise is to go back to the same results that lead up to Deep South (a technicality in avoiding infringement) and, further, extend those to any and all method patents. Its begging a question, though drawn against the backdrop of Deep South, the intent was to avoid simply hat changing to avoid infringement. But given the current anti-patent movement/sentiments I doubt we’ll be seeing anything done soon on something like updating 217(f) and the like.

  3. EG: I think that Judge Linn’s dissent in the Federal Circuit’s case explains the logic how 271(f) fits into the analysis. Here is some pertinent language from his opinion: “In 1952, Congress removed joint-actor patent infringement liability from the discretion of the courts, defining “infringement” in § 271(a) and expressly defining the only situations in which a party could be liable for something less than an infringement in § 271(b) and (c) — clearing away the morass of multi-actor infringement theories that were the unpredictable creature of common law. Since that time, Congress has on three occasions made policy choices to treat certain special circumstances as tantamount to “infringement.” See 35 U.S.C. § 271(e)(2), (f), and (g). In doing so, Congress did not give the courts blanket authority to take it upon themselves to make further policy choices or define ‘infringement.'” Akamai Technologies, Inc. v. Limelight Networks, 692 F. 3d 1301, 1337 (Fed. Cir. 2012).

    Wingnut_Leftist: In your post you pose this hypo: “I can essentially do this by forming two unrelated shell companies. One that does AB and another that does CD.” In fact, I think this creates liability under 271(a). If you, individually, control two separate corporations that each undertake separate steps at your direction, then the actions of the two corporations would be attributed to you. As stated in BMC Resources,

    “These rules for vicarious liability might seem to provide a loophole for a party to escape infringement by having a third party carry out one or more of the claimed steps on its behalf. To the contrary, the law imposes vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party. In the context of patent infringement, a defendant cannot thus avoid liability for direct infringement by having someone else carry out one or more of the claimed steps on its behalf.” BMC Resources, Inc. v. Paymentech, Lp, 498 F. 3d 1373, 1397 (Fed. Cir. 2007).

    Your second hypo is closer, and by leaving the last step to the customer, it’s much closer to the Limelight facts. But I wonder if the concept of the “mastermind” still captures it. As the Federal Circuit said in that same opinion,

    “A party cannot avoid infringement, however, simply by contracting out steps of a patented process to another entity. In those cases, the party in control would be liable for direct infringement. It would be unfair indeed for the mastermind in such situations to escape liability.” Id. 1381.

    In any case, since inducement theory is off the table, the Federal Circuit will have to wrestle with whether Limelight’s actions do fit into 271(a) under Muniauction and BMC Resources. I wonder if the majority in Limelight will pick up on Judge Newman’s dissent (which none of the other judge’s joined), who said that the term “whoever” in 271(a) is both singular and plural, and thus allows for liability for multiple unrelated actors. Judge Linn clearly rejected that idea, stating that Judge Newman’s reasoning recasts direct liability as not being a strict liability tort, and resurrects the very joint tortfeasor theories that he believes Congress rejected.