Opinion ID: 181384
Heading Depth: 2
Heading Rank: 1

Heading: Joint Infringement of the '703 Patent[3]

Text: On appeal, Akamai asserts that we should reverse the district court's JMOL of noninfringement of the '703 patent because substantial evidence supports the jury's determination that Limelight exercises control or direction over the entire claimed process. Akamai attempts to distinguish Muniauction, arguing that Limelight: (1) creates and assigns a unique hostname for the content provider; (2) provides explicit step-by-step instructions to perform the tagging and serving claim steps; (3) offers technical assistance to help content providers with their performance of the claim steps; and (4) contractually requires content providers to perform the tagging and serving claim steps if they utilize the Limelight service. Limelight responds that Akamai's evidence is indistinguishable from that found legally insufficient in Muniauction and therefore we should affirm. It is well settled that direct infringement requires a single party to perform every step of a claimed method. BMC Resources, 498 F.3d at 1378-79 (citing Warner-Jenkinson Co., Inc. v. Hilton Davis Corp., 520 U.S. 17, 40, 117 S.Ct. 1040, 137 L.Ed.2d 146 (1997)). In both BMC Resources and Muniauction this court confronted the situation in which more than one party is required to perform the steps of a claimed method. The court concluded that there can be no infringement unless one party exercises `control or direction' over the entire process such that every step is attributable to the controlling party. Muniauction, 532 F.3d at 1329 (citing BMC Resources, 498 F.3d at 1380-81). In assessing whether control or direction is present, the court in BMC Resources made reference to the legal principle that imposed vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party. BMC Resources, 498 F.3d at 1379 (citing Engle v. Dinehart, 213 F.3d 639 (5th Cir.2000) (unpublished decision); Restatement (Second) of Agency § 220 cmt. d). The court concluded that [it] would be unfair indeed for the mastermind in such situations to escape liability. Id. at 1381. Moreover, the court in BMC Resources also explained that [a] party cannot avoid infringement ... simply by contracting out steps of a patented process to another entity. Id. While the control or direction test of BMC Resources established a foundational basis on which to determine liability for direct infringement of method claims by joint parties, it left several questions unanswered, including the question of whether the furnishing of instructions is sufficient to attribute the actions of the instructed party to the accused. Muniauction addressed the question about instructions and, in concluding that the instructions in that case were not enough, reiterated the notion of vicarious liability mentioned in BMC Resources. The court in Muniauction held that the requisite level of control or direction over the acts committed by a third party is met in circumstances in which the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party. 532 F.3d at 1330. Thus, both BMC Resources and Muniauction set forth relevant factors in assessing liability for joint infringement. While control or direction is a consideration, as is the extent to which instructions, if any, may be provided, what is essential is not merely the exercise of control or the providing of instructions, but whether the relationship between the parties is such that acts of one may be attributed to the other. Implicit in this court's holdings in BMC Resources and Muniauction is that the performance of a method step may be attributed to an accused infringer when the relationship between the accused infringer and another party performing a method step is that of principal and agent, applying generally accepted principles of the law of agency as explicated by the Supreme Court and the Restatement of Agency. The Restatement defines agency as the fiduciary relationship that arises when one person (a `principal') manifests assent to another person (an `agent') that the agent shall act on the principal's behalf and subject to the principal's control, and the agent manifests assent or otherwise consents so to act. Restatement (Third) of Agency § 1.01. For an agency relationship to exist, and thus, for infringement to be found, both parties must consent that the agent is acting on the principal's behalf and subject to the principal's control. See Dixson v. United States, 465 U.S. 482, 505, 104 S.Ct. 1172, 79 L.Ed.2d 458 (1984) (citing the Restatement (Second) of Agency § 1 for the rule that an agency relationship [is] created when one person agrees with another `that the other shall act on his behalf and subject to his control'). Similarly, also implicit in the court's holdings in BMC Resources and Muniauction, is that joint infringement occurs when a party is contractually obligated to the accused infringer to perform a method step. In assessing infringement based on the actions of joint parties, it is not enough to determine for whose benefit the actions serve, for in any relationship there may be benefits that inure in some respects to both parties. This court therefore holds as a matter of Federal Circuit law that there can only be joint infringement when there is an agency relationship between the parties who perform the method steps or when one party is contractually obligated to the other to perform the steps. Neither is present here. The court notes that the common law of agency encompasses not only the fiduciary relationship noted above, but also some other relationships, which may include those of independent contractors. United States v. Hudson, 491 F.3d 590, 595 (Fed.Cir.2007) (As a matter of legal custom and tradition, ... nothing about the title independent contractor invariably precludes someone from being an agent under appropriate circumstances.); Restatement (Third) of Agency § 1.01 cmt. c (The common law of agency ... additionally encompasses the employment relation.... [T]he common term `independent contractor' is equivocal in meaning and confusing in usage because some termed independent contractors are agents while others are nonagent service providers.... This Restatement does not use the term `independent' contractor.); Restatement (Second) of Agency § 2(3) (An independent contractor ... may or may not be an agent.). This same principle applies to the question of joint infringement. A party that engages another to perform a step of a claimed method as its agent cannot escape liability simply by designating its agent an independent contractor if all the elements that otherwise reflect an agency relationship are present. In this case, there is nothing to indicate that Limelight's customers are