TARANTO, Circuit Judge.
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 multi-year 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 direct-infringement 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 divided-infringement 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., ___ U.S. ___, 134 S.Ct. 2111, 2120, 189 L.Ed.2d 52 (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
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, ___ U.S. ___, 136 S.Ct. 1661, ___ L.Ed.2d ___, 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 direct-infringement 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
The '503 patent, entitled "Active Reservation System," recognizes that, to serve a national market, vendors have begun selling their goods and services both through the Internet and at their physical locations. '503 patent, col. 1, lines 31-37.
The specification describes means of controlling the entire inventory from a local site. The local site maintains the total inventory of available goods and services and designates pricing. Id., col. 3, lines 24-27. It communicates what portion of the inventory is available to an Internet server, which makes that inventory accessible for purchase by consumers online. Id., col. 3, lines 27-32. When a sale is requested over the Internet, the Internet site contacts the local site, which confirms the sale and updates the total inventory. Id., col. 3, lines 32-38. The adjusted inventory is then transmitted to the Internet site, along with a confirmation of the sale, which is forwarded to the consumer. Id., col. 3, lines 38-42. In this way, any time a sale is made, whether at the local or Internet site, the local site can keep an up-to-date account of its total inventory and communicate that information to both sites. Id., col. 3, lines 16-19.
Claim 1 is illustrative, stating:
Id., col. 8, lines 33-67.
In these cases, filed in October 2013, Mr. Mankes has alleged that Vivid Seats and Fandango infringe the '503 patent by operating Internet-based reservation systems for reserving, buying, and selling tickets to movies, sporting events, and concerts. He has admitted that Vivid Seats and Fandango do not themselves perform every step of the claims. He has urged a finding of divided infringement, however, on the asserted ground that local entertainment venues perform the remaining steps.
When these suits began, divided-infringement law was in flux, as reflected in the developments in the case brought by Akamai against Limelight. In 2010, a panel of this court had held that Limelight could not be held liable for direct infringement, applying Muniauction and BMC. Akamai I, 629 F.3d at 1318-22. But in 2011, this court granted en banc review. Akamai Techs., Inc. v. Limelight Networks, Inc., 419 Fed.Appx. 989 (Fed.Cir. 2011). In the 2012 en banc decision, Akamai II, the court left the rejection of direct infringement in place without revisiting existing standards, 692 F.3d at 1307, 1318-19, but held that inducement under § 271(b) might be established even if no person could be held liable for direct infringement, id. at 1308-18. That was the state of the law in 2013 when Mr. Mankes brought these suits. See Aristocrat, 709 F.3d at 1361-64. The Supreme Court, however, had already invited the Solicitor General to express the views of the United States on Limelight's certiorari petition seeking review of Akamai II. See Limelight Networks, Inc. v. Akamai Techs., Inc., ___ U.S. ___, 133 S.Ct. 2879, 186 L.Ed.2d 906 (2013).
When the Supreme Court granted certiorari, Limelight Networks, Inc. v. Akamai Techs., Inc., ___ U.S. ___, 134 S.Ct. 895, 187 L.Ed.2d 701 (2014), the parties in the present cases, recognizing that the Court might alter the legal landscape, asked the district court for a stay of proceedings, and the court obliged. Then, in June 2014, the Supreme Court decided Limelight, eliminating the independent inducement option and remanding with the observation that "the Federal Circuit will have the opportunity to revisit the § 271(a) question if it so chooses." Limelight, 134 S.Ct. at 2120. After that decision, the district court in the present cases put off deciding whether to lift the stays until this court, on remand from the Supreme Court in the Akamai-Limelight case, decided whether once again to hear the matter en banc (a process necessary to change preexisting direct-infringement law) or to refer
Vivid Seats and Fandango moved for judgment on the pleadings, arguing that they could not be liable for direct infringement because, based on the prevailing standard, Mr. Mankes had not alleged enough to attribute the ticket sellers' actions to them. In his responses, Mr. Mankes noted the various changes in the state of the law, and he continued to argue for changing the law on divided infringement. In February 2015, in two materially similar opinions, the district court granted the defendants' motions — addressing the merits of both direct infringement and inducement. The court relied on the prevailing divided-infringement law and found that Mr. Mankes had not "allege[d] facts permitting the inference that defendant[s] direct[ ] or control[ ] the theaters in their actions." 15-1500 J.A. 8, 18. The court entered final judgment for Vivid Seats and, after Fandango dismissed its counterclaims without prejudice, entered final judgment for Fandango.
