Intellectual Property News and Reports

Robert Mankes owns U.S. Patent No. 6,477,503, which describes and claims methods for managing a reservation system that divides inventory between a local server and a remote Internet server. In October 2013, Mr. Mankes sued Vivid Seats Ltd. and Fandango, LLC in the Eastern District of North Carolina, alleging that their operation of Internet-based reservation systems, in conjunction with the operation of local reservation systems by movie theaters and other entertainment venues, infringes the ’503 patent. Because it is undisputed that no one person performs all of the steps of the method claims, Mr. Mankes’s case depends on establishing what has been called “divided infringement.”

When Mr. Mankes filed his complaints, the law relating to divided infringement was in the midst of a multiyear process of active judicial reconsideration, including by this court sitting en banc and by the Supreme Court. This court had granted en banc review to address the standards for direct-infringement liability for divided infringement but, in its decision, had left existing directinfringement standards in place without reconsidering them, while providing an independent inducement basis for divided-infringement liability. Akamai Techs., Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012) (en banc) (Akamai II). By mid-2014, however, the Supreme Court had reversed Akamai II, held that dividedinfringement liability of the sort at issue here requires some person to be liable for direct infringement under 35 U.S.C. § 271(a), and remanded for possible reconsideration of direct-infringement standards by this court. Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct. 2111, 2120 (2014) (Limelight).

In early 2015, the district court in the present cases, applying the law on direct-infringement liability as it then stood, concluded that Mr. Mankes’s allegations are insufficient to establish direct infringement under § 271(a), and on that basis the court granted judgments on the pleadings for Vivid Seats and Fandango. When Vivid Seats thereafter sought attorney’s fees against Mr. Mankes under 35 U.S.C. § 285, the court denied the request, finding the case not to be exceptional, a prerequisite to a fee award under § 285. Mr. Mankes has appealed the merits judgments against him, and Vivid Seats has appealed the denial of fees.

During the briefing on the merits appeal here, the legal standards applied by the district court were first reinforced, then revised, by further decisions of this court in the Akamai-Limelight case. In Akamai Technologies, Inc. v. Limelight Networks, Inc., 786 F.3d 899 (Fed. Cir. 2015) (Akamai III), a panel of this court, on remand from the Supreme Court, rejected direct-infringement liability for Limelight—as had the initial panel in the case in 2010, Akamai Techs., Inc. v. Limelight Networks, Inc., 629 F.3d 1311, 1318–22 (Fed. Cir. 2010) (Akamai I), and the en banc court in 2012, Akamai II, 692 F.3d at 1307, 1318– 19. The Akamai III panel reasoned that Limelight did not direct or control its customers’ performance of claim steps, that its customers were not agents for Limelight, and that Limelight and its customers did not together constitute a joint enterprise (whose members can be charged with each other’s acts in the enterprise). 786 F.3d at 914–15.

Three months later, however, the en banc court vacated Akamai III and decided Akamai Technologies, Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (Akamai IV), cert. denied, 2016 WL 442440 (U.S. Apr. 18, 2016). The en banc court changed the result in the Akamai-Limelight case, now ruling against Limelight and for Akamai. Id. at 1025. The court did so by broadening the circumstances in which others’ acts may be attributed to an accused infringer to support directinfringement liability for divided infringement, relaxing the tighter constraints on such attribution reflected in our earlier precedents and in the three previous rulings for Limelight on direct infringement. See Aristocrat Techs. Austl. Pty Ltd. v. Int’l Game Tech., 709 F.3d 1348, 1362– 63 (Fed. Cir. 2013); Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329–30 (Fed. Cir. 2008); BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1380–82 (Fed. Cir. 2007). The en banc court concluded that attribution is proper in a joint-enterprise setting, and it also articulated a standard that permits liability “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.” Akamai IV, 797 F.3d at 1023. The court added: “In the future, other factual scenarios may arise which warrant attributing others’ performance of method steps to a single actor. Going forward, principles of attribution are to be considered in the context of the particular facts presented.” Id. And the court stated: “To the extent our prior cases formed the predicate for [Akamai III], those decisions are also overruled.” Id. at 1023 n.3.

We need not say how much broadening occurred in Akamai IV. In the present cases, the district court’s rulings and the arguments of Fandango and Vivid Seats to the district court were squarely based on the earlier, narrower standard. We vacate the judgments on the pleadings against Mr. Mankes and remand for further proceedings in light of Akamai IV.

We affirm the denial of attorney’s fees to Vivid Seats. Not only is Vivid Seats no longer a prevailing party (given our vacatur of the judgment in its favor), but we readily conclude that the district court did not abuse its discretion in deeming the case not to be exceptional even under the state of the law before Akamai IV. Mr. Mankes rested his case on reasonable arguments for adjustment of legal standards that this court had already granted en banc review to consider in Akamai II and that remained in play, as indicated by Akamai II’s postponing reconsideration of those standards, by Limelight’s remand, and, ultimately, by Akamai IV’s adoption of broadened standards. In these circumstances, the district court did not err in refusing to deem unreasonable Mr. Mankes’s pursuit of this case to date.

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