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Federal Circuit Defines “Use” Under § 271(a) for System and Apparatus Claims Involving Multiple Actors

January 20, 2011

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Last Month at the Federal Circuit - February 2011

Judges: Lourie, Linn, Moore (author)

[Appealed from: S.D. Ind., Chief Judge McKinney]

In Centillion Data Systems, LLC v. Qwest Communications International, Inc., Nos. 10-1110, -1131 (Fed. Cir. Jan. 20, 2011), the Federal Circuit vacated and remanded the district court’s grant of SJ of noninfringement, and reversed and remanded the district court’s grant of SJ that the asserted claims were not anticipated.

Centillion Data Systems, LLC (“Centillion”) owns U.S. Patent No. 5,287,270 (“the ’270 patent”), which, at a high level, discloses and claims a system for presenting information to a user comprising four components:  (1) storage means for storing transaction records; (2) data processing means for generating summary reports specified by a user; (3) transferring means for transferring the reports to a user; and (4) personal computer data processing means adapted to perform additional processing on the transmitted reports.  The system thus includes a “back-end” (claim elements 1-3) maintained by a service provider and a “front-end” (claim element 4) maintained by an end user.  Centillion accused a number of billing systems of Qwest Communications International, Inc., Qwest Corporation, and Qwest Communications Corporation (collectively “Qwest”) of infringing the ’270 patent.  For purposes of the appeal, the Federal Circuit stated that it did not need to differentiate between the accused systems.  Each system included a back-end, maintained by Qwest, and front-end client applications that Qwest’s customers could install on their personal computers.

In the district court, the parties filed cross-motions for SJ regarding infringement, Qwest filed an SJ motion for invalidity, and Centillion filed an SJ motion for no anticipation.  The district court found that Qwest did not directly infringe the ’270 patent because Qwest did not use or control the use of the front-end elements on its customers’ personal computers nor did it require its customers to load the software and perform the additional processing element required by the claims.  Additionally, the district court granted Centillion’s SJ motion for no anticipation, finding that the prior art fell outside the claims as construed.

On appeal, the Federal Circuit first addressed the district court’s definition and application of “use” under 35 U.S.C. § 271(a) for system and apparatus claims.  The Court noted that it had never directly addressed the question of infringement for “use” of a system claim that includes elements in the possession of more than one actor.  Relying on its decision in NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282 (Fed. Cir. 2005), which focused on the situs of infringement rather than the nature of the infringing act, the Court 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 “control” contemplated in NTP and by the Court’s definition of “use” for system claims “is the ability to place the system as a whole into service,” it does not require “exercis[ing] physical or direct control over each individual element of the system,” as the district court had required.  Id.  Thus, to put a system into service, the end user must use all elements of the claimed invention.

The Federal Circuit then applied its definition of “use” to the facts of the case, noting that Qwest’s accused system had two different manners of operation relevant to the appeal:  (1) an “on-demand” operation where a customer seeks specific information by creating a query that Qwest’s back-end system processes and provides a response for downloading; and (2) a “standard” operation, in which a customer subscribes for Qwest’s services and Qwest’s back-end system periodically provides downloadable summary reports.  The Court found that both manners of operation “used” Qwest’s system as a matter of law.  In each instance, the customer puts the system as a whole into service—controlling and obtaining a benefit from the system—by creating a query and transmitting it to Qwest’s back-end in the “on demand” operation and by subscribing to Qwest’s services thereby causing the back-end processing to perform its function on a monthly basis in the “standard” operation.

The Federal Circuit also found, as a matter of law, that Qwest did not “use” all of the elements required by the claimed system under § 271(a) because it did not use or control the use of the front-end element of the claimed system.  First, Qwest did not load the software or process data on the front-end personal computer data processing means.  The Court found that supplying the software was not the same as using the system.  Second, Qwest was not vicariously liable for “use” of the front-end element of the system because it did not direct its customers to perform or act as its agents; rather, it was entirely the customer’s decision to install and operate the Qwest-provided software on the customer’s personal computer data processing means.

Further, the Court found that, as a matter of law, Qwest was not liable for “making” the claimed system under § 271(a).  Qwest made only a part of the claimed system.  In order to “make” the entire claimed system, Qwest would need to combine all of the claim elements.  The Federal Circuit found that since it was Qwest’s customers, not Qwest, who complete the system by providing the “personal computer data processing means” and installing the client software, Qwest did not make the entire system and thus could not be liable for “making” under § 271(a).  Further, the Court concluded that Qwest was not vicariously liable for “making” the entire system because Qwest’s customers do not act as Qwest’s agents, as a matter of law, and are not contractually obligated to act in a manner that would practice the missing element of the claims. 

Accordingly, the Federal Circuit vacated the district court’s SJ of noninfringement and remanded these issues for further consideration, noting that the district court had not compared Qwest’s accused systems to each and every element of the claimed system and the Federal Circuit would not do so in the first instance on appeal.

Finally, the Court found that the district court erred in granting Centillion’s motion for SJ of no anticipation because, under the district court’s claim construction, which was not disputed on appeal, there were factual disputes as to whether a prior art system provided “summary reports” created “as specified by the user,” as required by the claims.  Accordingly, the Federal Circuit reversed and remanded for the district court to consider these genuine issues of material fact.


Summary authored by Michael D. Stone, Esq.