Centillion Data v. Qwest Communications: Getting Around Joint Infringement Problems

By Jason Rantanen

Centillion Data Systems, LLC v. Qwest Communications International, Inc. (Fed. Cir. 2011)
Panel: Lourie, Linn, Moore (author)

Joint patent infringement remains a hot topic as the Federal Circuit continues to tinker with the doctrine.  Centillion Data v Qwest adds a new twist, allowing joint infringement issues to be avoided altogether when dealing with system claims if a customer "puts the system as a whole into service, i.e., controls the system and obtains benefit from it" – even if the customer does not physically possess or own elements of the system.

Background
Centillion Data Systems sued Qwest for infringement of Patent No. 5,287,270, which relates to a system for collecting, processing, and delivering information from a service provider to a customer.  As described by the CAFC, claim 1 requires:

“a system for presenting information . . . to a user . . . com-
prising:” 1) storage means for storing transaction records, 2) data processing means for generating summary reports as specified by a user from the transaction records, 3) transferring means for transferring the transaction records and summary reports to a user, and 4) personal computer data processing means adapted to perform additional processing on the transaction records.

Slip Op. at 2-3.  Centillion conceded that the claim concludes both components maintained by the service provider (elements 1-3) and an element maintained by an end user (element 4), but contended that Qwest's billing systems (which contain two parts: the "back office" systems and front-end client applications) nevertheless infringe the '270 patent. 

On Qwest's motion, the trial court granted summary judgment of noninfringement, concluding that under BMC Resources Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007) and Cross Medical Products v. Medtronic Sofamor Danek, Inc. 424 F.3d 1293 (Fed. Cir. 2005), Qwest could not be liable for infringement because it did not "use" every element of the claim, nor did it direct or control the fourth element.  The trial court also held that Qwest's customers did not "use" the system, nor did they direct or control elements 1-3.

Meaning of "use"
On appeal, the CAFC focused on the meaning of the word "use" in the context of a system claim, concluding that under NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005), Qwest's customers "use" the system as required under 271(a).  In reaching its conclusion, the court drew upon its definition of the term in NTP.  Based on that prior definition, the CAFC held that "to 'use' a system for purposes of infringement, a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it."  Slip Op. at 8.  While the district court correctly recognized that this was the proper definition to apply, it erred "by holding that in order to 'use' a system under § 271(a), a party must exercise physical or direct control over each individual element of the system. The 'control' contemplated in NTP is the ability to place the system as a whole into service." Id.

Applying this rule, the CAFC concluded that although Qwest itself does not "use" the system, its customers do.  Those customers put the system into operation by initiating a demand for the service that causes the back-end system to generate the requested reports.  "This is 'use' because, but for the customer's actions, the entire system would never have been put into service."  Id. at 11. On the other hand, Qwest does not "use" the system because it never "puts into service the personal computer data processing means.  Supplying the software for the customer to use is not the same as using the system."  Id. at 13.

Comment: Dennis predicted this outcome a year ago.

Whither BMC?
While both the district court and Qwest relied heavily on BMC and Cross Medical, any substantive discussion of those cases, or joint infringement theory more generally, is conspicuously absent from the CAFC's ruling concerning Qwest's customers.  Rather, underlying the court's analysis is the conclusion that BMC and Cross Medical are irrelevant to primary issue before the court: the meaning of the term "use" in 271(a).  This court thus relegates BMC and Cross to the limited context of vicarious liability analyses.  "The customer is a single “user” of the system and because there is a single user, there is no need for the vicarious liability analysis from BMC or Cross Medical."  Slip. Op. at 10.  Of course, the court's ruling is limited to system claims; method claims (the type of claims at issue in BMC) might produce a different result.

Other holdings:
The CAFC addressed two other issues in its opinion, first concluding that Qwest does not "make" the infringing system because it does not provide the "personal computer data processing means" or install the client software, and then ruling that summary judgment of no anticipation was improper due to the existence of disputed issues of fact.

33 thoughts on “Centillion Data v. Qwest Communications: Getting Around Joint Infringement Problems

  1. I still wish there was an “ignore” feature so I could block out the daily flaming and frivolity and just skip straight to Sarah’s posts.

  2. Ugh!

    Dennis–please go back to the far more professionally-appropriate, easier-to-utilize, familiar comments format.

    Now PatentlyO looks like all those many 1,000′s of junk blog sites out there; and definitely degrades your otherwise superb site/blog.

  3. If weza goin to nest, the least we can do is to make the hyperlink in the Recent Comments section bring you to the explicit comment you want to reply to.

    Iza be too lazy to hunt and find the right nest.

  4. I just wanted to note that whatever one might say about Kappos, and despite whatever mischief he may be up to in the law, the man does give good cupcakes for the employee appreciation day.

  5. Egads the dreaded threaded view!

    D, if you’re going to do that, make it optional if you can like they do at techdirt and JPE.

  6. I’m not a huge fan of nesting, but I can live with it.

    If we’re trying to improve the comments, can we please get rid of Sarah now?

  7. Well this does provide a ray of hope where multiple parties are acting in concert. At least one of them is using the system.

    We can then focus our infringement theories against big pockets in terms of contributory infringement.

  8. if they had submitted a claim containing only elements 1-3, would Centillion have received a patent in the first place? Clearly element 4 only requires ordinary skill in the art to combine, since the entire customer base managed to figure it out. What if Qwest provided instructions to their customers to provide element 4?

  9. I like the most latest comment on top – but the nested comments feature must go. – Way too much work to find pertinent sub-threads.

