Ten New Supreme Court Opinions Reshaping The Intellectual-Property Landscape

Thirty years ago, the U.S. Supreme Court heard between 150 and 175 cases each year, but rarely accepted an intellectual-property case for review. Much has been written about the Court's shrinking docket in recent years—in its October Term 2013, which just came to an end, the Court heard argument in only 67 cases. Yet among those 67 were no fewer than 10 cases dealing with intellectual property—six patent cases, two copyright cases, and two Lanham Act cases. Each of these decisions is already reshaping the landscape of intellectual-property law.

In the patent area, the Supreme Court continued to narrow the scope of intellectual-property protection from that afforded by the Federal Circuit's decisions. In Alice Corp. v. CLS Bank Intl., the Court curtailed patent eligibility on certain computer-implemented methods.1 In Limelight Networks v. Akamai, the Court clarified that direct patent infringement by some individual or entity was a prerequisite to a finding of induced infringement. In Octane Fitness v. Icon Health & Fitness and Highmark v. Allcare, the Court made it easier for prevailing parties in patent litigation to obtain their attorneys' fees. In Nautilus v. Biosig Instruments, the Court relaxed the Federal Circuit's traditional standard for finding a patent claim to be indefinite (and thus invalid). And in Medtronic v. Mirowski Family Ventures LLC, the Court clarified that a patent owner bears the burden of proving infringement, even when the patent owner is made a defendant to a declaratory-judgment lawsuit.

The Supreme Court was also unusually active in the area of copyrights this past Term. In the widely publicized American Broadcasting Companies v. Aereo case, the Court held that Aereo's unusual antenna-based television subscription service violated the Copyright Act's Transmit Clause. And in Petrella v. MGM, a case alleging that the 1980 movie Raging Bull copied the plaintiff's 1969 screenplay, the Court concluded that the equitable doctrine of laches cannot be used to bar a claim for copyright infringement damages that is brought within the three-year limitations period of Section 507(b) of the Copyright Act.

Finally, the Court also decided two important Lanham Act cases in its recent Term. In Lexmark International v. Static Control Components, the Court held that Static Control had adequately pleaded the requirements of a Lanham Act false-advertising claim by alleging an injury to a commercial interest in sales or business reputation proximately caused by the defendant's misrepresentation. And in POM Wonderful v. Coca-Cola, the Court ruled that a competitor was entitled to sue under the Lanham Act for unfair competition by alleging false or misleading descriptions on product labeling, even where the labeling is regulated by the FDA.2

This set of 10 IP-related decisions demonstrates a few important principles. First, the fact that the patent decisions all narrowed the rights of intellectual property owners, while the copyright and Lanham Act cases each ruled in favor of the rights holders, suggests that the Court sees itself as needing especially to readjust the nation's patent-law precedents, which since 1982 have been under the exclusive purview of a special appellate court located in Washington, DC, the U.S. Court of Appeals for the Federal Circuit. In particular, the Court continues to relax the bright-line tests the Federal Circuit has crafted over the years as failing to properly apply the bounds of the patent statutes they were meant to fit. Second, and relatedly, the Court has opted to construe patent law narrowly by holding the Federal Circuit to the precise words used by Congress, but—as the Court's decision in Aereo reflects—the Court is willing to take a more policy-based approach to the interpretation of copyright law. And third, these cases demonstrate that intellectual-property law is only gaining importance to the American economic and legal landscapes

An understanding of these decisions—and the trends they represent—is crucial to doing business in any technology or intellectual-property-related sector. Here, we take a closer look at five of these important new decisions.

Limelight Networks, Inc. v. Akamai Technologies, Inc.

Under well-established principles of patent law, there can be no indirect infringement without direct infringement.3 The Federal Circuit stretched the bounds of this rule when it held that a party could be liable for inducing infringement of a method claim under 35 U.S.C. § 271(b) despite undisputed evidence that no single party was liable for direct infringement under 35 U.S.C. § 271(a).4 The Supreme Court reversed in a unanimous opinion that has important consequences for parties seeking to enforce patent claims that cover specific methods for doing something (as opposed to claims covering products).

Background. The patent at issue in Limelight claimed a method of delivering electronic data over a content delivery network ("CDN"). Massachusetts Institute of Technology, the assignee, and Akamai Technologies, Inc., the exclusive licensee (collectively "Akamai"), brought suit against Limelight Networks, Inc. claiming its CDN infringed. Limelight did not perform all of the steps claimed in the patent. Rather, its customers performed the step of designating content for storage.

After a jury verdict for Akamai, the Federal Circuit issued its decision in Muniauction, Inc. v. Thomson Corp.5 In Muniauction, the accused defendant performed some, but not all, of the steps claimed while customers performed the remainder. The Federal Circuit held that there was no liability because the customers were not under the defendant's control, and a single party—or entities under its control or direction—must perform every step of a claimed method to establish direct infringement. Applying the Muniauction principle to Limelight's current facts, a three-judge panel of the Federal Circuit held that Limelight did not directly infringe.

The Federal Circuit granted en banc review and reversed—not on the issue of direct infringement, but on induced infringement. The Court found Limelight liable for inducement even though no single party would have been liable for direct infringement under the same circumstances. The Court claimed this did not run afoul of established Supreme Court precedent because all that precedent requires for indirect infringement liability is proof that there has been direct infringement (i.e., that all of the steps claimed had been performed somewhere along the way, even if by diverse and unrelated actors), not that anyone is liable for that infringement.

The High Court's Reversal. The Supreme Court granted certiorari to review the narrow question of whether a defendant may be liable for inducing infringement of a patent under 271(b) when no one has directly infringed the patent under 271(a) or any other statutory provision. In a unanimous decision that took the Federal Circuit to task for its misinterpretation of precedent, the Court held that the answer is no.6

The Court's rationale was simple. Under the Federal Circuit's interpretation of 271(a) in Muniauction, it was undisputed that there had been no direct infringement of the...