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IP Alert: Federal Circuit Expands Liability Regarding Divided Infringement

August 14, 2015

On August 13, 2015, the U.S. Court of Appeals for the Federal Circuit sitting en banc in Akamai Technologies, Inc. v. Limelight Networks, Inc., expanded the law of divided infringement under 35 U.S.C. § 271(a) to include at least two new activities. The court held that it “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.” 

Prior to the Federal Circuit’s en banc decision, a party could be liable for direct infringement under section 271(a) if (1) it acts through an agent (applying traditional agency principles), or (2) contracts with another to perform one or more steps of a claimed method. In determining whether a single entity directs or control the acts of another, the general principles of vicarious liability apply.

The Federal Circuit added another category under the umbrella of vicarious liability. In the facts before the court, it determined that liability under section 271(a) can also be found “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 or timing of that performance.” Moreover, “[w]hether a single actor directed or controlled the acts of one or more third parties is a question of fact, reviewable on appeal for substantial evidence.”  

In addition to the new category related to “direction or control,” the Federal Circuit further held that “where two or more actors form a joint enterprise, all can be charged with the acts of the other, rendering each liable for the steps performed by the other as if each is a single actor. . . . A joint enterprise requires proof of four elements: 

(1) an agreement, express or implied, among the members of the group; 
(2) a common purpose to be carried out by the group; 
(3) a community of pecuniary interest in that purpose, among members; and
(4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control. 

As with direction or control, whether actors entered into a joint enterprise is a question of fact, reviewable on appeal for substantial evidenced.”  

Possibly signaling that the Federal Circuit could expand the scope of divided infringement even further, it held that “[s]ection 271(a) is not limited solely to principal-agent relationships, contractual arrangements, and joint enterprise. . . . Rather, to determine direct infringement, we consider whether all method steps can be attributed to a single entity.” In so holding, the Federal Circuit expressly overruled decisions that “formed the predicate for the vacated panel decision.”  

In applying this expanded scope to the facts of the case, the Federal Circuit reversed and reinstated the jury verdict, which held that Limelight was liable for infringement.  

The Akamai case is significant for those Fitch Even clients concerned with divided infringement. For more information, please contact Fitch Even partner Eric L. Broxterman, the author of this alert.


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