IP Law Daily, TOP STORY—Fed. Cir.: Limelight loses final attempt to avoid reinstated $45 million patent infringement verdict, (Nov 16, 2015)

By Cheryl Beise, J.D.

The U.S. Court of Appeals for the Federal Circuit has rejected Limelight Network’s final attempt to overturn a $45 million verdict in favor of Akamai Technologies, which the en banc court reinstated in August following remand from the U.S. Supreme Court (Akamai Technologies, Inc. v. Limelight Networks, Inc., November 16, 2015, Linn, R.). The court was not persuaded by Limelight’s arguments that the district court erred in construing two disputed terms or in allowing the jury to hear Akamai’s theory of lost profits damages.

Litigation History

In 2006, Akamai Technologies, Inc. and the Massachusetts Institute of Technology (together, “Akamai”) sued Limelight Networks, Inc. (“Limelight”) in the federal district court in Boston, asserting infringement of claims 19–21 and 34 of U.S. Patent No. 6,108,703 (the ’703 patent), along with certain claims of U.S. Patent Nos. 6,553,413 (the ’413 patent”) and 7,103,645 (the ’645 patent). Akamai stipulated that it could not prove infringement of the ’645 patent under the district court’s claim construction. The district court thus entered judgment of non-infringement. The district court subsequently entered summary judgment of non- infringement of the asserted claims of the ’413 patent. The district court’s rulings regarding the ’413 and ’645 patents were affirmed, vacated, and later reinstated by the Federal Circuit.

Akamai’s claim that Limelight infringed the ’703 patent proceeded to a jury trial. The jury found that Akamai’s the ’703 patent was not invalid and was directly infringed by Limelight. The jury awarded Akamai approximately $40 million in lost profits, $1.4 million in reasonable royalty damages, and $4 million in price erosion damages. The district court, however, granted Limelight’s motion for judgment as a matter of law (“JMOL”), concluding that Limelight could not be liable for direct infringement of the ’703 patent because it did not perform or direct the performance of all of the steps required. Akamai appealed the district court’s rulings regarding all three patents-in-suit and Limelight cross-appealed.

A panel of the Federal Circuit affirmed the district court’s decision, but in August 2012, the en banc court vacated the panel decision and reversed the district court. On June 2, 2014, a unanimous Supreme Court reversed the Federal Circuit’s en banc decision. The Supreme Court held that a defendant cannot be liable for inducing infringement under §271(b) when no one is liable for direct infringement under §271(a), or any other provision of the patent laws.

Following remand from the Supreme Court, a divided Federal Circuit panel on May 13, 2015, held that Limelight was not liable for direct infringement because it neither performed nor directed its customers to perform all of the method steps of the ’703 patent. On August 13, 2015, the en banc court vacated its May 13 decision, reinstated the jury’s infringement verdict, and set forth the law of divided infringement under 35 U.S.C. §271(a). The case was then returned to the three-judge panel to resolve the residual issues in the case.

Current Appeal

In today’s opinion, the panel addressed three issues remaining from Limelight’s cross appeal: (1) whether the district court erred in construing the claim term “tagging”; (2) whether the district court erred in construing the claim term “optimal,” and properly instructed the jury on the construction; and (3) whether the district court erred in allowing Akamai to present a lost profits theory based on the testimony of its expert.

The parties previously stipulated to a construction of the term “tagging” in claims 17, 19, and 34 of the ’703 patent as “providing a ‘pointer’ or ‘hook’ so that the object resolves to a domain other than the content provider domain.” The parties also stipulated that “to resolve to a domain other than the content provider domain” should be construed as “to specify a particular group of computers that does not include the content provider from which an optimal server is to be selected.”

“Tagging.” The meaning of the term “tagging” was not disputed until Limelight requested a jury instruction explaining that tagging could only be accomplished by “either prepending or inserting a virtual server hostname into the URL,” and filed Rule 50 motions for judgment of noninfringement. The district court denied the requested jury instruction and the Rule 50 motions.

On appeal, Limelight argued that: (1) in the context of the ’703 patent, “tagging” is necessarily limited to using a “pointer” or “hook” that either prepends or inserts a virtual server hostname into the URL because the ’703 patent discloses no other way to “tag” to achieve the goals of the invention; and (2) that “alphanumeric string” as used in the ’645 patent is the product of tagging in the ’703 patent, which necessarily meant that the ’703 patent incorporated the same limitations as the ’645 patent.

