Pointers: Supreme Demolition

Tangible IP, LLC
Supreme Demolition
In two unanimous rulings, Limelight Networks v. Akamai Tech. and Nautilus v. BioSig, the US Supreme Court weighed against patent owners by further narrowing the scope of induced infringement and making it easier to invalidate patents. The decisions, overturning Court of Appeals for the Federal Circuit (CAFC) precedents, come only a month after the Supreme Court lowered the patent fee shifting standard and made it easier for defendants to get attorneys fees. Clearly, the current SCOTUS is on a trajectory that weakens the position of patent holders, with the finale possibly arriving with the forthcoming CLS Bank v. Alice Corp. decision that may impact the patentability of software.
In Limelight, the Court rejected the expanded inducement doctrine established by the CAFC, ruling that inducement liability can only arise if there is direct infringement. The issue of inducement pertains to divided infringement, when the actions of multiple parties combine to constitute infringement and no single party infringes the entire claim. The highest tribunal appears to agree with the policy basis for the CAFC’s expanded infringement doctrine, noting that potential infringers can evade liability by simply dividing steps that map to the patent claims. However, rather than expand inducement liability in divided infringement, the Court suggests that the CAFC reconsider its strict interpretation of single-actor rule; to possibly align it with the traditional respondeat superior doctrine, where an agency relationship between multiple parties may render them liable for divided infringement
Citing the rise in costly litigation resulting from the CAFC inducement doctrine, parties from Google, Oracle, Cisco, SAP and the US Department of Justice, submitted amicus briefs supporting Limelight position to narrow divided infringement liability. Although some news outlets have tied divided infringement to patent trolls, in light of troll demand letters and lawsuits involving end-users, there has been no assessment of whether patent trolls have extensively relied on the CAFC’s inducement doctrine in asserting patents.
In Nautilus, the Supreme Court rejected the “insolubly ambiguous” standard established by the CAFC to determine the level of definiteness in patent claims needed to meet patent law’s public notice function requirement. The Court determined that the CAFC standard diminishes the definiteness requirement, thereby introducing uncertainty into the patent system and giving patentees incentive to file ambiguous claims. The decision has potentially far reaching implications on new patent filings, as well as existing patents scrutinized in patent challenge proceedings. The Nautilus decision, supported by firms like Amazon and Google, will undoubtedly encourage more patent defendants and competitors to challenge patents at the filing stage and at the time of litigation.
Patent owners would be advised to measure the impact of the Limelight and Nautilus decisions on the strength of their assets, and consequence effect on their patent strategies. The decisions affect the ability of patent holders to assert, file for and defend their assets, touching on the very issues of rampant litigation and low quality patents that legislative reform proponents have addressed. The Supreme Court may not deliver the kind of sweeping reform that Congress has debated, yet its multiple recent decisions have already significantly altered the patent marketplace, probably as much as any proposed legislation, by going to the very heart of patent validity and infringement paradigms rather than focusing on curbing procedural abuse.
Louis Carbonneau
Founder & CEO

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