End User May 'Use' System Patent Claim By Putting Other Claim Elements Into Service

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• Case Summary: Qwest Telecommunications customers may have made an infringing “use” of a patented invention on a billing system occur even though Qwest's billing system is entirely under the company's physical control.

• Key Takeaway: When more than one party performs actions that, taken collectively, meet the limitations of a patent claim, the standard for finding infringement by a single actor is less stringent for system claims than it is for method claims.

The U.S. Court of Appeals for the Federal Circuit ruled Jan. 20 that an infringing “use” of a system patent claim occurs if one party within the system performs an action putting the rest of the system into service (Centillion Data Systems LLC v. Qwest Communications International Inc., Fed. Cir., 2010-1110, 1/20/11).

The court held that an infringing “use” of a multi-device computing system by an end user does not require physical control over all the devices. In the instant case, the accused system was put into service, and thus the patent may have been infringed when a customer made a data request on one device that the service provider's device automatically fulfilled, and when the customer simply signed up for a monthly report generation service.

Patent on Telephone Service Billing System.

Centillion Data Systems LLC is a software development and information services company that provides electronic billing solutions to the telecommunications industry. The company is assignee of a patent (5,287,270) issued in 1994 on a system for processing records of phone call data and delivering the information to customers for further processing, display, and analysis on personal computers. Prior art systems supplied similar information only on data tapes, for processing on mainframe computers.

The patented system is defined to include both “back-end” functionality maintained by the telephone service provider and “front-end” processing by an end user through “personal computer data processing means.”

Qwest Communications International Inc. is a telephone service provider that offers some customers billing information in two ways. In a passive mode, Qwest's back-end system generates the information monthly and makes it available for the end user to download. In an on-demand mode, the end user makes a request for the information covering a specific date range, causing the back-end to create a report and download it to the user's PC.

For both modes, Qwest offers PC software for the end user's processing of the data, but users are not required to install the software to take advantage of the electronic billing information.

Centillion sued Qwest for patent infringement in the U.S. District Court for the Southern District of Indiana.

Judge Larry J. McKinney granted Qwest's motion for summary judgment of noninfringement, addressing only infringement by “use” under 35 U.S.C. §271(a) and determining that neither Qwest nor a Qwest customer practices or controls both the back-end and front-end limitations of the asserted claims.

McKinney also granted Centillion's motion for summary judgment of no anticipation by a prior art COBRA system created by NYNEX Corp. in the 1980s.

Both parties appealed. The claims at issue on appeal are all system claims, not method claims.

Infringement by Putting System Into Service.

Judge Kimberly A. Moore vacated the noninfringement judgment, reversed the anticipation judgment, and remanded the case for further proceedings.

As to the noninfringement judgment, Moore began, “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.”

Addressing the definition of “use” of a system first, she noted that the scenario was similar in NTP Inc. v. Research in Motion Ltd., 418 F.3d 1282, 75 USPQ2d 1763 (Fed. Cir. 2005) (70 PTCJ 433, 8/12/05), even though the central issue in that case was the geographical location of parts of the system. Only slightly revising the definition as presented in NTP, the court in the instant case 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.”

The district court had decided based on that definition, the court acknowledged, but it erred in requiring physical “control” over each individual element of the system. Control exists when the end user makes the system operate “by putting every element collectively into service,” the court held.

“In order to 'put the system into service,' the end user must be using all portions of the claimed invention,” Moore said. “For example, in NTP, the end user was 'using' every element of the system by transmitting a message,” which ultimately was processed and delivered by the relay and server components of the patented e-mail system.

As to the instant case, Moore said, each mode is a “use” of the system as a matter of law. The end user controls on-demand operation by making a request and causing the back-end “to act for its intended purpose to run a query and return a result,” she said. In the monthly passive mode, she explained, “By subscribing a single time, the user causes the back-end processing to perform its function on a monthly basis.”

In both modes, Moore said, the customer-initiated demand for the service is “use” of a system since, “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.”

Thus, the court concluded, the district court erred in finding no use of the system by Qwest's customers. Because the lower court did not directly compare the Qwest system to the patent's limitations, however, the court remanded the case for that further determination.

No Vicarious Liability for Qwest's Use.

Turning to the actions of Qwest itself, the court applied the same analysis to determine that Qwest does not use the system because it never puts into service the personal computer data processing means of the claimed invention. “Supplying the software for the customer to use is not the same as using the system,” Moore said.

Centillion's only alternative, she explained, was to establish that Qwest was vicariously liable for the actions of its customers.

The Federal Circuit has ruled on vicarious liability as to method claims in multiple recent decisions, Moore noted, most recently in Akamai Technologies Inc. v. Limelight Networks Inc., No. 2009-1372 (Fed. Cir. Dec. 20, 2010) (81 PTCJ 255, 12/24/10). In Akamai, she said, the court reaffirmed that, when two parties perform different steps of a method claim, one party must control or direct the actions of the other party and for a court to make that finding, “an agency relationship or other contractual obligation to perform the steps must exist.”

The court addressed vicarious liability for infringement when making a claimed apparatus or system in Cross Medical Products v. Medtronic Sofamor Danek Inc., 424 F.3d 1293, 76 USPQ2d 1662 (70 PTCJ 631, 10/7/05) (Fed. Cir. 2005), Moore noted further. She compared the facts at issue in Cross Medical--a patent claim directed to a medical device in contact with the patient's bone, with the device manufacturer found not vicariously liable for the surgeon's bringing it into contact with the bone--to the instant case of a software provider and the end user's computer. “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.”

Therefore, again as a matter of law, Moore said, Qwest cannot be vicariously liable for the actions of its customers.

No 'Making' Infringement; Fact Issues on Validity.

Centillion further asked the appeals court to address whether Qwest infringed the patent under Section 271(a) by “making” the invention as well, but the court readily disposed of that alternative. “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 court said. “The customer, not Qwest, completes the system by providing the 'personal computer data processing means' and installing the client software.”

Finally, the court addressed the district court's judgment of no anticipation by the COBRA system. The decision turned on whether COBRA generated “summary reports as specified by the user.” COBRA generated four different reports and allowed customers to select one of them, so the question was whether the claim meant only that the customer specified parameters that defined the contents of a report, or also covered when the customer specified which of a selection of pre-defined reports to download.

Concluding that there were genuine issues of material fact regarding whether the COBRA system met the claimed limitation, the court determined that the lower court erred in granting summary judgment.

Judges Alan D. Lourie and Richard Linn joined the opinion.

Victor M. Wigman of Blank Rome, Washington, D.C., represented Centillion. Qwest was represented by Vincent J. Belusko of Morrison & Foerster, Los Angeles.

By Tony Dutra