A federal jury in Boston ruled today that Limelight Networks of Tempe, AZ, infringed on a key MIT patent licensed to Akamai Technologies (NASDAQ: [[ticker:AKAM]]) of Cambridge, MA. Akamai also won a damage award totaling more than $45 million. But the verdict was not the huge win Akamai hoped it would be, as much of the company’s case against Limelight had been thrown out weeks earlier, and Akamai acknowledges it felt that the evidence called for an award of at least $100 million.
Nevertheless, Jeff Young, Akamai’s director of corporate communications told Xconomy this afternoon, “We’re extremely pleased with the jury’s verdict. We have an obligation to our shareholders to protect the unique assets of our technology. Today’s ruling recognizes the strength of our patent portfolio and is a tangible reflection of our resolve to vigorously defend the company’s intellectual property.”
Akamai and Limelight both operate global content distribution networks used by media companies and other Web publishers to speed delivery of video, music, software, games, and other rich media to end users. Both companies’ networks do this in part by caching copies of the most-requested content on networks of servers that, in effect, bring the content closer to end users and dilute traffic.
Akamai sued Limelight in the U.S. District Court of Massachusetts in Boston in June 2006, alleging that Limelight was infringing on two key patents covering various aspects of its content distribution network. The patents, U.S. patents 6,108,703, and 6,553,413, are owned by the Massachusetts Institute of Technology and licensed exclusively to Akamai. In a summary judgment in early February, the court ruled that Limelight was not infringing on patent 6,554,413. That narrowed the case to patent 6,108,703, which was issued in August 2000.
The patent describes a “global hosting system” that includes a method of copying content from a web server to a network of caching servers around the world and directing browsers to the cached content by “prepending” a modified URL for the caching server to the URL for the original file. The jury ruled that Limelight is infringing on this “prepend” method and another so-called “CNAME” method claimed in the patent.
The essence of the jury’s thinking is captured in a seven-page form signed and presumably also filled out by foreperson James Ranieri. On the form, “X” marks indicate that the jury decided that Limelight infringed on four claims involving the prepend and CNAME methods and rejected all of Limelight’s claims that the patent was invalid. The form also includes hand-written notes detailing damages to be awarded to Akamai. These include $40,102,000 to compensate for profits lost as a result of Limelight’s infringement, to which the jury affixed a royalty of $1,424,946, and a further $4 million in price erosion damages suffered by Akamai—accounting for the total award of $45,526,946. You can see the Akamai verdict form here.
Akamai had hoped for a much larger damage award, according to Young. “I can’t really comment on the specific amount, but we believe the evidence showed at least a nine-figure damage number,” he said. The company said it will return to court to seek a permanent injunction prohibiting Limelight from selling services that infringe on the ‘703 patent. “We anticipate that there will be a series of post-trial motions before the court,” Young said.
For its part, Limelight issued the following statement from Phil Maynard, the company’s chief legal counsel: “We are disappointed with the jury’s verdict in this matter. We strongly believe that, like other companies that follow long-established Internet standards, we do not infringe the patent in this case. We will continue to remain a competitive choice in the marketplace as we pursue all appropriate legal avenues.”
Akamai has pursued perceived patent infringers aggressively in the courts. In fact, this is the second (by some counts the third) time the company has successfully asserted the ‘703 patent against a competitor. The first suit came shortly after the patent was issued and was brought against Digital Island, a content distribution company later bought by Cable & Wireless. In 2002 Akamai won a permanent injunction forcing Exodus, the Cable & Wireless business unit to which Digital Island belonged, to stop using its Footprint content distribution service.
Also in 2002, Akamai sued Speedera Networks of Santa Clara, CA, again alleging infringement of the ‘703 patent. A drawn-out legal battle finally ended in 2005 when Akamai bought Speedera.
(Here’s another link to the Akamai-Limelight case’s filled-in jury verdict form.)
