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.