FEDERAL CIRCUIT APPLIES BROADENED TEST FOR DIVIDED INFRINGEMENT
May 2 2016
On April 18, 2016, the Supreme Court denied certiorari in Akamai Technologies, Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir., August 2015) (“Akamai IV”), cert. denied, 2016 U.S. LEXIS 2768. The Court declined Limelight’s petition for review of a $46 million jury verdict against Limelight for patent infringement. The jury had found Limelight liable for direct infringement of Akamai’s method patent, but the Federal Circuit Court of Appeals had reversed that judgment, ruling for Limelight. In Akamai IV, however, the Federal Circuit had reinstated the jury’s verdict, establishing a new rule for direct infringement by “divided” (or “joint”) infringement.
The new rule of Akamai IV is that a defendant can be liable for direct infringement of a method claim when another party performs some of the steps of the method as long as the steps performed by others are attributable to the defendant. According to the court, a defendant can be liable for direct infringement if the acts of the other party or parties can be attributed to the defendant through a joint enterprise or “when 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 for timing of that performance.” Akamai IV, supra, at 1023. The court emphasized that its new rule is flexible and should be applied on a case-by-case basis, stating “other factual scenarios may arise” that would support a finding of attribution. Id. With its new rule, the Federal Circuit expressly overruled its prior cases and turned Limelight’s victory into a loss.
Limelight’s petition for certiorari argued that the Federal Circuit’s Akamai IV rule was too broad. Many agreed with Limelight, but obviously the Supreme Court did not.
On April 22, 2016, within days after the Supreme Court denied certiorari in Akamai IV, the Federal Circuit used Akamai IV to vacate a district court’s decision in favor of the defendants in another case involving divided infringement, Mankes v. Vivid Seats Ltd., 2016 U.S. App. LEXIS 7924. In Mankes, the Federal Circuit remanded the case to the district court based on the “broadened divided-infringement standard articulated by the en banc court in Akamai IV.” Id. at *16.
In Mankes, the plaintiff owned a method patent for a reservation system in which the inventory was split between a local server and a remote Internet server. Mankes sued Vivid Seats Ltd. and Fandango, LLC in the Eastern District of North Carolina for patent infringement. The defendants’ business offered movie ticket reservations and used both an Internet system and local movie theaters’ systems. Fandango and Vivid Seats did not perform all of the steps of Mankes’ claimed method, but together with the local movie theaters, all of the steps of the method claim were performed.
The Federal Circuit explained that Mankes had gotten caught in the changing law of divided patent infringement, as both the Federal Circuit and Supreme Court issued multiple decisions in Akamai v. Limelight. In early 2015, the Mankes district court had granted judgment on the pleadings for Fandango and Vivid Seats on the grounds that Mankes had not sufficiently alleged direct infringement under 35 U.S.C. §271(a).
On appeal, the Federal Circuit held that the district court’s judgment on the pleadings against Mankes was based on the prior, narrower rule of divided infringement that had been superseded by the new rule of Akamai IV. Mankes, supra, at *18. The appellate court vacated the district court’s decision and remanded the case. The court noted that Mankes had alleged that some of the method steps (the Internet server) were performed by Fandango and Vivid Seats, while other steps (the local server) were performed by local movie theaters. The defendants had not disputed that all of the method steps were performed; rather, they contended that the local theaters’ actions could not be attributed to them. Id. at *16.
The Federal Circuit held that Mankes should have a chance to prove his case under the new rule of divided infringement, stating that Mankes may be able to allege facts that fall within Akamai IV’s new rule “or might otherwise justify finding direct-infringement liability for divided infringement.” Id. at *20. The court emphasized that it is not “appropriate to rule out at this stage any particular theory of direct infringement, including the joint-enterprise theory and the possibility of other bases of attribution recognized in Akamai IV.” Id. Thus, the court left the door wide open for Mankes to argue that his case falls within a flexible application of the Akamai IV rule. After all, if Akamai could win after three tries, Mankes might win on his second time around.