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Federal Circuit requires principal-agent relation or contractual obligation for joint infringement of method patent

December 30, 2010

To establish infringement of a method claim, a patent holder must show that all of the recited steps in the claim are performed by a defendant.  If the recited steps are not performed by a single entity, but by the defendant acting in concert with another party, the patent holder may still show “joint infringement” if the defendant controls or directs the activities of another party.  The joint infringement issue can be especially important in financial services method patents.

In Akamai Technologies v. Limelight Networks the Federal Circuit looked at what types of activities qualify as directing or controlling the activity of a another party.  The court opted for a bright-line rule that requires either a principal-agent relationship or a contractual obligation to perform the steps of the claim.

The patent in question relates to a method of delivering large amounts of Internet content without crashing or bogging down.  In particular, a hosting service hosts embedded objects (such as pictures, videos, graphics and the like) that are embedded in a website.  Therefore, a webpage owner might use the services of a hosting service to host the embedded objects within their webpage.  Most of the steps of the asserted patent claims are clearly performed by the hosting service.  However, one of the recited steps is to tag the embedded objects so that they direct a visitor’s browser to the hosting site to retrieve the embedded objects.  The tagging step is generally performed by the webpage owner.

In this case, the defendant Limelight Networks ran a hosting service.  It was undisputed that Limelight did not itself tag the embedded objects as required by the claims.  However, the patent holder alleged that Limelight was liable under the joint infringement theory because Limelight controlled and directed the tagging step.   Specifically, Limelight gave detailed instructions to the webpage owners on how to perform the tagging step and had a standard contract with the webpage owners that required the webpage owners to perform the tagging step if they wanted to utilize the hosting services.

The Federal Circuit first announced its bright-line rule that joint infringement only occurs when there is a principal-agent relationship or a contractual obligation to perform the steps.  In applying the rule, it stated that the test of a principal-agent relationship is whether “both parties . . . consent that the agent is acting on the principal’s behalf and subject to the principal’s control.”    The detailed instructions on how to use the services were not enough to create a principal-agent relationship.   Furthermore, the standard contract between Limelight and the webpage owners using its hosting services did not obligate the webpage owners to perform the tagging step.  The webpage owners needed to perform the tagging step if they wanted to use the hosting services for a particular embedded item, but they were not obligated to perform the step.  Therefore, the court found no joint infringement.

The important takeaway from this case for inventors is to try to draft claims that will be infringed by a single entity.  For example, in the Akamai case, rather than reciting the step of tagging an embedded object, the claim could have been drafted to include the step of receiving a request initiated by tagged embedded content.  For possible defendants, it may be worthwhile to investigate whether it is possible to outsource some of the steps of an otherwise patented process to a third party in a fashion that avoids joint infringement.

 

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