U.S. court revives $45 million patent verdict against Limelight

By Andrew Chung

NEW YORK (Reuters) - Limelight Networks' is responsible for infringing rival Akamai Technologies (NASDAQ:AKAM) Inc's patent for managing Web images and video, a U.S. appeals court ruled on Thursday, reviving a $45 million verdict against the company.

Limelight shares slid, down more than 20 percent at one point, after the U.S. Court of Appeals for the Federal Circuit in the District of Columbia said its control over its customers' use of its services to deliver media content over the Internet means it is liable for violating the Akamai patent.

The decision by a full slate of 10 judges on the Federal Circuit, the top U.S. patent court, vacated the same court's previous decision from May.

In early afternoon, Limelight shares were down almost 19 percent at $2.66 at 1:24 p.m. EDT. Akamai was up slightly.

Limelight could not immediately be reached for comment. A spokesman for Akamai said in a statement that the company was pleased with the decision and hoped to be "sufficiently compensated for Limelight's infringement."

Technology companies have closely followed the case, which was on remand from the U.S. Supreme Court. It centers on whether a company can be said to infringe a patent when the final step leading to infringement is carried out by a third party.

The legal dispute dates to 2006, when Akamai accused Arizona-based Limelight of infringing on its patented technology for efficiently handling website content.

A jury in 2008 found in Akamai's favor but the judge threw out the verdict saying Limelight did not itself use all of Massachusetts-based Akamai's technology.

A divided Federal Circuit ruled for Akamai in 2012. Limelight petitioned the Supreme Court to hear the case, supported by companies such as Google Inc (NASDAQ:GOOGL) and Cisco Systems Inc (NASDAQ:CSCO), which said the ruling could lead to more infringement suits.

The high court overturned the decision last June, ruling that a defendant is not liable for inducing infringement when not a single party has directly infringed the patent.

In May, a Federal Circuit panel said Limelight did not infringe, and that if Limelight could be found jointly liable with its downstream users, innocent customers doing as little as swiping a debit card could be targeted by predatory patent suits.

The appeals court on Thursday voided that ruling and reinstated the jury verdict because the evidence showed that "Limelight directs or controls its customers' performance of each remaining method step, such that all steps of the method are attributable to Limelight."

The case is Akamai Technologies, Inc et al. v. Limelight Networks, Inc, in the U.S. Court of Appeals for the Federal Circuit, No. 2009-1372.