Plenty of internet companies choose to avoid patent battles, as the drawn-out lawsuits and counter-suits can quickly devolve into what some in the industry call “mutually assured destruction,” with the only winner being the lawyers. But the business of content delivery networks is not one of those industries that shies away from patent fights. One of the most well-known cases is Akamai (NSDQ: AKAM) Technologies vs. Limelight Networks (NSDQ: LLNW). Akamai sued its competitor Limelight for patent infringement back in 2006. Yesterday, an appeals court shot down Akamai’s patent claims, likely for good.
The U.S. Court of Appeals for the Federal Circuit, which handles all U.S. patent appeals, said that a Massachusetts district court judge was right when he ruled that Limelight didn’t infringe three patents that Akamai had used against it. The district court judge’s 2008 ruling threw out a jury verdict that would have given Akamai $45.5 million, not to mention a chance at shutting down Limelight’s operations.
The district court judge ruled-and the appellate court agreed-that Limelight didn’t infringe the relevant patent claims on its own, and that was important in this case. Most of the steps of Akamai’s patented system were allegedly carried out by Limelight, but some other actions covered in the patent were performed by Limelight customers. Akamai argued a theory of “joint infringement,” saying that Limelight was directing what its customers did, but the three-judge appeals panel didn’t accept that argument.
“We are disappointed in the decision and are evaluating our options,” an Akamai spokesman said, noting that the company has a “robust portfolio” of more than 100 patents. “Despite this outcome, we believe Akamai has tremendously valuable intellectual property, and we remain resolved to vigorously defend it where appropriate.”
For this lawsuit, Akamai’s options are pretty limited: the company can ask for the full appeals court to re-hear the case, or appeal to the Supreme Court. Either route would be a major longshot.
Limelight has a right to crow about its victory-this is Limelight’s second big patent defense win. In 2009, the company was sued by competitor Level 3 Communications, but was vindicated when a Virginia jury found it didn’t infringe any patents.
Akamai, meanwhile, continues to try to hamper its competitors with patent lawsuits. In November, it sued smaller competitor Cotendo over three patents (not the same ones used against Limelight.) That suit is pending in Massachusetts.
Both of Akamai’s lawsuits were filed in partnership with the Massachusetts Institute of Technology, where Akamai developed its technology. The fact that MIT was a co-plaintiff in the case indicates the school would have benefited financially from a win. Having MIT as a partner also undoubtedly gave Akamai a big advantage during the 2008 jury trial, since Arizona-based Limelight had to defend itself in front of a Boston jury, which knew that a win for Akamai would also be a victory for a well-respected local university.
» Read Akamai Technologies v. Limelight Networks Appeal Ruling [PDF]