Centillion Data Systems, LLC v. Qwest Communications International, Inc.
2011 U.S. App. LEXIS 1117, 97 U.S.P.Q. 2d (BNA) 1697, 631 F.3d 1279 (2011)
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Rule of Law:
A party directly infringes a system patent by "use" under 35 U.S.C. § 271(a) if it puts the entire patented system into service by controlling the system as a whole and obtaining a benefit from it, even if the party does not physically possess or directly control every individual component of the system.
Facts:
- Centillion Data Systems, LLC holds the '270 patent for a data processing system comprising a service provider-controlled back-end and a user-controlled front-end on a personal computer.
- Qwest Communications offers electronic billing services that feature a back-end system operated by Qwest and front-end software that its customers can choose to install on their personal computers.
- Qwest's customers can subscribe to the service, which causes Qwest's back-end to automatically generate and make available monthly billing reports.
- Qwest's system also allows customers to make "on-demand" requests for specific reports, which triggers data processing on Qwest's back-end.
- The customer's action—either subscribing or making an on-demand request—is what initiates the function of the back-end system to generate the reports.
- While Qwest provides the front-end software, its customers have sole discretion over whether to install and operate it on their personal computers to perform additional processing.
Procedural Posture:
- Centillion Data Systems, LLC sued Qwest Communications in the U.S. District Court for the Southern District of Indiana for patent infringement.
- The parties filed cross-motions for summary judgment regarding infringement, and Qwest also moved for summary judgment of invalidity.
- The district court (trial court) granted Qwest's motion for summary judgment of noninfringement, holding that no single party 'used' the entire patented system.
- The district court also granted Centillion's motion for summary judgment of no anticipation, finding a prior art system did not invalidate the patent.
- Centillion, as appellant, appealed the noninfringement ruling to the U.S. Court of Appeals for the Federal Circuit.
- Qwest, as cross-appellant, appealed the ruling on invalidity to the same court.
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Issue:
Does a party "use" a patented system under 35 U.S.C. § 271(a) when they put the entire system into service, controlling it as a whole and obtaining a benefit from it, even if they do not physically possess or directly control every individual component of the system?
Opinions:
Majority - Moore, J.
Yes, a party 'uses' a patented system when it puts the system as a whole into service for its intended purpose. To 'use' a system for purposes of infringement, a party must put the invention into service by controlling the system as a whole and obtaining a benefit from it. The court, citing its precedent in NTP, Inc. v. Research in Motion, Ltd., held that 'control' does not require physical possession or direct control over every element. Here, Qwest's customers 'use' the entire patented system because their actions—subscribing to the service or making an on-demand query—cause the back-end components to perform their function, thereby putting the entire system into service for the customer's benefit. Conversely, Qwest does not 'use' the system because it operates the back-end but does not control the customer's personal computer, which is a required element of the claim. Qwest cannot be held vicariously liable for its customers' actions as there is no agency relationship or contractual obligation compelling the customers to use the front-end software.
Analysis:
This decision significantly clarifies the definition of direct infringement by 'use' for client-server system patents where control over components is divided between a service provider and an end-user. By focusing on who 'puts the system into service,' the court affirmed that an end-user can be a direct infringer even without possessing the back-end infrastructure. This holding makes it easier for patentees to allege direct infringement against customers of a service, shifting the legal focus toward potential indirect infringement (inducement) claims against the service provider.
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