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January 23, 2011

Use

5,287,270 claims a computerized billing system, ostensibly for phone calls. Who uses it? Patent owner Centillion thought Qwest did, so it sued for infringement. The district court summarily found otherwise, because "no single party practices all of the limitations of the asserted claims." A phone user used the front end, while Qwest handled the back end. Appeal dialed it in differently.

Centillion Data Systems v. Qwest Communications (CAFC 2010-1110) precedential

Summary judgment is appropriate when, drawing all justifiable inferences in the nonmovant's favor, there exists no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

Infringement juice boiled down to "use." More to the point, the point of use. But also loose was whose use.

This case turns on what constitutes "use" of a system or apparatus claim under § 271(a).

We have never directly addressed the issue of infringement for "use" of a system claim that includes elements in the possession of more than one actor. However, we defined the term in a very similar scenario in NTP. In NTP, the issue was whether infringement occurred within the United States. Id. at 1313. The claims and the accused product involved a handheld device operated by a customer as well as a number of relays operated by a service provider. One of these relays was located outside the United States. We had to determine whether a "use" by a customer of the entire system amounted to a "use" within the United States. We stated that "courts have interpreted the term 'use' broadly." Id. at 1316. Citing Bauer & Cie v. O'Donnell, 229 U.S. 1 (1913), we stated that the term use means "the right to put into service any invention." NTP, 418 F.3d at 1316- 17. We went further to distinguish use of a claimed method from that of a claimed system and to hold that "[t]he use of a claimed system under section 271(a) is the place at which the system as a whole is put into service, i.e., the place where control of the system is exercised and beneficial use of the system obtained." Id. at 1317. Applying this rule to the facts of the case in NTP, we held that customers located in the United States who sent messages via the accused product used the overall system and the location of the use was in the United States.

Turning to the instant action, although NTP dealt with the situs of infringement rather than the nature of the infringing act, it interpreted the definition of "use" under § 271(a). We hold 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. NTP, 418 F.3d at 1317. The district court correctly determined that this definition from NTP was the proper one to apply. Opinion at 22.

So far, no abuse of use. But the soul of use goes to the control of use. Not that use and control are synonymous. It is certainly fit that use goes to benefit.

The district court erred, however 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. In other words, the customer in NTP remotely "controlled" the system by simply transmitting a message. 418 F.3d at 1317. That customer clearly did not have possession of each of the relays in the system, nor did it exert the level of direct, physical "control" that the district court requires. To accept the district court's interpretation of "use" would effectively overturn NTP because the predicate "use" in that case would no longer fall under the definition of "use."

We agree that direct infringement by "use" of a system claim "requires a party . . . to use each and every . . . element of a claimed [system]." In order to "put the system into service," the end user must be using all portions of the claimed invention. For example, in NTP, the end user was "using" every element of the system by transmitting a message. It did not matter that the user did not have physical control over the relays, the user made them work for their patented purpose, and thus "used" every element of the system by putting every element collectively into service.

How about Qwest customers who punch in a billing request?

We hold that the on-demand operation is a "use" of the system as a matter of law. The customer puts the system as a whole into service, i.e., controls the system and obtains benefit from it. The customer controls the system by creating a query and transmitting it to Qwest's back-end. The customer controls the system on a one request/one response basis... By causing the system as a whole to perform this processing and obtaining the benefit of the result, the customer has "used" the system under § 271(a). It makes no difference that the back-end processing is physically possessed by Qwest. 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.

A footnote notes that construction of "use" "does not dispose of the issue of infringement because the district court did not compare the accused system to the asserted claims."

Another bottom line - standard operation is "use."

We also hold that the standard operation is a "use" as a matter of law. The standard operation allows users to subscribe to receive electronic billing information on a monthly basis... Like the on-demand operation, the back-end processing in normal operation is performed in response to a customer demand. The difference though is that a single customer demand (the act of subscribing to the service) causes the back-end processing monthly. But in both modes of operation, it is the customer initiated demand for the service which causes the back-end system to generate the requisite reports. This is "use" because, but for the customer's actions, the entire system would never have been put into service. This is sufficient control over the system under NTP, and the customer clearly benefits from this function.

Then there's the question of use by Qwest.

To "use" the system, Qwest must put the claimed invention into service, i.e., control the system and obtain benefit from it. NTP, 418 F.3d at 1317. While Qwest may make the back-end processing elements, it never "uses" the entire claimed 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.

