Last week the United States Court of Appeals for the Federal Circuit issued a precedential opinion in Centillion Data Systems, LLC v. Qwest Communications International, Inc., in which the district court was affirmed in part and reversed in part. Of particular note here is the determination of the meaning of “use” as that term is used in 35 U.S.C. 271(a). The Federal Circuit, per Judge Moore (with Judges Lourie and Linn joining) acknowledged that the Court has never directly addressed the issue of infringement for “use” of a system claim that includes elements in the possession of more than one actor, thereby making the specific issue a question of first impression.
The CAFC went on to hold that to “use” a system for purposes of infringement, a party must put the invention into service, or in other words control the system as a whole and obtain benefit from it. Furthermore, the Court held that the on-demand operation is a “use” of the system as a matter of law despite the fact that the back-end processing is physically possessed by another, who in this case was Qwest.
The patent at question in this case was U.S. Patent No. 5,287,270, which discloses a system for collecting, processing, and delivering information from a service provider, such as a telephone company, to a customer. Centillion conceded that the claim includes both a “back-end” system maintained by the service provider and a “front-end” system maintained by an end user. In reaching the underlying determination the district court did not perform an element by element comparison between the allegedly infringing device and the patent claim, but rather, jumped to the question of whether Qwest could be liable for infringement of a system claim that requires both a back office portion as well as a personal computer operated by a user. The district court determined that no single party practiced all of the limitations of the asserted claims under its accepted definition of “use” and, therefore, Qwest could not possibly be infringing.
The infringement aspects of this case turn on what constitutes “use” of a system or apparatus claim under § 271(a). Centillion argued that the district court adopted an overly narrow interpretation and that “use” simply means “the right to put into service any given invention.” Centillion further argued that use does not require that a party “practice” every element, only that it use the system as a collective. Essentially Centillion argued that operation of one component of an invention may “put into service” the invention even if the accused infringer does not directly interact with other components.
Qwest responded that the district court was correct, that to “use” a system under § 271(a), an accused infringer must exert control over or “practice” each claimed element. It further argued that the Federal Circuit should require “use” of the entire system, practicing each element, by a single entity and should never look to the conduct of more than one party to determine “use.”
The seminal case to provide guidance to the Federal Circuit panel was NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005). In that case 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. Of particular importance is the fact that one of these relays was located outside the United States, so it was necessary for the Federal Circuit to determine whether a “use” by a customer of the entire system amounted to a “use” within the United States. The Court in NTP explained that the term “use” has always been construed broadly and specifically means “the right to put into service any invention.” Applying that rule to the fact in NTP, the CAFC held that customers located in the United States who sent messages via the accused product used the overall system within the United States.
While not an identical case, once the teachings of NTP are understood it was not a stretch at all for the Federal Circuit to hold that to “use” a system for purposes of infringement, a party must put the invention into service, or in other words control the system as a whole and obtain benefit from it. Therefore, the district court did correctly determined that this definition from NTP was the proper one to apply, but the district court’s application of the facts of the Centillion-Qwest dispute to the proper definition was wanting.
The Federal Circuit ruled that the district court 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. Judge Moore explained that the “control” contemplated in NTP is the ability to place the system as a whole into service. In NTP the customer remotely “controlled” the system by simply transmitting a message. The 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 required Centillion to demonstrate. Therefore, if the Federal Circuit were to accept the district court’s interpretation of “use” it would effectively overturn NTP because the predicate “use” in that case would no longer fall under the definition of “use” that would emerge from this present case.
Having defined the term “use” under § 271(a), the Court turned to whether there was a use. The Federal Circuit held as a matter of law that the on-demand operation of a system is indeed “use.” The customer puts the system as a whole into service, controls the system and obtains benefit from it. It makes no difference that the back-end processing is physically possessed by Qwest.
The Federal Circuit stopped short of saying that there was infringement or there was not infringement because the district court concluded as a matter of law that no single party could be liable for “use” of the patented invention and did not compare the accused system to the claim limitations. In short, the district court disposed of the case on summary judgment and there are genuine issues of material fact that still remain after the proper resolution of the meaning and application of the term “use.” The Federal Circuit, therefore, declined the invitation to for the first time on appeal determine whether the accused products satisfy the “as specified by the user” claim limitation. Similarly, the Federal Circuit was not about to determine in the first instance whether any individual customer actually installed the Qwest software, downloaded records, and analyzed them as required by the claims.
The Federal Circuit also held, as a matter of law, that Qwest does not “make” the patented invention under § 271(a) as a matter of law because the customer, not Qwest, completes the system by providing the personal computer data processing means and installing the client software. Similarly, the Federal Circuit determined that Qwest is not vicariously liable for the actions of its customers because their customers do not act as Qwest’s agents, nor are they contractually obligated by Qwest to act.
As for my feelings, I have never been a fan of the NTP decision because I am troubled by the fact that a step that occurs outside the United States, and is in fact required, supports a finding of infringement of a U.S. patent. I do understand that rationale, and without such a ruling it would be quite easy to avoid patent infringement of a U.S. system patent. Nevertheless, I just don’t see the statute allowing for such a ruling, no matter how “correct” that ruling may be. In our system it should be for Congress to determine, but we all know that they are practically absent without leave on patent matters, so I don’t harbor any ill feelings toward the Federal Circuit for the NTP ruling, yet I am troubled to some extent.
Similarly, I am troubled a little by this decision, although I do realize that this does seem to be the logical conclusion and next step forward from the NTP decision. I just wonder whether there were ways to claim the system so as to capture the specific approach employed by Qwest as infringing. I think there are ways that could have been accomplished without resorting to defining “use” as a matter of law under § 271(a).
Finally, I wonder why we are discussing the definition of “use” under § 271(a) at all. It would seem that the Federal Circuit is potentially broadening the definition of “use” under § 271(a) in a manner that expands direct infringement to start to include those types of things that normally would have been infringement under the doctrine of equivalents. Of course, the Supreme Court in Festo together with the Federal Circuit in Honeywell International Inc. v. Hamilton Sundstrand Corporation have eviscerated the doctrine of equivalents to the point of its non-existence. Perhaps Centillion v. Qwest, NTP and other cases yet to come will breathe new life into the theory under the guise of a direct infringement “use” of a system under § 271(a).- - - - - - - - - -
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.