The Federal Circuit declined to import a “prepending” limitation into the claims. A claim term is only given a special definition different from the term’s plain and ordinary meaning if the patentee clearly sets forth a definition of the disputed claim term, the court explained. Although Figure 4 of the ’703 patent described “prepend[ing a] virtual server host name,” the patent likewise described Figure 4 as showing the “preferred” method. The patent’s reference to preferred embodiments did not provide the clarity necessary to find that the patentees intended to limit the term tagging to the preferred embodiment. The prosecution history cited by Limelight similarly failed to provide the necessary clarity to limit “tagging” to the preferred embodiment. Even if a patent describes only a single embodiment, claims will not be read restrictively unless the patentee has demonstrated a clear intention to limit the claim scope, the court said. In this case, Limelight stipulated to a construction of “tagging,” and it was bound by that stipulation.

“Optimal server.” The parties’ second dispute was whether the term “an optimal server” was necessarily limited to a single “best” server, or could refer to several potentially optimal servers from which content is retrieved. The phrase “optimal server” did not appear in the patent, but was included within the parties’ stipulated claim constructions.

Limelight argued that: (1) the unambiguous meaning of “optimal” was necessarily restricted to a single aggregate “best” server; (2) the court’s ambiguous construction improperly left a claim construction issue for the jury; and (3) Akamai was judicially estopped from arguing that “optimal” did not require a single “best” server by prior statements.

The court was not persuaded by Limelight’s arguments. First, Limelight failed to appreciate the context of the selection of “an optimal server” in the claim. The selection of “an optimal server” described the functionality enabled by the necessary “tagging.” The ’703 patent was replete with examples in which conditions or circumstances independent of the tag influence which server ultimately served embedded object, the court noted. The court found that nothing in the patent limited the functionality of the tag to selecting an “aggregate best.”

Limelight’s argument that the “unambiguous” meaning of “optimal” was a single “best” was also unconvincing. The intrinsic evidence supported the district court’s construction. The district court also did not improperly leave a claim construction issue for the jury. The district court construed “optimal server” during the Markman hearing and elaborated during jury instructions that “an optimal server” was: “one or more content servers that are better than other possible choices considering” specific criteria.

Finally, Akamai’s use of the terms “optimal” and “best” in the prior litigation did not estop Akamai from arguing that “optimal” allows for serving from other than a single composite best server because the point at issue in the discussions cited was distinct from the issue here. The question of whether tagging enabled serving from only a single “optimal server” or from a server which performed better than others within a particular criteria was never addressed in the prior litigation.

Lost profits damages. Limelight argued the district court committed legal error in allowing lost profits as a measure of damages because Akamai failed to show a causal connection between Limelight’s infringement and Akamai’s lost profits. The Federal Circuit disagreed.

To prove damages, Akamai relied heavily on the testimony of its expert, Dr. Keith Ugone’s calculation of Akamai’s lost-profits. Ugone testified that in 2005 Akamai had a market share of 79.8 percent and Limelight had a market share of 5 percent. After Limelight released its infringing service in April 2005, in 2006 Akamai’s market share declined to 74.7 percent and Limelight’s rose to 10.7 percent. Ugone considered the elasticity of the market for content delivery network services, the degree of competition between Akamai and Limelight, and the price disparity between Akamai’s more expensive and Limelight’s less expensive products. Ultimately, Ugone concluded that, but-for Limelight’s infringement, Akamai would have collected about $74 million. The court saw no error in the district court’s decision to allow Ugone’s adjusted lost-profits analysis.

Limelight appeared to contend that the price disparity between Akamai’s and Limelight’s prices necessarily created separate market segmentation. However, Ugone’s 25 percent adjustment for market elasticity was sufficiently grounded in economic principles for the district court to allow it. Akamai presented evidence that Akamai and Limelight were direct competitors and the two clear leaders in the field. Ugone explained that the market was relatively inelastic, and set forth a number of reasons for his opinion.

Finally, in its supplemental briefing, Limelight for the first time challenged the evidentiary basis for the amount of the jury’s award, as distinct from the legal challenge to the availability of lost profits. The court did not consider this argument, but said that even if it had, it would have found it unconvincing.

Conclusion. Concluding that the district court did not err in its claim constructions, related jury instructions, or in allowing Akamai’s expert’s lost profits damages testimony, the Federal Circuit reversed the district court’s grant of JMOL of non-infringement and remanded the case with instructions to reinstate the jury’s original verdict and damages award. The Federal Circuit also confirmed its previously reinstated affirmance of the district court’s judgment of noninfringement of the ’413 and ’645 patents.

The case is Nos. 2009-1372, 2009-1380, 2009-1416, and 2009-1417.

Attorneys: Seth P. Waxman (Wilmer Cutler Pickering Hale and Dorr LLP) for Akamai Technologies, Inc., and the Massachusetts Institute of Technology. Aaron M. Panner (Law Office of Aaron M. Panner, P.L.L.C.) for Limelight Networks, Inc.

Companies: Akamai Technologies, Inc.; the Massachusetts Institute of Technology; Limelight Networks, Inc.

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