Something various is whether infringement is vicarious. Here control resolves use.

The only way that Centillion can establish "use" by Qwest is if Qwest is vicariously liable for the actions of its customers such that "use" by the customers may be attributed to Qwest. Our precedents on vicarious liability, BMC, Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1328-29 (Fed. Cir. 2008), Akamai Technologies, Inc. v. Limelight Networks, Inc., 2009-1372, 2009-1380, 2009- 1416, 2009-1417, 2010 WL 5151337 (Fed. Cir. Dec. 20, 2010), and Cross Medical, analyze the circumstances in which the actions of one party ought to be attributed to a second party for purposes of direct infringement - vicarious liability. In BMC, we noted that "[f]or process patent or method patent claims, infringement occurs when a party performs all of the steps of the process." 498 F.3d at 1378-79. However, we noted that in some instances, one party could be liable for infringement of a method claim even if it did not perform all of the steps. This vicarious liability arises when one party controls or directs the actions of another to perform one or more steps of the method. Id. at 1379. We confirmed this approach for method claims in Muniauction, 532 F.3d at 1328-29 and recently explained in Akamai Technologies that for infringement to be found when more than one party performs the steps of a method claim, an agency relationship or other contractual obligation to perform the steps must exist. See Akamai Techs., 2010 WL 5151337, at *6. In Cross Medical, we considered the issue of vicarious liability for making a claimed apparatus or system under § 271(a). The claim related to a medical device and, as properly construed, required contact between the device and human bone. 424 F.3d at 1310-11. In the particular facts of that case, the accused manufacturer created the accused product, but did not perform surgeries to bring the device into contact with bone. We held that the manufacturer did not "make" the claimed apparatus. We held that if anyone made the claimed apparatus, it was the surgeon who implanted the accused device, possibly bringing it into contact with bone. Id. at 1311. We noted that the manufacturer would not be liable for the surgeon's direct infringement unless the surgeon acted as an agent of the manufacturer. Id.

Qwest was not controlling its customers to use the claimed system.

Following our vicarious liability precedents, we conclude, as a matter of law, that Qwest is not vicariously liable for the actions of its customers. Qwest in no way directs its customers to perform nor do its customers act as its agents. While Qwest provides software and technical assistance, it is entirely the decision of the customer whether to install and operate this software on its personal computer data processing means.

Next came the issue of liability for "making" under § 271(a).

Qwest does not "make" the patented invention under § 271(a) as a matter of law. Qwest manufactures only part of the claimed system. In order to "make" the system under § 271(a), Qwest would need to combine all of the claim elements--this it does not do. The customer, not Qwest, completes the system by providing the "personal computer data processing means" and installing the client software.

Further, Qwest is not vicariously liable for the actions of its customers; as discussed above, Qwest's customers do not act as Qwest's agents as a matter of law nor are they contractually obligated by Qwest to act. See Akamai Techs., 2010 WL 5151337, at *6; Cross Medical, 424 F.3d at 1311.4

4 Centillion also argues that Qwest employees can remotely log into customer computers to install the software. Centillion cites no evidence to support this statement and Qwest argues that its personnel have access to customer accounts, not computers.

Summary judgment of no anticipation was reversed owing to a "genuine issue of material fact."

Vacated-in-part, reversed-in-part, and remanded.

A well-reasoned and well-written opinion by Judge Moore.

Posted by Patent Hawk at January 23, 2011 11:42 PM | Infringement

Comments

Hawk,

Great coverage. I agree the opinion was well-written and I generally agree with Judge Moore's rationale.

I do, however, think that the definition of "use" for system claims is a bit clunky ... I could see a situation where putting something into use would not necessarily involve "control." Similarly, whether one "benefits" is in the mind of the beholder.

Judge Moore's holding seems to imply that the control and benefit are synonymous with deployment (putting into service). I'm not sure why a simple definition like "to avail oneself of" wasn't sufficient. More in my post about this case, if any of your readers are interested.

Posted by: Patrick at January 24, 2011 12:02 AM

In this case:

How we fcked up NTP and how that fck up is going to fck up even more caselawl and on and on forever until the USSC or a clear thinking En Banc Court reels our stpid ases in.

I just knew when I read NTP that it would be fin things in the future. But, that's what happens when you go blatantly off course from what the law means. Suddenly everything else in the law doesn't make sense either.

Posted by: 6000 at January 24, 2011 12:19 PM