After the district court granted judgment on the pleadings, Vivid Seats filed a motion requesting attorney's fees under 35 U.S.C. § 285. On June 30, 2015, the district court, considering all of the circumstances, found the case not exceptional and therefore denied Vivid Seats' motion.
Meanwhile, on May 13, 2015, before Mr. Mankes filed his opening brief in his (consolidated) appeals from the merits judgments, a panel of this court decided Akamai III, applying a divided-infringement standard sufficiently limiting that, as in Akamai I and Akamai II, the court held Limelight to be entitled to judgment of no direct infringement as a matter of law. Akamai III, 786 F.3d at 899-915. In August 2015, however, before briefing was completed, the en banc court vacated that opinion, see Akamai Techs., Inc. v. Limelight Networks, Inc., 612 Fed.Appx. 617 (Fed.Cir.2015), and decided the case anew in Akamai IV. In that decision, the court ruled against Limelight, reversing the district court judgment in its favor and holding it liable for direct infringement based on the articulation of the broadened liability standards quoted above. 797 F.3d at 1022-23. Those standards now apply on this appeal. See Thorpe v. Hous. Auth. of City of Durham, 393 U.S. 268, 282, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969).
We have jurisdiction to review the merits and fees judgments under 28 U.S.C. § 1295(a)(1).
We review the district court's judgments on the pleadings de novo. buySAFE, Inc. v. Google, Inc., 765 F.3d 1350, 1352 (Fed.Cir.2014); Drager v. PLIVA USA, Inc., 741 F.3d 470, 474 (4th Cir. 2014). The district court here concluded that Mr. Mankes's operative complaints (amended complaints filed in February and March of 2014) do not plead facts sufficient to support liability for divided infringement. But the district court reached that conclusion based on legal standards that are now too narrow in light of the intervening decision in Akamai IV, which sufficiently broadened the standard governing direct-infringement liability for divided infringement that a three-time loss on the issue for Akamai (in Akamai I, II, and III) turned into a win. We conclude that
We first reject Vivid Seats' argument (not joined by Fandango) that Mr. Mankes waived a claim of direct infringement. The district court did not find any such waiver; it did not even discuss waiver. The court addressed direct infringement on the merits. We see no error in its having done so.
A sufficient reason, reflected in the district court's silence about waiver, is that Vivid Seats did not expressly argue waiver to the district court. In opposing Vivid Seats' motion for judgment on the pleadings in November 2014, after the June 2014 Limelight decision, Mr. Mankes relied on direct infringement — despite having told Vivid Seats by email in March 2014, before Limelight rejected the independent inducement theory of Akamai II, that he was not pressing direct infringement in his amended complaint, 15-1500 J.A. 125-26. But Vivid Seats responded to Mr. Mankes's shift in emphasis to direct infringement only by stating that it was "surprising"; Vivid Seats did not argue that Mr. Mankes must be held to have waived a direct-infringement claim. Reply Br. in Support of Def. Vivid Seats Ltd.'s Mot. for Judgment on the Pleadings at 1, Mankes v. Vivid Seats Ltd., No. 5:13-cv-00717 (E.D.N.C. Dec. 11, 2014), ECF No. 40. Without a waiver argument having been directly made by Vivid Seats, we cannot fault the district court for deciding the merits of the direct-infringement contention rather than considering it waived.
Vivid Seats' waiver argument amounts to a new argument on appeal, but it makes no showing of the plain error or miscarriage of justice required to justify reversal based on a new argument. See Karpel v. Inova Health Sys. Servs., 134 F.3d 1222, 1227 (4th Cir.1998). Indeed, it makes no persuasive showing of error at all. Mr. Mankes's February 2014 amended complaint is not by its terms limited to indirect infringement, and Vivid Seats cites no authority treating such a complaint as not encompassing direct infringement. (The amended complaint against Fandango is similar, yet Fandango does not argue that it excludes a direct-infringement contention.) Vivid Seats points to the March 2014 email statement by Mr. Mankes's counsel, but it cites no authority requiring treatment of that email as a forfeiture, at least when, several months later, the Supreme Court in Limelight altered the law by eliminating the independent inducement principle of Akamai II. And Vivid Seats has identified no way in which it was prejudiced by the district court's considering direct infringement to be in the case, especially in light of the liberal availability of the opportunity to amend pleadings so early in the case. See Laber v. Harvey, 438 F.3d 404, 426-27 (4th Cir.2006) (en banc). In these circumstances, we find no basis for deeming Mr. Mankes to have waived his direct-infringement contention against Vivid Seats.