  10. Y

    I had a friend named Bonnie,
    who like me spent time in the soil.
    So I made her a hat to shade her,
    so she could continue to toil.

    The Hat so much like a book,
    called the Cat In The Hat.
    At the Tennessee game the Camera did focus,
    I’m sure where the Mad Hatter was at.

    A good 60 seconds he zoomed,
    I’m sure it was to send me over.
    But sadly for you that Hat was to close,
    To Zeus, so you wasted that Rover!

    If only I equated what Roy he did say,
    That the Hatter he knew all along.
    And from the beginning he knew what the hay,
    But continued to do me so wrong!

  11. So, the user infringes but Qwest is not vicariously liable, does not “make” and presumably does not “sell.” Qwest liability under 271(a) is foreclosed.

    However, there is a direct infringer, the user, who is provided software by Qwest. Therefore, infringement under 271(b) or (c) might be possible — right?

    Is there any hope for the PO?

  12. We are all smart as the dickens, sitting here in 2011. Were we that smart in 1989?

    Email has been around since the 60s.

    I earned some change back in 1982 or thereabouts entering customer transaction data into an Apple II for my friend’s dad (yes, he had a modem, too). The database software was certainly capable of generating summaries.

    That would anticipate this “system” claim.

  13. “We are all smart as the dickens, sitting here in 2011. Were we that smart in 1989?”

    Well, idk about you, but even at age 6 I was smart enough to know that maybe you could take a stored transaction document, summarize it, send it to someone interested in that summary according to the stored document, and have a computer standing by to do something else to the document.

    But then, everyone thought I was a super geniose at age 7, so at age 6 I must have been getting close to that.

    However, I will grant you that I might not have been able to fathom the inclusion of the powerful computer brain. At that age I was very susceptable to being impressed by those sorts of things.

    Also, on a more serious note, a year or so later I made a model of the fort/town of jamestown out of sticks I gathered and populated it with lego men. Subsequently my lego men and one of the jamestown houses were stolen when the project was put on display in the school library.

    Note here that what I’m talking about was ACTUAL THEFT, as opposed to mere infringement of a patent, and yet you guys go on and on about an infringement while ACTUAL THEFT went completely uninvestigated and unpunished.

    Also of note was the fact that the construction project I mentioned went over-budget as I ran out of sticks 3/4 of the way through construction so the actual scene became a scene of “The Construction of Jamestown” rather than the completed fort. Either way I still had the best fort by a long shot.

  14. Joint infringement is the topic, Rite?

    lessee – Sunshine is hear, so odds are the topic has moved to windmills.

  15. a system for presenting information, USING A POWERFUL COMPUTER BRAIN, to a user com-
    prising: 1) storage means for storing transaction records, 2) data processing means for generating summary reports as specified by a user from the transaction records, 3) transferring means for transferring the transaction records and summary reports to a user, and 4) personal computer data processing means adapted to perform additional processing on the transaction records.

    Rite?

  16. What’s the priority date? 1972?

    1989. That’s before it was known that you could take a document out of storage, summarize it, send somebody the summary, and have the recipient do stuff with the summary. On a computer.

    Incidentally, is there any reason you haven’t taken over the hosting duties at 1201tuesday.com?

  17. “a system for presenting information . . . to a user . . . com-
    prising:” 1) storage means for storing transaction records, 2) data processing means for generating summary reports as specified by a user from the transaction records, 3) transferring means for transferring the transaction records and summary reports to a user, and 4) personal computer data processing means adapted to perform additional processing on the transaction records.

    What’s the priority date? 1972?

  18. I guess my near profanity laden last post didn’t make it past the filter.

    In any event, to sum it up, poor decision based on an even poorer decision. Either an En banc panel or the USSC needs to step in and stop this ridiculous butchering of the law.

    Also, I just thought I’d make everyone aware that apparently someone did decide to make a site along the lines of the one I proposed a few years ago. It is rather well executed:

    link to foundpersuasive.com

    Indeed, these three chaps are either a plain indication that the future generations of lawyers will be better prepared than the last, or they are fanbois of mine. Neither would surprise me.

  19. Hi Patrick

    I think Judge Moore still has it wrong. Basic hypothetical that shows the extreme of her logic: I am in the baking business. I make custom cakes for my clients, but I don’t have my own oven. Customer orders cake, I take it across the street and bake it with the neighbor’s oven, which assume for the moment, is the infringing system. By Moore’s logic, the baker doesn’t infringe, as she claims he did not “use” the oven.

    IMO this is an adulteration of the term that divorces it from its plain meaning. If you look at the older SCOTUS cases, “use” was defined very broadly. I believe you can have more than one party “use” an infringing system, albeit in a different way – you don’t even have to be using the infringing aspect. For example, suppose the claim was on oven that baked up to 500 degrees, but my cakes were only baked at 400. Should not matter, the system is still a system, and it is still a “use” of that system. All the extra baggage now added by the CAFC is nowhere to be found in the statute.

  20. Jason,

    Good analysis. As you note above, and as I mentioned in my post about this case, the defendant still doesn’t “use” the system because the deployment/benefit/control is written from the perspective of the customer, not the service provider. It seems like Judge Moore did not believe it was necessary to further expand on BMC. In other words, its still important when reviewing claims to consider whether any of the elements describe aspects of a product not under your client’s direct control.

    I also am interested to hear what others think about Judge Moore’s conflation of “put into service” with the control and benefit aspects of the holding. Are these necessarily one and the same? I’m sure I could come up with a scenario where one party puts a system into service, but the control and benefits flow to another party.

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