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The U.S. Court of Appeals for the Federal Circuit has issued a precedent-setting ruling expanding the case law on when a defendant exercises enough control over a party that it can be found liable for jointly infringing a patent. The court held that there must be an agency relationship between the parties for the infringing acts of one to be attributed to the other. On Dec. 20, a unanimous panel issued a ruling in Akamai Technologies Inc. v. Limelight Networks Inc. that affirmed a judgment of noninfringement from April 2009. In the earlier ruling, the District of Massachusetts held that Limelight did not infringe claims in one patent “because Limelight did not perform all of the steps of the asserted method claims.” The Federal Circuit also affirmed the lower court’s judgment that Limelight did not infringe two other patents. Judge Richard Linn wrote the opinion, joined by Chief Judge Randall Rader and Judge Sharon Prost. Akamai and the Massachusetts Institute of Technology sued Limelight in June 2006 claiming infringement of three patents. The patents were issued to MIT and Akamai as the exclusive licensee. All three are related to a framework for a set of hosting servers used to store and deliver a Web site’s embedded objects — such as as links to images, video and sound. Following a trial on some of the claims of one patent, a jury awarded the Akamai plaintiffs $40.1 million in lost profits and $1.4 million in reasonable royalty damages. The district court later overturned the verdict on a judgment as a matter of law. According to the Federal Circuit ruling, Limelight provides information to its content-provider customers. The customers do the actual tagging and change their Web pages or Internet address routing information. In his opinion, Linn cited the Federal Circuit’s 2007 ruling in BMC Research Inc. v. Paymentech LP. In that case, the court explained that joint infringement requires that “one party exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party.” But that ruling “left several questions unanswered,” including whether giving instructions establishes enough of a link between the two parties “to attribute the actions of the instructed party to the accused.” The court’s next key ruling on the issue, Muniauction Inc. v. Thomson Corp. in 2008, held that the control or direction threshold is met when “the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party,” Linn wrote. What the court now finds essential, Linn wrote, is “whether the relationship between the parties is such that acts of one may be attributed to the other” — that is, when the accused infringer is the principal and the other party is its agent. Linn wrote that case law defines an agency relationship as one in which “both parties must consent that the agent is acting on the principal’s behalf and subject to the principal’s control.” “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,” Linn wrote. In the current case, he found that nothing indicates that Limelight’s customers are performing any of the patented steps as Limelight’s agents. Linn noted that the agreement between Limelight and its customers gives the customers “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,” Linn wrote. “Instead, the evidence leaves no question that Limelight’s customers acted principally for their own benefit and under their own control.” Linn also wrote that the patent claim drafting was an issue in the case. “Here, the asserted claims were drafted so as to require the activities of both Limelight and its customers for a finding of infringement,” Linn wrote. “Thus, Akamai put itself in a position of having to show that the allegedly infringing activities of Limelight’s customers were attributable to Limelight.” MIT’s lawyers at Boston’s Choate, Hall & Stewart declined to comment. MIT spokeswoman Jessica Holmes said the university has a policy of not commenting on litigation. In an e-mailed statement, Akamai spokeswoman Liz Bradley wrote: “[W[e are disappointed with the decision and are evaluating our options.” “Akamai has invested heavily in innovation over the past decade, and has a robust patent portfolio of over 100 patents,” Bradley added. “Despite this outcome, we believe Akamai has tremendously valuable intellectual property, and we remain resolved to vigorously defend it where appropriate.” Akamai’s lawyer, Donald Dunner, a partner at Washington’s Finnegan, Henderson, Farabow, Garrett & Dunner, declined to comment. Limelight’s lawyer, Alexander MacKinnon, a Los Angeles partner at Chicago’s Kirkland & Ellis, declined to comment before conferring with his client. In a press release, Limelight noted that the company has long maintained that it does not infringe the patent in question. In the release, Chairman and Chief Executive Officer Jeff Lunsford stated that “this ruling affirms that Limelight Networks respects the intellectual property of others, and that our growth and success have been achieved through the innovation of our founders and engineers.” The case is the first time the Federal Circuit has spelled out how far it will take the idea of agency, or what it means for the accused infringer to have control over another party that performs some steps of the patented technology, said Steven Moore, an intellectual property litigation partner in the Stamford, Conn., office of New York’s Kelley Drye & Warren. Moore isn’t involved in the case. “The Federal Circuit made it clear that the agent is someone you really have control over,” Moore said. “It’s clear that they’re not going to allow agency to mean I’m giving direction to a customer who may or may not take my direction.” Moore thinks the case will have an impact on similar litigation because patent holders will be “far more hesitant to assert claims where there are more than two actors.” When it comes to filing patents, this is “an issue that I harp on constantly,” Moore added. “When I see someone’s claims in a patent, it’s so critical that you have one actor,” Moore said. “These cases give you the absolute reason for not making that mistake.” The ruling closes loopholes in prior case law, said Harold Wegner, a patent partner in the Washington office of Foley & Lardner, who isn’t involved in the case. The two key prior rulings, BMC and Muniauction, were very short, Wegner said. Those rulings suggested that a mastermind could be deemed an infringer of a multistep patent even when it didn’t perform all the steps if exerted “control or direction” of the other parties, Wegner said. But the Akamai ruling explains “control or direction” in joint infringement cases must be in “the context of traditional agency law,” Wegner said. The court also recognized that, although it’s difficult to prove joint infringement, patent claims can be written so that a single actor would infringe, Wegner said. “In essence, the court faults those who have drafted claims where no single party performs all steps of a claimed combination as creating claims that cannot be infringed,” Wegner said. Sheri Qualters can be contacted at [email protected].

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