performing any of the claimed method steps as agents for Limelight. To the contrary, Limelight's CDN is a service similar to Thomson's on-line auction system in Muniauction, and Limelight's relationship with its customers is similar to Thomson's relationship with the bidders. In both cases, customers are provided instructions on use of the service and are required to perform some steps of the claimed method to take advantage of that service. In Muniauction, the customers performed the step of bidding. Here, the customers decide what content, if any, they would like delivered by Limelight's CDN and then perform the step of tagging that content. Limelight's customers also perform the step of serving their own web pages. Akamai argues that in Muniauction, the direction or control provided by Thomson was only tangentially related to the claimed process because it related to controlling access to the auction system, not directing users on what bid information to input. Akamai's Principal Br. at 44. According to Akamai, here the control or direction is directly related to the claimed step because Limelight tells providers not only how to tag, but also what hostname to use as a tag. Further, Akamai points out that by including the word direct in the control or direct test, this court in BMC Resources must have meant the word direct to mean something other than control, and this case presents the ultimate in direction because of the detailed instructions and technical assistance provided to customers by Limelight. Akamai's Principal Br. at 42. However, the words in the BMC Resources test must be read in the context of traditional agency law. An essential element of agency is the principal's right to control the agent's actions. Control is a concept that embraces a wide spectrum of meanings, but within any relationship of agency the principal initially states what the agent shall and shall not do, in specific or general terms. Restatement (Third) of Agency § 1.01 cmt. f. Like BMC Resources, the Restatement and the Supreme Court refer to the words control and direction when assessing whether an agency relationship exists, but there is no indication that an agency relationship arises when one party simply provides direction, no matter how explicit, to another party. All the elements of an agency relationship must be present. See Meyer v. Holley, 537 U.S. 280, 286, 123 S.Ct. 824, 154 L.Ed.2d 753 (2003) (The Restatement [ ] specifies that the relevant principal/agency relationship demands not only control (or the right to direct or control) but also `the manifestation of consent by one person to another that the other shall act on his behalf, and consent by the other so to act.'). Akamai also argues that the relationship between Limelight and its customers compels a finding of joint infringement because Limelight contracts out to content providers the claim steps that it alone does not perform. This conclusion stems from Limelight's standard form contract that, according to Akamai, obligates content providers to perform the claim steps of tagging the embedded objects and serving the tagged page so that requests for the embedded objects resolve to Limelight's network instead of the content provider's. Akamai's Principal Br. at 40. For this argument, Akamai relies on the statement in BMC Resources that [a] party cannot avoid infringement ... simply by contracting out steps of a patented process to another entity. BMC Resources, 498 F.3d at 1381. Akamai's reliance on this statement is misplaced. As discussed above, Limelight's customers decide what content, if any, they choose to have delivered by Limelight's CDN and only then perform the tagging and serving steps. The form contract does not obligate Limelight's customers to perform any of the method steps. It merely explains that the customer will have to perform the steps if it decides to take advantage of Limelight's service. See Muniauction, 532 F.3d at 1329 ([M]ere `arms-length cooperation' will not give rise to direct infringement by any party.). What is critical here is whether the evidence shows that the relationship between Limelight and its customers is such that the steps in question are performed by the customers as agents of Limelight or under a contractual obligation and are, thus, properly attributable to Limelight. It is true that Limelight's agreement calls for its customers to assign a unique hostname, requires content providers to perform certain claim steps if they choose to use Limelight's service, and provides instructions and offers technical assistance for performing those steps. However, none of those points establishes either Limelight's control over its customers or its customers' consent to Limelight's control. To the contrary, the agreement merely provides the customers with the tools to allow them to exercise their independent discretion and control over how and in what respect they implement the system. Limelight's customers did not perform the actions of tagging and serving as Limelight's agents and were not contractually obligated to perform those actions. Instead, the evidence leaves no question that Limelight's customers acted principally for their own benefit and under their own control. While acknowledging the difficulty of proving infringement of claims that must be infringed by multiple parties, this court has noted that such concerns can usually be offset by proper claim drafting. A patentee can usually structure a claim to capture infringement by a single party. BMC Resources, 498 F.3d at 1381. Akamai recognizes and, indeed, asserts that the other two patents at issue in this case (the '645 and '413 patents), which share the same specification, do not implicate this joint infringement issue because of the way the asserted claims were drafted. Oral Arg. 10:35-11:10, available at http:// oralarguments.cafc.uscourts.gov. This court also observes that in addition to initially structuring a claim to capture infringement by a single party, patentees may be able to correct a claim that can only be infringed by multiple parties by seeking a reissue patent. See Mark A. Lemley et al., Divided Infringement Claims, 33 AIPLA Q.J. 255, 278-79 (2005). Here, the asserted claims were drafted so as to require the activities of both Limelight and its customers for a finding of infringement. Thus, Akamai put itself in a position of having to show that the allegedly infringing activities of Limelight's customers were attributable to Limelight. Akamai did not meet this burden because it did not show that Limelight's customers were acting as agents of or were contractually obligated to Limelight when performing the tagging and serving steps. Thus, the district court properly granted JMOL of noninfringement to Limelight.