Under Section 271(a) of the U.S. Patent Statute, “whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States, or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.”
For the first time, the U.S. Court of Appeal for the Federal Circuit (“CAFC”) has directly addressed the issue of infringement by “use” of a patented system that includes separate elements owned and operated by, and in the possession of, separate actors. While proving infringing use by an end user has been simplified and made a bit easier, finding an effective remedy for that infringing use has at the same time been made correspondingly more difficult.
In Centillion Data Systems, LLC (“CDS”) v. Qwest Communications Int’l, Inc., Appeal Nos. 2010-1110, -1131 (Fed. Cir., Jan. 20, 2011) the CAFC vacated a trial court’s grant of summary judgment of noninfringement. A telephone company’s automated electronic billing system was at issue in the case. The system included both a “back-end” portion (call transaction storage means, data processing means for generating reports specified and requested by an end user, and means for transferring the reports to the end user) and a “front-end” portion (personal computer data processing means for performing additional processing of the reported transaction records).
CDS alleged that both Qwest and its end users infringed by “use” of the patented system. The trial court disagreed, ruling that Qwest did not use the entire system when it merely provided software that an end user could load onto its personal computer data processing means, and further that Qwest’s end users neither directed nor controlled the “back-end” of the system. In addition, the trial court ruled that because Qwest did not exercise any direction or control of its end users, the actions of those end users could not be attributed to Qwest itself in such a way that would render Qwest vicariously liable for those end user actions.
The CAFC focused on “use” of a system under 35 U.S.C. § 271(a) and 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.” It does not require a party to exercise physical or direct control over each individual element of the patented system. Because Qwest’s “customer puts the system as a whole into service, i.e., controls the system and obtains benefit from it,” the customer end user’s action constitutes potentially infringing “use” of the system as a matter of law under Section 271(a). Moreover, the CAFC noted that since this sort of “use” is carried out by a single person or entity, issues of vicarious liability for direct infringement do not come into play.
CDS may have won a Pyrrhic victory, however, because CDS didn’t sue Qwest’s customers, it sued Qwest itself. While Qwest’s customer end users put the invention into service, controlled the system and obtained benefit from it, the same could not be said of Qwest itself. As a result, the CAFC also held that Qwest did not “use” the system under Section 271(a), as a matter of law. Nothing done by Qwest actually “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.”
Moreover, because “Qwest in no way directs its customers to perform nor do its customers act as its agents,” the CAFC also held that Qwest is not vicariously liable for the actions of its customer end users.
The bad news for CDS was not over. CDS had also asserted, possibly belatedly, that Qwest should be liable for direct infringement under § 271(a) for its “making” of the patented system. Rather than delve into CDS’s possible waiver of this argument due to its timing, the CAFC ruled that Qwest does not “make” the patented invention, as a matter of law, because Qwest manufactures only part of the claimed system. In order to “make” the system, Qwest would need to combine all of the claim elements, which it does not.
It is worth noting that the CAFC specifically avoided any discussion of issues of indirect infringement, whether contributory infringement or inducement of infringement, as these issues were apparently not reached by the trial court. Had those theories been raised by CDS at the trial level, however, it is difficult to imagine how summary judgment could have been entered without them being considered and decided by the trial court.
This case is a good illustration of the patent enforcement problems faced by a patent-owning service provider where the customer end user’s appropriately programmed personal computer is an element of the patented system. Such patent owners cannot effectively sue, and it is an understatement to say that they are unlikely to sue, their own customers. Patent applicants and their counsel must take steps when drafting and reviewing patent claims in order to ensure that the claims will be infringed, if at all, by entities against whom effective enforcement may be pursued, and from whom effective remedies may be obtained.