On the merits, we conclude that Mr. Mankes's cases warrant reinstatement and a remand for further proceedings in light of the broadened divided-infringement standard articulated by the en banc court in Akamai IV. Mr. Mankes has alleged that each step of claim 1 is performed by some entity. Some steps, i.e., (b), (e)-(g), (j), involve operating an online system for selling tickets and communicating
Although Mr. Mankes noted at oral argument that his claim could not survive under the direct-infringement standards pre-dating Akamai IV (as Akamai's direct-infringement claim did not survive under those standards), 15-1500 Oral Arg. at 1:16-2:02, those are no longer the governing standards. Under Akamai IV, the district court's analysis is now insufficient to support rejection of direct-infringement liability here. This court in Akamai IV articulated circumstances warranting attribution not previously enumerated in such terms, and it changed an Akamai loss into a Limelight loss on direct infringement on that basis. 797 F.3d at 1023 ("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 also is explicit that "other factual scenarios may arise which warrant attributing others' performance of method steps to a single actor," to be assessed "in the context of the particular facts presented." Id. In at least those ways, Akamai IV makes clear that it does not suffice to reject direct-infringement liability here to conclude that local venues are not agents of the defendants and are not required by the defendants to take the claim steps that they perform.
When the governing legal standards have changed during an appeal, it may be appropriate, in the exercise of our authority under 28 U.S.C. § 2106, to vacate a determination made under superseded standards and to remand for consideration under the new standards and for any proceedings made necessary and appropriate by the new standards. See, e.g., Patterson v. Alabama, 294 U.S. 600, 607, 55 S.Ct. 575, 79 L.Ed. 1082 (1935) ("We may recognize [an intervening legal] change, which may affect the result, by setting aside the judgment and remanding the case so that the ... court may be free to act."); Oplus Techs., Ltd. v. Vizio, Inc., 782 F.3d 1371, 1374-75 (Fed.Cir.2015) (vacating and remanding attorney's fees case in light of Supreme Court decision changing the legal standard); Meadaa v. K.A.P. Enters., L.L.C., 756 F.3d 875, 885 (5th Cir.2014); GDG Acquisitions, LLC v. Gov't of Belize, 749 F.3d 1024, 1029 (11th Cir.2014); McCravy v. Metro. Life Ins. Co., 690 F.3d 176, 180-82 (4th Cir.2012). In the present case, such a disposition is appropriate.
We do not think it appropriate to rule out at this stage any particular theory of direct infringement, including the joint-enterprise theory and the possibility of other bases of attribution recognized in Akamai IV. Nor do we prescribe the course of proceedings required on remand beyond ruling that, given the early stage of this litigation, Mr. Mankes must at least have the chance to amend his complaints, if he believes such amendment might be useful or the district court determines it is necessary, based on this court's new articulation of divided-infringement standards. See Laber, 438 F.3d at 426.
We affirm the denial of Vivid Seats' motion for attorney's fees. We review
In any event, independently of whether legal standards undergo further changes or whether Mr. Mankes eventually loses, we think it clear and worth ruling that the district court committed no error in rejecting an exceptional-case contention even under the law before Akamai IV. As the Supreme Court has explained, an "exceptional" case is "one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated." Octane Fitness, LLC v. ICON Health & Fitness, Inc., ___ U.S. ___, 134 S.Ct. 1749, 1756, 188 L.Ed.2d 816 (2014). Here, the district court could readily view Mr. Mankes as having reasonably, openly, and in good faith pressed arguments for plausibly result-altering changes in governing legal standards that were demonstrably under active judicial reconsideration in this court and the Supreme Court at the time. While Mr. Mankes's case was pending before the district court, the law on divided infringement remained uncertain, with both our court and the Supreme Court weighing in on possible changes, and Mr. Mankes's litigation conduct appropriately reflected that shifting legal landscape. Without addressing other situations, we conclude that, in these circumstances, the district court properly determined that this case, to date, has not been exceptional in a way that would justify an award of fees against Mr. Mankes.
For the foregoing reasons, we vacate the district court's judgments dismissing the cases and remand for further proceedings, and we affirm the denial of Vivid Seats' motion for attorney's fees.
No costs.