The Software IP Report

How Did the Supreme Court’s Akamai Decision Change the Law of Divided Patent Infringement?

By Charles Bieneman

Categories: Patent Infringement, The Software IP Report

The Federal Circuit has given new life to a patent owner alleging that actions of multiple parties constitute direct infringement under 35 U.S.C. § 271(a).  Mankes v. Vivid Seats Ltd., No 15-1500 (Fed. Cir. April 22, 2016).  The patent owner had alleged direct infringement of its patent by parties who carried out only some and not all of the steps of a method claim.  The district court had held that the plaintiff did not allege enough to state a case of direct patent infringement.  The district court’s holding may have been correct under the law prevailing at the time of its ruling (early 2015), but it could not be sustained now.

Claims of U.S. Patent No. 6,477,503 were directed to “methods for managing a reservation system that divides inventory between a local server and a remote Internet server.”  (And if you read the claims, you might be most interested that this post is not about 35 U.S.C. § 101, but it is not.)  The parties did not dispute that no one party carried out all claimed method steps; the defendants managed Internet reservation systems that executed some claim steps, but other claim steps were executed only by local theaters.  The Federal Circuit panel  (Judges Taranto, Schall, Chen) vacated the district court’s decision that the plaintiff’s allegations could not establish direct infringement, explaining that the plaintiff should be given the opportunity to try to plead a direct infringement case in light of the Federal Circuit’s en banc opinion in Akamai Technologies, Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (referred to as “Akamai IV” in the Court’s opinion).

It is no coincidence that this Federal Circuit decision comes just four days after the Supreme Court denied certiorari from the en banc 2015 Akamai IV decision.  Indeed, the Court’s decision in Mankes appears to be predicated on the assumption that divided infringement law has perhaps stabilized following a series of twists and turns going back to 2007, and the line of cases including Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech., 709 F.3d 1348 (Fed. Cir. 2013); Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008) and BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007).

In particular, Judge Taranto discussed four different incarnations of Akamai at the Federal Circuit, and its trip up to the Supreme Court.  The district court’s dismissal of the plaintiff’s claim came after the Supreme Court’s holding that divided infringement liability requires a proof of direct infringement by a single actor, but before the Federal Circuit held in the 2015 en banc Akamai IV decision that direct infringement could be attributed to a single actor “in a joint-enterprise setting, and . . . also articulated a standard that permits liability ‘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.’”

Here, the district court’s earlier rulings “were squarely based on the earlier, narrower standard.”  The patent owner conceded that, under that pre-Akamai IV standard, he could not have stated a claim of direct infringement under 35 U.S.C. § 271(a).  Now, however, even if local venue owners were not the defendant’s agents, there were “other factual scenarios” under which direct infringement liability for their acts could be attributed to the defendant Internet reservation system operators.  The Federal Circuit declined to rule here on whether the plaintiff had already made sufficient allegations.  However,

[g]iven what he already has alleged, Mr. Mankes should have the opportunity to allege facts that allow for a more informed evaluation than is possible on the present record, which was not developed with Akamai IV in mind, of whether the defendants’ accused activities come within the ambit of the Akamai IV “conditions participation” standard or might otherwise justify finding direct infringement liability for divided infringement.

In addition to vacating the district court’s dismissal of infringement allegations, the Federal Circuit affirmed the district court’s denial of attorney fees to the defendants.  Among other things, they were no longer the “prevailing party” entitled to an award under 35 U.S.C. § 285.

So where does this decision, coupled with the Supreme Court’s denial of the cert. petition in Akamai, leave us?  Incredibly, the standard for stating a claim of divided infringement seems to be not only relaxed, as the court put it, but looser and vaguer than it was before.  The Supreme Court might have thought that its decision in Limelight Networks v. Akamai Technologies, 134 S. Ct. 2111 (2014), holding that there could not be induced infringement under 35 U.S.C. § 271(b) without direct infringement under 35 U.S.C. § 271(a), would make divided infringement more difficult to prove.  Instead, we seem to be heading in the opposite direction.